I’ve finally finished all 169 pages of the Stabilization Bill, doesn’t Nancy Pelosi look surprised? I am not sure how many members of Congress actually read the whole thing…
By far the hardest part to read was this last section, Division C – Tax Extenders and Alternative Minimum Tax Relief.
This is where all the really good stuff is, 72 pages of pork. It was hard to read because almost every paragraph was a new topic and there was no real order to it.
Initially I was expecting this to be mostly related to the AMT – based on the title – and the first few pages actually are, but then it deviates to things you’d never expect.
So here it is, the explanation of pages 97-169 of the Emergency Economic Stabilization Bill. Division A and Division B were already explained in earlier posts. Again I apologize for the length, there’s a lot of lipstick that’s been added to this bloated pig of a bill…
The exemption amount is increased to $69,950 for 2008, this is up from $46,200. There is also an increase in the refundable credits an individual with lots of unused credits can qualify for. The specific areas that are increased are rather complex, so I am not going to get into it, but if you pay the AMT make sure to check it out. The deduction for state and local taxes increases until 2010, and school teachers can deduct “qualified related expenses” until the end of 2009 now. If you don’t itemize your taxes you can deduct property taxes until 2009, and you can donate to charity from your individual retirement plans tax-free also until 2009.
Business tax provisions make up the next section, and research credits (for conducting research of “qualified types”). Both are extended until 2009, but expired in 2007, so chances are 2008 is a loophole year. There are lots of other complex business exemptions that I don’t fully understand because they are only explained by extending the years – so if you file a lot of exemptions make sure to verify that they are all extended to 2009 or later.
Then there are some interesting clauses like these:
Qualified restaurant improvement tax credits are extended. New construction of “qualified restaurant property” has a 15 year recovery period for depreciation of improvements, as long as these improvements do not include enlargements to the property, elevators/escalators, common areas, or internal structure.
An increase on the rum excise tax to Puerto Rico and the Virgin Islands. The tax increase applies to any “distilled spirits” brought into the US after December 31st, 2007 and is in effect until Jan. 2010. Also in Puerto Rico: the income deduction for “domestic production activities” (not fully explained) is extended from 2 years to 4 years.
American Somoa gets an extension on it’s economic development credits for four more years to aid in “tax relief and encourage the health care act”
The tax credit for Mine Rescue Team training is also extended until December 2009.
Educational “Zone Academy Bonds” are now allowing $400,000,000 to be spent on the bonds, as long as 100% of the proceeds go to “qualified purposes”. These bonds are distributed based on the poverty levels in each state, and if your state doesn’t use all they are allotted it will carry over for two years. I think a Zone Academy is a poor public school, and qualified purposes include: post secondary educational training, increasing graduation rate, increasing employment, improving the curriculum, or preparing for the “rigors of college and the increasingly complex workforce”. Most of these schools are located in “empowerment zones” that are communities where 35% or more students qualify for “free lunch” programs.
If you hire a Native American Indian your company gets an employment credit until 2009, but this originally expired in 2007, so 2008 is probably a loophole year. And there is a clause simply extending the “accelerated depreciation for business property on Indian Reservations” until 2009, but I am not sure what accelerated depreciation really means.
Railroad track maintenance tax credits are also tacked in here. The tax credit for track repair and maintenance is extended to January 2010, with clauses allowing AMT credits as well.
Congress gave out a loan for a motorsports racing track facility – this loan needed to be paid back in 7 years or
iginally but now needs to be paid in 9 years (from 2007 to 2009) , although this is still called the “seven-year cost recovery period” in it’s title.
Environmental Remediation is cleaning up pollutants in the environment, and the costs associated with this are now reimbursed by the government until December 2009 – I am sure this is in a limited manor, but the original details of this clause are not explained, just the date extension.
Hurricane Katrina Work Credits – if you are an employee affected by Hurricane Katrina your tax credit extended from 2 years to 4 years.
The tax deduction for “qualified computer contributions” has been enhanced and extended to 2009.
The tax incentives for investing in Washington D.C. have been extended to 2009 or later for certain incentives that aren’t fully explained.
The amount you can donate and deduct regarding food contributions has been increased and the date extended to 2009. There is also a temporary suspension of the limit on charitable contributions that farmers and ranchers can make regarding food.
The amount of books you donate to charity has also been increased and the date extended to 2009. It doesn’t specify what the amount has been increased to or from.
The duty tax on wool and wool products or research has been extended. The “Harmonized Tariff” schedule is now in effect until 2014, which includes the temporary reduction in wool duty taxes for certain wool products.
There is now a permanent authority for undercover operations relating to terrorists. And you must now disclose to “appropriate officials” any information regarding terrorist activities.
The income threshold to calculate the refundable portion of a child tax credit is now $8,500 beginning Dec. 31st 2007.
There are some provisions on film and television productions and what expensing rules they qualify for. Movies and TV shows don’t qualify if they spend more than $15,000,000 (15 million) on their total aggregate costs. But there are qualified films that get around that if they do certain things in the US and file a W-2 for all employees.
There is an exemption for the tax on “certain wooden arrows designed for use by children”. If there is a wooden arrow that has a shaft of “all natural wood” with no lamination or artificial spine enhancers and is less than 5/16th of an inch in diameter, and is not suitable for certain bow types that are not explained fully, then it is exempt from this tax. I didn’t know we had a tax on children’s toy arrows, but apparently in certain cases it’s been waived.
