The House of Representatives has passed a bill containing a set of tax deductions and extensions, renewable energy incentives, and a provision equalizing the penalty standards for tax preparers and taxpayers.
H.R. 6049 passed by a vote of 263 to 160 after the Ways and Means Committee approved it last week (see Ways and Means Committee Approves Eased Tax Preparer Provision). The American Institute of CPAs lobbied heavily for the tax return preparer provision and praised passage of the bill.
"Today's action by the House is a significant step forward in our fight to solve a critical problem for CPAs nationwide," said AICPA CEO Barry Melancon (pictured) in a statement.
The provision modifies the penalty on understatement of taxpayer's liability by tax return preparers, conforming the penalty standards for return preparers with the standards for taxpayers. For undisclosed positions, the penalty standard for return preparers is reduced to substantial authority. For disclosed positions, a return preparer generally must have a reasonable basis for the position. For positions involving tax shelters and certain reportable transactions, a return preparer must have a reasonable belief that the position would more likely than not be sustained on the merits.
The legislation corrected a law passed in May 2007 that raised the reporting standards for tax return preparers to a level higher than that required of taxpayers. The standard applicable to preparers for undisclosed positions was raised from "realistic possibility" to a "reasonable belief that the position would more likely than not be sustained on its merits." The preparer standard for disclosed positions was raised from "not frivolous" to "reasonable basis."
Melancon said the unequal thresholds produced by that law could create conflicts of interest between preparers and their clients, and consequently would affect the nature of taxpayers' representation. Rep. Joseph Crowley, D-N.Y., and Jim Ramstad, R-Minn., originally introduced H.R. 4318, a bill to equalize the tax return reporting standards, which was later incorporated into H.R. 6049.
The larger bill also includes a set of extensions for various tax deductions that have either recently expired or are set to expire. They include deduction of state and local sales tax, tuition and other education expenses, out-of-pocket expenses by teachers, property taxes for non-itemizers, and an expansion of the refundable child tax credit to taxpayers earning $8,500 a year. H.R. 6049 will also provide tax incentives for businesses to invest in new technology by extending the research and development credit and active financing provisions.
The legislation encourages the use and production of renewable energy through a six-year extension of the investment tax credit for solar energy; three-year extensions of the production tax credit for energy derived from biomass, geothermal, hydropower, landfill gas and solid waste; a one-year extension of the PTC for energy derived from wind; and tax incentives for carbon capture and sequestration demonstration projects.
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