CCH has issued a Special Tax Briefing on the Tax Extenders Act of 2009 that was approved this month by the House.
If adopted by the Senate, the bill would provide more certainty to taxpayers and their advisors as they make their financial plans for next year.
Extender legislation often occupies the attention of Congress at this time of year, said CCH principal federal tax analyst Mark Luscombe. There are many provisions in the Tax Code that officially only have a one- or two-year life, because budget rules would make it very expensive to write them into the code permanently. This means that Congress either has to extend them each year, or kill tax breaks that many people find appealing.
The House bill extends several provisions affecting individuals through the 2010 tax year, including the itemized deduction for state and local sales taxes, the additional standard deduction for state and local real estate property taxes, the above-the-line deduction for qualified tuition and related expenses, the above-the-line teachers classroom expenses deduction, the ability to make tax-free distributions from IRAs for charitable purposes, and an extension of special provisions on disaster losses first enacted in 2008 as part of the Emergency Economic Stabilization Act.
These are significant provisions that are very popular, but whats also interesting are some of the expiring provisions that arent in this package, namely the partial exclusion of unemployment benefits and the 65 percent COBRA subsidy that were part of this years stimulus bill, and any fix for the Alternative Minimum Tax in 2010, Luscombe said. Well have to see how these are addressed in further legislation, such as a jobs bill.
The bill also extends dozens of expiring provisions affecting business, notably the research credit. It pays for the extensions with provisions changing the taxation of carried interest, along with heightened information reporting and disclosure requirements for foreign bank and financial accounts.
Taxing the carried interest of investment fund managers as ordinary income has been proposed as a revenue-raising measure several times in the past, but has never made it through the Senate, Luscombe noted. It is usually presented as closing a loophole that benefits a fairly small number of fund managers, but some argue it would affect many more taxpayers than that.
The briefing can be accessed at http://tax.cchgroup.com/Legislation/2009-Tax-Extenders-Act.pdf.
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