Congress Sends Stimulus Package To Bush's Desk

by Mike Godfrey, Tax-News.com, Washington

10 February 2008

The United States Congress has approved a USD168 billion package of economic stimulus legislation, which now awaits the formality of President Bush's signature to go into effect.

The House of Representatives voted overwhelming in favor of the proposed measures on Thursday night by 380 to 34, in the process accepting a Senate amendment which included 20 million seniors and 250,000 disabled veterans in the rebates package. Senate Democrats had initially wanted to expand the bill even more, to include assistance for unemployed, heating aid to low income families, and tax breaks for home building, but weeks of deadlock were finally broken when the Senate voted 81 to 16 to approve the final version shortly before the House vote.

President Bush is expected to sign the legislation next week, paving the way for tax rebate checks to be sent out in May.

The legislation provides lower-income and middle-income working families, veterans and seniors with tax rebates of between USD300 and USD1,200, depending on their circumstances. These rebates will be subject to a phase-out for taxpayers with adjusted gross income in excess of USD75,000 (USD150,000 for married couples filing jointly). Residents of possessions of the United States will receive similar rebates.

Provisions aimed at small businesses include temporary enhanced small business expensing, and a temporary bonus depreciation.

Under the enhanced expensing provisions, small business taxpayers are allowed to write-off up to USD125,000 (indexed for inflation) of capital expenditures, subject to a phase-out once capital expenditures exceed USD500,000 (also indexed for inflation) until the end of 2010. The package would double the amount that small business taxpayers may write-off to USD250,000 for capital expenditures incurred in 2008, and would increase the phase-out threshold to USD800,000 in 2008.

Under the temporary depreciation measures, small businesses would be allowed to write-off 50% of the cost of depreciable property (e.g., equipment, tractors, computers) acquired in 2008. In subsequent years, businesses will continue to depreciate the remaining cost of depreciable property under the current law-depreciation schedule.

The passage of the "Recovery Rebates and Economic Stimulus for the American People Act of 2008" was welcomed by Bush, who had urged the Senate to put aside bipartisan politics and follow the House's lead by swiftly passing a bill in line with the administration's request.

"This plan is robust, broad-based, timely, and it will be effective. This bill will help to stimulate consumer spending and accelerate needed business investment," Bush commented following the Senate vote.

According to Treasury Secretary Henry Paulson, the Internal Revenue Service will manage the current tax filing season and simultaneously prepare to issue these additional payments starting in early May.

"Payments will be largely completed this summer, putting cash in the hands of millions of Americans at a time when our economy is experiencing slower growth," he announced on Thursday.

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