George Bush Ready To Sign Tax Bill

by Mike Godfrey, Tax-News.com, New York

12 March 2002

George Bush is shortly expected to sign the stimulus bill that sailed through Congress last week, clearing the Senate by 85 votes to 9 on Friday, less than 24 hours after the measure passed the House 417-3.

The bill contains far fewer tax cuts than President Bush initially sought, but will still reduce corporate taxes by $43 billion this year and provide $8 billion to extend unemployment benefits by 13 weeks.

Of greatest interest to financial services firms is a five-year extension of an exemption from US taxes on overseas earnings that are taxed by foreign governments. It expired December 31 but will be renewed retroactively. "Five years is very good," said Edward L. Yingling, the executive director of government relations for the American Bankers Association. "We had been concerned it may have been be a one-year extension."

"I am very pleased that we have passed an economic stimulus bill that will provide help for ... hard-hit workers, give businesses an incentive to invest, and help New York rebuild and recover," Senate Majority Leader Tom Daschle said Friday.

The bill accelerates depreciation for business expenses, providing an immediate 30% depreciation write-off for new investments for the next three years. But it would not repeal the corporate alternative minimum tax, as the White House and the financial services industry initially sought. Other tax provisions include a temporary extension to five years, from the current two, of the period that companies can carry back net operating losses; and several tax incentives for investing in lower Manhattan in New York City.

Senate Democrats took credit for the bill, saying that House Republicans were forced to pare down three previous stimulus packages because of steadfast objections from Democrats in the narrowly divided Senate. "This is basically the package I proposed a couple of months ago," Mr. Daschle said.

House Republicans, along with Mr. Bush, would have preferred a stronger stimulus package with more individual and business tax relief, but promised to continue passing tax bills throughout the year, including legislation to make permanent last year's repeal of the estate tax.

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