Senate Panel Unveils Economic Recovery Measures

by Mike Godfrey, Tax-News.com, Washington

27 January 2009

United States Senate Finance Committee Chairman Max Baucus (D-Mont.) has unveiled economic recovery provisions for inclusion in the American Recovery and Reinvestment Act of 2009, including USD275bn in tax cuts and investments intended to create jobs in fields like green energy, highways, and health care, and provide relief for working families and businesses.

The plan, which contains similar measures to those unveiled by the House Ways and Means Committee, will be formally considered by the Finance Panel in the coming week. The bill also contains approximately USD180bn in additional investments help the unemployed keep health care coverage and find new work, and to inject cash into struggling state economies.

“This country is in a world of economic hurt, and Congress has to act boldly now to stabilize the situation. With the right mix of tax cuts and investments, the American Recovery and Reinvestment Act will create green energy jobs, highway jobs, health care jobs, and other opportunities for folks to get back on their feet. We can make an immediate difference in folks’ financial situations by cutting taxes for struggling families and businesses, too,” said Baucus.

The Finance Panel's bill includes the following tax relief measures:

Individuals:

• Making Work Pay Credit: an individual tax credit in the amount of 6.2 % of earned income not to exceed USD500 for single returns and USD1,000 for joint returns in 2009 and 2010.
• Seniors, Disabled Veterans and SSI: a one-time payment of USD300 to Social Security beneficiaries and SSI recipients receiving benefits from the Social Security Administration and Railroad Retirement beneficiaries.
• Temporary Suspension of Taxation of Unemployment Benefits: federal income tax temporarily suspended on the first USD2,400 of unemployment benefits per recipient.
• Expansion of the Earned Income Tax Credit: an increased credit for three or more children and additional marriage penalty relief for married couples.
• Expansion of the Refundable Child Tax Credit: increased eligibility for the refundable child tax credit in 2009 and 2010 by lowering the threshold to USD6,000.
• American Opportunity Tax Credit: a USD2,500 higher education tax credit that is available for the first four years of college
• Computers as qualified education expenses in 529 Education Plans: computers and computer technology to qualify as qualified education expenses.
• Homeownership Tax Credit: modifies the USD7,500 tax credit for home purchases that occur after 2008 and before July 1, 2009.

Businesses:

• Increase of the Net Operating Loss Carry Back Period: carry back period for net operating losses extended from two years to five years for NOLs arising in taxable years ending in 2008 and 2009.
• Delayed Recognition of Certain Cancellation of Debt Income: Certain businesses allowed to recognize cancellation of indebtedness income over four years for specified types of business debt repurchased by the business after December 31, 2008 and before January 1, 2011.
• Extension of Elective Expensing (Section 179): USD250,000 expensing limit for 2008 extended to 2009.
• Extension of Bonus Depreciation: Extension of bonus depreciation for calendar year 2009 at 50% for trades and businesses.
• Extension of Monetization of Accumulated AMT and R&D Credits in Lieu of Bonus Depreciation: extends the provision contained in the Foreclosure Prevention Act of 2008 and allows AMT and loss taxpayers in 2009 to receive 20% of the value of their old AMT or research and development (R&D) credits to the extent such taxpayers invest in assets that qualify for bonus depreciation. The amount is capped at the lesser of 6% of outstanding and unused AMT and R&D credits or USD30m.
• Expansion of the Work Opportunity Tax Credit: adds homeless veterans and disadvantaged youth as qualified target groups for WOTC.
• New Markets Tax Credit: authorizes an additional USD1.5bn for the 2008 allocation round and an additional USD1.5bn for the 2009 allocation round.
• Industrial Development Bonds: modernizes certain tax exempt qualified small issue bonds or industrial development bonds (IDBs) for facilities that create or manufacture intangible property. The proposal would also clarify which physical components of any given facility are eligible for such tax exempt financing.
• Duty Refund Recollection: prohibit US Customs and Border Protection (CBP) from demanding that US lumber, steel, and other companies repay duties that CBP collected on Canadian and Mexican imports, and then distributed to the companies between 2001 and 2005.
• Small Business Capital Gains: increases the exclusion for individuals on the gain from the sale of certain small business stock held for more than five years from 50% to 75%.
• Five-year Carryback of General Business Credits: extends the carryback period for general business energy credits from one year to five years.

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