House and Senate leaders made last-minute adjustments to the economic stimulus package as the final bill headed for a vote.

Among the changes were an expansion of the net operating loss carryback provision that would allow companies to deduct their current tax losses from their tax returns going back five years and claim refunds. Negotiators dickered over whether companies with up to $15 million or $5 million in gross receipts could qualify for the tax break. Sen. Olympia Snowe (pictured), R-Maine, pushed for expansion of the tax break, according to The New York Times.

Businesses have the choice to carryback net operating losses three, four or five years. The new treatment will apply only to NOLs for any tax year beginning or ending in 2008. The normal NOL carryback period of two years will return for 2009.

Other adjustments were made in recent days to President Obama’s signature program, the Making Work Pay refundable tax credit. It now allows a credit against income in an amount equal to the lesser of 6.2 percent of an individual’s earned income or $400 ($800 for married couples filing jointly). That’s down from $500 for individuals and $1,000 for couples. The credit applies in full for individuals whose modified adjusted gross income does not exceed $75,000, or $150,000 for couples. The credit phases out above that limit.

The conference agreement increased the refundable portion of the child tax credit for 2009 and 2010, according to a summary of the tax provisions in the package issued by CCH. The agreement sets the income threshold at $3,000. The agreement also raises the first-time homebuyer tax credit from the current maximum of $7,500 to $8,000. It also eliminates any required repayment to the IRS after 36 months in the home.

“However, these enhancements apply to purchases of a principal residence by a first-time homebuyer after Dec. 31, 2008,” noted CCH. “Purchases on or after April 9, 2008, and before January 1, 2009, continue to be governed by the original first-time homebuyer credit enacted last year. The credit phase-out that starts for taxpayers with AGI in excess of $75,000 ($150,000 for joint filers) continues to apply to both 2008 and 2009 purchases.”

The agreement also includes a $69.8 billion one-year patch to the alternative minimum tax because legislators were unsure if they could pass the fix later in the year, given the state of the economy. The patch raises the exemption amount slightly above the 2008 patch levels. The 2009 exemption amounts are $70,950 for joint filers and surviving spouses, up from $69,950 in 2008; and $46,700 for singles and heads of households, up from $46,200.

A new car deduction added by the Senate allows purchasers of new vehicles in 2009 to take an above-the-line deduction on the state and local sales taxes they paid. However, the conference agreement put two limits on the new deduction, CCH noted.

The deductible sales or excise taxes cannot exceed the portion of the tax attributable to the first $49,500 of the purchase price of any one vehicle; and any deduction will be phased out for any tax year in which the purchaser has adjusted gross income exceeding $125,000 ($250,000 for joint returns).

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