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IRS Issues Winter Statistics Of Income Bulletin

by Mike Godfrey,, Washington

15 March 2007

The Internal Revenue Service on Monday announced the release of the Winter 2006-2007 issue of the Statistics of Income Bulletin. Highlights include articles on individual income taxes, split-interest trusts and tax-exempt organizations.

Preliminary data for tax year 2005 indicated that taxpayers filed 134.5 million US individual income tax returns, an increase of 1.6% from the preliminary estimate of 132.4 million returns filed for tax year 2004. Adjusted gross income (AGI) increased by 8.9% from the previous year to $7.4 trillion for 2005, and taxable income increased 9.5% to $5.1 trillion.

The alternative minimum tax rose 31.6% to $15.9 billion, while total income tax increased 11.8% to $928.3 billion. Other notable changes were: net capital gains, the second largest component of adjusted gross income, rose by 36.7% to $604.4 billion; statutory adjustments to total income increased 10.2%, from $94.5 billion to $104.2 billion; total deductions increased 8.4% to $1,665.6 billion; and total tax credits used to offset income tax liabilities increased 5.7% to $54.3 billion. The total earned income credit, including the refundable portion, increased 6.1% to $43.1 billion for tax year 2005.

For tax year 2004, taxpayers filed 132.2 million returns, of which 89.1 million (or 67.4%) were classified as taxable returns. This represented an increase of 0.2% in the number of taxable returns from tax year 2003. Adjusted gross income (AGI) on these taxable returns rose 9.0% to $6,266 billion, while total income tax showed the first increase in 4 years, rising 11.2%. Also for the first time in 4 years, the average tax rate for taxable returns rose, increasing 0.3 percentage points to 13.3% for 2004. Taxpayers with an AGI of at least $328,049, the top 1% of taxpayers, accounted for 19% of total AGI, representing an increase in income share of 2.2% from the previous year. These taxpayers accounted for 36.9% of the total income tax reported, an increase from 34.3% in 2003.

In filing year 2005, some 124,292 Split-Interest Trust Information Returns (Form 5227) were filed, an increase of 0.8% from filing year 2004. Charitable remainder unitrusts continued to be the most common trust type, increasing by 1.6%, or 1,450 returns, between 2004 and 2005. Charitable lead trust filings increased the most, 9%, to 6,168 in 2005. The number of returns filed for charitable remainder annuity trusts decreased by 4.2% between 2004 and 2005. Total net income reported for charitable remainder trusts (CRTs) increased by 67.4% from 2004 to 2005, primarily due to an exceptionally large increase in the value of capital gains reported in 2005. Total net capital gains reported for CRTs increased by 119.2% from filing year 2004 to filing year 2005.

During calendar years 2004 and 2005, tax-exempt organizations filed an estimated 36,064 Forms 990-T, Exempt Organization Business Income Tax Return, for tax year 2003, ending a 4-year decline in annual Form 990-T filings. After offsetting $8.4 billion of total gross unrelated business income (UBI) with a nearly equal amount of total deductions, the resulting unrelated business taxable income (less deficit) for 2003 was $23.2 million. Positive unrelated business taxable income reported on Form 990-T increased by 20.5% between tax years 2002 and 2003, totaling $780.1 million, and the associated unrelated business income tax (UBIT) rose 13.3%, to $219.9 million. After adjusting UBIT with certain credits and other taxes, the resulting total tax reported on Form 990-T was $220.9 million.

About 3.8% of the 263,353 Internal Revenue Code section 501(c)(3) nonprofit charitable organizations that filed Forms 990/990-EZ, Return of Organization Exempt From Income Tax/Short Form Return of Organization Exempt From Income Tax, also filed Forms 990-T to report UBI. Overall, nonprofit charitable organizations that filed Forms 990/990-EZ reported an aggregate $1,072.2 billion of total revenue for tax year 2003, of which under one-half of 1 percent, or $4.2 billion, was attributable to UBI.

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