The House passed a new version of its patch for the alternative minimum tax that eliminates a controversial provision to raise taxes on the carried interest earnings of managers of private equity firms and hedge funds.
The version differs from the one passed by the Senate last week, however, by still including an attempt to pay for the AMT patch with other offsets. The measure passed by a vote of 226-193, but the White House has threatened to veto the measure.
The House had earlier passed an AMT fix of its own, but it was filibustered by Senate Republicans. The Senate instead passed a bill that eliminated any offsets.
"This new bill removes those controversial pay-fors and incorporates provisions that have been suggested to receive broad support in the Congress," said House Ways and Means Committee Chairman Charles Rangel, D-N.Y., in a statement. He added that the House is "giving the Senate one more chance to do the right thing and pass this critical tax relief without adding to the deficit."
H.R. 4351 would extend for one year AMT relief for nonrefundable personal credits and increase the AMT exemption amount to $66,250 for joint filers and $44,350 for single filers. The legislation would also increase the eligibility for the refundable child tax credit in 2008 to more than 12 million children by lowering the income floor for qualification to $8,500.
To pay for the $53 billion AMT patch, the bill closes a loophole that allows hedge fund managers to defer compensation in offshore accounts, delays implementation of worldwide allocation of interest, clarifies the economic substance doctrine, creates a uniform penalty for failure to file partnership and S corporation returns, increases information return penalties, and increases general failure-to-file return penalties by taking inflation into account.
However, Treasury Secretary Henry Paulson warned that the latest bill is unacceptable. "Until legislation is enacted that provides AMT relief for 2007, the IRS will not be able to complete substantial preparations for the upcoming filing season, meaning as much as $75 million in refunds will be delayed for weeks," he said in a statement. Senate Republicans also threatened to block the measure.
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