Senate Finance Committee Chairman Max Baucus, D-Mont., and House Ways and Means Committee Chairman Sander Levin, D-Mich., have introduced legislation that would extend unemployment insurance and the 65 percent COBRA health insurance subsidy for the unemployed through the end of the year, as well as many expiring tax breaks.

Among the many tax breaks that would be extended are the research and development tax credit, and the election to take an itemized deduction for state and local general sales taxes in lieu of the itemized deduction permitted for state and local income taxes. The bill would also extend through 2010 the additional standard deduction for state and local real property taxes. In addition, it would extend through 2010 the special 15-year cost recovery period for certain leasehold improvements, restaurant buildings and improvements, and retail improvements.

“Our economy is just beginning to show signs of recovery, yet too many hard-working Americans lost their jobs in this recession and we can’t leave them behind,” Baucus said in a statement. “Our bill will provide the tax cuts American businesses need to grow and hire more workers, and it will ensure American families continue to have the support of unemployment insurance and other programs they depend on while we work to create jobs. This bill is the jumpstart our economy needs to help create new job opportunities for American workers and get our economy moving again.”

On the charitable deduction side, the bill would extend through 2010 the increased contribution limits and carryforward period for contributions of appreciated real property (including partial interests in real property) for conservation purposes. It would also extend through 2010 a provision allowing businesses to claim an enhanced deduction for the contribution of food inventory. In addition, it would extend through 2010 a provision that permits tax-free distributions to charity from an Individual Retirement Account of up to $100,000 per taxpayer, per taxable year.


The tax breaks would be paid for in part by changing the taxation of carried interest to prevent investment fund managers from paying taxes at capital gains rates instead of ordinary income rates on investment management services income received as carried interest in an investment fund. A transition rule would apply prior to Jan. 1, 2013.  The bill also includes a package of provisions to curtail abuses of the U.S. foreign tax credit system by multinational companies. It includes rules to prevent splitting foreign tax credits from the foreign income on which taxes were paid. The bill would also prevent taxpayers from claiming the foreign tax credit with respect to foreign income that is never subject to U.S. taxation because of a covered asset acquisition. The bill would also repeal the 80/20 rules for interest paid by resident alien individuals, but would include relief for existing 80/20 companies that meet specific requirements and are not abusing the 80/20 company rules.

“Provisions in this legislation will help companies and state and local governments spur job growth while also providing critical tax relief and economic assistance to American families who were hit hard by the recession,” said Levin in a statement. “By promoting jobs here in the U.S. and cracking down on loopholes that encourage companies to move overseas, we strengthen opportunities for American workers and businesses so that we can continue building on recent economic growth toward a robust recovery. This legislation also contains a vital extension of unemployment and health benefits through the end of the year to help workers and their families make ends meet while they continue to seek out their next job opportunity.”

Another provision in the bill would prevent the Medicare physician payment rates from being reduced by more than 20 percent next month. The provision would provide “reasonable updates” in physician payment rates for the rest of this year and next year. For 2012 and 2013, rates would continue to increase if spending growth on physician services is within reasonable limits, with an extra allowance for primary and preventive care. Rates could not be reduced in 2012 or 2013, but after that rates would return to their current law levels.  Another provision would provide a six-month extension of the temporary increase in the Federal Medicaid Matching Rate.

The bill would also provide funding to support over 300,000 jobs for youth ages 16 to 21 through summer employment programs. 

On the unemployment front, the bill would prevent the Emergency Unemployment Compensation program from phasing out at the end of May. The program provides (depending on a state’s unemployment rate) up to 53 weeks of extended benefits, and would extend the EUC program through December 2010.

The bill also extends federal funding of the Extended Benefits program, which was scheduled to phase out at the end of May 2010. The program provides up to an additional 13 to 20 weeks of benefits in certain states (i.e., 13 weeks for states at or above 6.5 percent unemployment and another seven weeks for states at or above 8 percent unemployment). The bill would extend full funding for the EB program through December 2010.

The bill would also extend the Federal Additional Compensation program, which increases unemployment benefits by $25 a week and was scheduled to phase out at the end of May. The bill would extend FAC through December 2010.

The bill would also eliminate the penalty for part-time employment in the Emergency Unemployment Compensation program. The legislation coordinates EUC benefits with regular benefits by providing states with a number of options to allow EUC claimants to remain eligible for the EUC program when they become newly entitled to state unemployment compensation if switching to state benefits would reduce their weekly unemployment insurance check by at least $100 or 25 percent.

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