Tax Extender Agreement Reached
House, Senate, White House, Agree to Tax Relief Package to Protect Families from the Alternative Minimum Tax, Extend R&D Credit
WASHINGTON -- Senate Finance Committee Chairman William V. Roth, Jr. (R-DE) and House Ways & Means Chairman Bill Archer (R-TX) today announced that a tentative agreement has been reached with the Administration on a tax relief package that will protect at least 1 million families from higher taxes next year due to the Alternative Minimum Tax (AMT). The cost estimate for the package is roughly $15B over 5 years and $17B over 10 years.
The package - commonly referred to as the tax "extenders" package - would renew several expiring tax credit provisions including the R&D Tax Credit, the Work Opportunity Tax Credit, and the Welfare-to-Work Tax Credit. A summary of the provisions follows this release, and reporters can access revenue tables tomorrow, November 17th, at the Joint Committee on Taxation website at www.house.gov/jct.
"Among other provisions, this bill corrects an upcoming problem for millions of middle-income Americans who otherwise would be hard hit by the Alternative Minimum Tax. It helps people who are leaving the welfare rolls as well as other hard-to-place workers, get jobs. It also extends the critically important research credit, which helps businesses expand and create jobs and has helped to make American business the best in the world. It includes the extension of an education and training program for workers who are adversely impacted by the reduction of barriers to foreign trade. Finally, I am pleased to report that it includes a tax credit for electricity produced by the burning of poultry litter," said Senate Finance Committee Chairman William V. Roth, Jr. (R-DE).
"This is a significant victory for families, workers and taxpayers. Because of our action, millions of families can breathe easier knowing they won't get hit with a surprise tax hike for the next three years because we fixed the AMT. Finally, this package will help keep American companies on the cutting edge of research and development which will lead to new products, better medicines and a higher standard of living for consumers," said House Ways and Means Committee Chairman Archer.
Summary of Tax Extender Provisions Tentative Agreement
Agreed to by House, Senate and the Administration
November 16, 1999
Tax Relief for Individuals and Families/Alternative Minimum Tax (AMT) Relief: Helps at least 1 million Americans avoid a tax increase in 1999 by allowing filers to offset fully regular tax liability (without regard to the minimum tax) by the personal nonrefundable credits, such as child tax credit, the Lifetime Learning tax credit, the Hope scholarship tax credit, the dependent care tax credit, and other qualified credits. Extension: 3 years, through 12/31/01.
Employer-Provided Educational Assistance: Extends the tax exclusion for employer-provided educational experience for undergraduate-level courses only. Generally, educational expenses paid by an employer for its employees are generally deductible by the employer. Extension: approximately 2.5 years, through 12/31/01.
Research & Experimentation Tax Credit: Extends the research credit and include an increase in the alternative incremental credit. Research credits attributable to the period after June 30, 1999, and before October 1, 2000, could not be taken into account by the taxpayer until October 1, 2000. The expired provision generally provides for a 20% tax credit of qualified research expenditures. Extension: 5 years, through 6/30/04.
Work Opportunity Tax Credit (WOTC): Current law provides employers who hire individuals from eight selected groups (including qualified veterans, food stamp recipients, SSI recipients, and high-risk youth) a tax credit up to $2,400 for full-time qualified employees and $1,200 for part-time qualified employees. Extension: 2.5 years, through 12/31/01.
Welfare-to-Work Tax Credit: Current law provides employers who hire former welfare beneficiaries a tax credit of up to $8,500 per qualified employee.
Extension: 2.5 years, through 12/31/01.
Qualified Zone Academy Bonds (QZABs): Provides tax-exempt bonding for the construction of qualified school buildings. Extension: 2 years, through 12/31/01.
Brownfields Environmental Remediation: Current law permits taxpayers to deduct certain environmental remediation measures at qualified contaminated sites known as "brownfields." Extension: 1 year, through 12/31/01.
Subpart F for Active Financing Income: Current law provides temporary exceptions from subpart F foreign personal holding company income, foreign base company services income, and insurance income for certain income that is derived in the active conduct of a banking, financing, or similar business, or in the conduct of an insurance business. Extension: 2 years, through 12/31/01.
Suspension of Income Limitation on Percentage Depletion: Current law permits suspending the 100 percent-of-net-income limitation for certain marginal properties under IRC §613A(c)(6). Extension: 2 years, through 12/31/01.
Electricity Produced by Wind and Closed-Loop Biomass Tax Credit: Current law provides a tax credit for electricity produced from either qualified wind energy or qualified "closed-loop" biomass facilities. The credit would be modified to include electricity produced from poultry litter. Extension: 2.5 years, through 12/31/01.
Rum Cover Over for Puerto Rico: Increase amount of rum excise tax that is covered over to Puerto Rico and the Virgin Islands (from $10.50 per gallon to $13.25 per gallon). Under current law, $10.50 of every $13.50 in excise taxes collected on a proof gallon of imported rum (without regard to the country of origin) is sent to Puerto Rico and the U.S. Virgin Islands for whatever use they determine.
Extension: 2.5 years, through 12/31/01. NOTE: This provision will accompany appropriations legislation.
Generalized System of Preferences: Extension: Through 9/30/01.
Trade Adjustment Assistance: Extension: Through 9/30/01. NOTE: This provision will accompany the appropriations legislation.
The bill is paid for entirely in 2000 and partly in 2001. The rest of the financing for the bill would come from the non-Social Security budget surplus that is projected to be $294B over five years and $996B over 10 years.
Several revenue raising provisions included in the Senate extenders bill have been set aside as funding sources for the Africa/CBI trade bill conference. Those provisions include:
• Impose limitation on prefunding of certain employee benefits (sec 419A).
• Increase to 15% from 10% optional withholding rates for nonperiodic payments from deferred compensation plans.
• Limit use of non-accrual experience method of accounting to amounts to be received for the performance of qualified professional services.
• Prevent duplication of loss through assumption of certain liabilities.
• Require consistent treatment and provide basis allocation rules for transfers of intangibles in certain nonrecognition transactions.
Next Article Previous Article