The Senate has approved the economic stimulus bill after three Republican senators agreed to vote for the massive package aimed at reviving the economy.

The Senate passed the American Recovery and Reinvestment Act on Tuesday by a vote of 61 to 37. Republican senators Susan Collins and Olympia Snowe of Maine and Arlen Specter of Pennsylvania voted for the bill along with all 56 Democratic senators and two independents. Commerce Secretary nominee Judd Gregg, R-N.H., abstained.

President Obama pushed aggressively for passage of the bill, warning in a prime-time news conference Monday night of financial catastrophe if the bill did not get approved. “If you delay acting on an economy of this severity, then you potentially create a negative spiral that becomes much more difficult for us to get out of,” he said.

The Senate version of the bill, estimated by the Congressional Budget Office at a cost of $838 billion, must now be reconciled in a conference committee with the House version, estimated to cost $819 billion. Obama wants to sign the final legislation before the President’s Day break.

One of the differences in the Senate version is a one-year patch for the alternative minimum tax estimated at $69.8 billion, which isn't included in the House version of the bill. There are other differences in the homebuyer credit, a tax break for new car buyers and other areas.

The House version of the homebuyer credit removes the repayment requirement for the refundable first-time homebuyer credit of up to $7,500, unless the home is resold within 36 months of purchase, according to an analysis by the Tax & Accounting division of Thomson Reuters. It would apply to homes bought after Dec. 31, 2008, and before July 1, 2009. The Senate version, on the other hand, would provide a one-time 10 percent tax credit of up to $15,000 on the purchase of a principal residence, and it wouldn’t have to be a first-time purchase.

The Senate credit isn’t refundable and isn’t recaptured as long as the home is owned for at least 24 months. To make the Senate credit worth more to lower-income taxpayers who couldn’t take full advantage of a $15,000 credit on their tax returns, the homebuyer could elect to take half the credit in each of two years.

In terms of the tax break for new car buyers, only the Senate bill creates an above-the-line deduction for interest paid on car loans, and for state and excise sales taxes on the purchase of new cars and light trucks. The deduction applies to interest on a debt of up to $49,500, incurred after Nov. 12, 2008, and before Jan. 1, 2010, to acquire the vehicle. The sales tax deduction also would apply only to taxes paid on up to $49,500 of a vehicle's cost. The amount of taxes qualifying for the deduction would phase-out between AGI of $125,000 and $135,000 for singles, and $250,000 and $260,000 on a joint return.

Both bills contain a new refundable tax credit of up to $500 for working individuals and $1,000 for working families, but the House version starts to phase-out at adjustable gross income levels above $75,000, or $150,000 for joint filers, while the Senate version phases out at $70,000 for individuals and $140,000 for joint filers. The credit would apply for 2009 and 2010 only, and could be claimed as a reduced amount of income tax wage withholding or through a credit on a tax return.

Both bills increase the eligibility for the refundable child tax credit in 2009 and 2010, but they contain different threshold levels. The House version lowers the income threshold from $8,500 to $0, while the Senate version lowers the income threshold from $8,500 to $8,100.

Both bills also expand the HOPE education tax credit for 2009 and 2010, making it available for four years at a rate of up to $2,500 of the cost of tuition and related expenses per year (100 percent of the first $2,000 of expenses and 25 percent of the next $2,000).

The credit would phase-out starting at AGI over $80,000, or $160,000 for joint filers. The House bill makes 40 percent of the credit refundable, but the Senate version only 30 percent, Thomson Reuters analysts noted.

The Senate bill, but not the House bill, allows computer technology and equipment to qualify as an education expense that can be paid from a Section 529 plan for 2009 and 2010. Only the Senate bill provides a temporary suspension of federal income tax on the first $2,400 of unemployment benefits received in 2009. In addition, only the Senate bill increases the maximum monthly exclusion for employer-provided transit and vanpool benefits (currently $120) to the same level as the exclusion for employer-provided parking (currently $230). Both the House and Senate bills also contain numerous energy and business tax incentives.

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