The House has passed a bill that includes extensions of various expiring tax credits and deductions, including the R&D tax credit and incentives for renewable energy, along with a provision equalizing the penalty standards for tax preparers and taxpayers, but its fate remains uncertain as it faces the threat of a veto.
The House took the bill passed by the Senate and split it into four separate parts with some changes (see House Passes AMT Patch and Disaster Relief Tax Breaks). The three other parts—including a temporary "patch" for the alternative minimum tax, tax breaks for victims of natural disasters and a law mandating parity for mental health insurance benefits—passed as separate bills earlier in the week without a compensating "offset" to pay for the AMT patch.
However, the House version of the tax extenders bill includes a number of offsets designed to raise revenue, limiting Section 199 tax breaks to major oil and gas companies and taxing individuals who receive deferred income on a current basis, which would increase taxes on many hedge fund managers.
The House passed H.R. 7060, "The Renewable Energy and Job Creation Tax Act of 2008," on Friday, but the White House has threatened to veto the bill if it includes the offsets and the House's version doesn't agree with the Senate's version. The bill as it stands provides for deductions of state and local sales tax, tuition and other education expenses, out-of-pocket expenses by teachers, and property taxes for non-itemizers. It also expands the refundable child tax credit to taxpayers earning $8,500 a year and enhances depreciation for restaurants.
The renewable energy provisions include an eight-year extension of the investment tax credit for solar energy; 2.75-year extensions of the production tax credit for energy derived from biomass, geothermal, waves and tides, hydropower, landfill gas, and solid waste; a one-year extension of the PTC for energy derived from wind; tax incentives for coal electricity plants that capture and sequester carbon dioxide; incentives for the production of renewable fuels such as biodiesel and renewable; and incentives to encourage energy efficient products, such as plug-in hybrid cars, and incentives for energy conservation in both.
Several energy provisions differ from the Senate's version of the bill. The House version eliminates a Senate provision that provided a tax credit for rebuilding refineries to process heavy oil produced from tar sands.
"We've put together a bill that makes a lot of sense on the issues - tax relief for families and businesses, energy independence and creating new, green jobs for our economy," said Ways and Means Committee Chairman Charles B. Rangel, D-N.Y.
The bill also modifies the penalty on the understatement of taxpayer's liability by a tax return preparer. It conforms the penalty standards to return preparers with the standards for taxpayers, a provision heavily promoted by the American Institute of CPAs. 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, the return preparer must have a reasonable belief that the position would more likely than not be sustained on the merits.
The AICPA urged Congress to reach bipartisan consensus on the legislation. "The tax bills of millions of Americans are affected by the provisions in the extenders legislation," said AICPA president and CEO Barry Melancon in a statement. "They deserve to know whether the deductions and credits will continue to be available to them so they can plan for personal and business expenses. In addition, it's critical for tax administrators to know what Congress intends because tax forms have to be revised, printed and mailed by the end of the year."
The bill also extends for one year, until Dec. 31, 2009, a provision for active financial services income. Like their foreign-based competitors, U.S. financial services firms—including manufacturers and leasing companies—will only pay a current tax in the country where their foreign operations are located.
On Sunday, the House took up two alternative versions of the tax legislation to try to resolve the impasse with the Senate, but withdrew both bills after it became clear that they would not pass in the Senate.
Register or login for access to this item and much more
All Accounting Today content is archived after seven days.
Community members receive:
- All recent and archived articles
- Conference offers and updates
- A full menu of enewsletter options
- Web seminars, white papers, ebooks
Already have an account? Log In
Don't have an account? Register for Free Unlimited Access