The Exxon-Valdez oil spill settlement now treats all recipients as if they are engaged in a fishing business “without regard to the commercial nature of the business” – so even if you don’t own a fishing business you are treated as if you do for tax purposes of the settlement. And you can donate the settlement money to a retirement plan as long as it is under $100,000 or the total of the money received – but this cannot exceed the normal regulations for contributions in a given year. There are other specific rules for the types of retirement plans, IRA’s and trusts and stuff – so if you receive this settlement and plan on donating to your retirement make sure you read up on all the details.
Certain farm equipment is now treated as “5-year property” – which involves deduction rates for the cost of depreciable tangible personal property bought for use in your trade or business. This includes any machinery used for farming businesses – not including grain bins, cotton gins or assets, fences, and land improvements.
The penalty for understating your tax liabilities has been modified. You now have to pay up to $1000 or 50% of the income that you did not state – which ever is greater. But there is an exemption if you show that there is “reasonable cause” for why you didn’t file.
After all those little paragraphs and random bacon slices there is a large Act – The Paul Wellstone and Pete Domenici Mental Health Parity and Addiction Equity Act of 2008. This is a full fledged new act in the middle of the bill.This act requires that mental health be treated equally with other medical and surgical procedures and that coverage be at least equal to the most common medical/surgical coverage at the current time. There are certain groups, like really small businesses (2 people) that can opt out. A small business that spends too high of a percentage of its income on this can also elect to opt out, but these situations are fairly tightly controlled. If you apply for an exemption it will only be granted after you have paid for the coverage for 6 months.
The cost associated with mental health coverage will be determined by an actuary and can increase each year as they see fit. The Secretaries in charge of this bill (Sec. Labor, Sec. Human Services, Sec. Treasury) can audit at any time within 6 years from when a company began compliance and take measures to avoid duplicate actions.
Then there are three pages of basically identical text explaining the same stuff again.
This act goes into effect one year from the date of the bill passing, so October 3rd 2009.
Then there is a section titled simply: “Other Provisions.” In the Other Provisions section is an area on improving rural schools and communities. Originally this came from the “Secure Rural Schools and Community Self-Determination Act of 2000″. It is now changed to increase funding for schools and roads/communities that: increase the ecosystem, implement stewardship objectives such as trail and infrastructure maintenance, or improve cooperat
ive relationships between people that use Federal land and the Federal Agencies that are in charge.
New things under Federal Jurisdiction (Department of Interior) include: the Oregon and California Railroad, and the Coos Bay Wagon Road. Funding for these projects is $500,000,000,000 ($500 million) the first year (2008) and 90% of itself for each following year.
States and Counties that contain federal land will get federal funding to take care of the land, and these payments have been increased to either 25 of 50% of operating costs in various situations. If a state or county chooses to accept government money they must use at least 85% of it for certain allowable projects, and have to continue taking it until 2011. The payments will have the same proportional distributions as they did in 2006.
In the future the deadline for being approved for funds is September 30th. And to be approved the entire committee in charge needs to agree. If your project is rejected you will be notified in 30 days, and if you are approved there will be a list distributed with your project on it.
There is also going to be a pilot study designed to see what percentage of timber can be sold and harvested most effectively. This study will get $1,000,000,000 ($1 million) in funding, and will report results in 2010. In this study 50% of the funds must be used for roads, streams, and watershed areas.
After “Other Provisions” is a section titled “Miscellaneous Provisions” - this keeps getting better, eh?
In this section it is decided that all funds that are gathered from this act shall be deposited directly into the US Treasury. There is new funding for abandoned mines that are reclaimed – $9,000,000,000 ($9 million) this year for the reclaiming, and $9 next year.
There is a large section determining federal response to disaster zones caused by Hurricane Ike in the “heartland”. Any floods, tornadoes, or storms that damaged the Midwest, and were declared disaster zones get the same basic funding as Katrina victims received. Most of this bill involves simply changing “hurricane Katrina” to “Midwestern disaster area”. There are a few differences between the Katrina coverage and this, including that this act expires in 2011 where Katrina payments go until 2013. Housing credits are increased from $8 to $18 dollars, and the government will pay for all demolition and debris clean up resulting from the storms.
There is also a Midwestern Tax Credit Bond issued to help pay for this, and there is a no limit on the amount that you can give to charity regarding this cause. There is also a tax credit for employees affected that decide to go back and work in the same places – employee retention tax credits, and volunteers that are driving from far away have their mileage reimbursement increased but it doesn’t say to what.
If your house is damaged the government will help you pay the mortgage on your primary residence until 2013, it will also help pay public utilities that are damaged, and private businesses. The amount given is $2,000 times the population of select counties.
There are changes in National Disaster Relief as well – the President is no longer the only person who can declare a disaster area, it can be “Federally declared” as well. And losses are tax deductible if they are more than 10% of your gross income. Individuals also get $500 for loss of capital. The costs of repair and reconstruction will be paid up to $150,000 for each person if your primary residence is destroyed and it is a “qualified disaster assist property”. This is an increase from previous spending.
There is a lot of stuff in this section, but the most interesting is this: If you are a foreign worker or corporation and your home country does not have a comprehensive income tax then you need to pay US income taxes on all earnings. There are several exceptions of course, there always are. And even if you pay national income taxes in your native country you need to pay US income tax on 20% of your income.
And that’s it! That’s all 169 pages!!
Phew.
Check out Parts A and B Here:
Related posts:
