Senate Approves $18B for Renewable-Energy Tax Credits
highlights are:
AMT Patch. Currently, a taxpayer receives an exemption of $33,750 (individuals) and $45,000 (married filing jointly) under the AMT. Current law also does not allow personal credits against the AMT. At the end of last year, H.R. 3996 increased the exemptions to $44,350 and $66,250, respectively, and allowed the personal credits against the AMT to hold the number of taxpayers subject to the AMT at bay. The provision expired December 31, 2007. The proposal increases the exemption amounts to $46,200 (individuals) and $69,950 (married filing jointly) for 2008. The proposal will also allow the personal credits against the AMT. The estimated cost of this proposal is $61.817 billion over ten years.
Qualified Tuition Deduction. The Economic Growth and Tax Relief Reconciliation Act
(EGTRRA) created an above-the-line tax deduction for qualified higher education expenses. The
maximum deduction was $4,000 for taxpayers with AGI of $65,000 or less ($130,000 for joint
returns) or $2,000 for taxpayers with AGI of $80,000 or less ($160,000 for joint returns). This
deduction expired on December 31, 2007. The proposal would extend the deduction to the end of 2009. The estimated cost of this proposal is $5.333 billion over ten years.
Additional Standard Deduction for Real Property Taxes. The Housing and Economic
Recovery Act of 2008 added a real property tax calculation to the standard deduction for
taxpayers who do not itemize. The real property tax deduction is the lesser of the amount
allowable as a deduction of State and local and foreign real property taxes, or $500 ($1,000 in the case of a joint return). The provision expires at the end of 2008. The proposal extends the
provision to the end of 2009. The proposal is effective on the date of enactment. The estimated
cost of the proposal is $1.495 billion over ten years.
Enhanced Charitable Deduction for Qualified Computer Contributions. The bill would extend for two years, through 2009, a provision that encourages businesses to contribute
computer equipment and software to elementary, secondary, and postsecondary schools by
allowing an enhanced deduction for such contributions. The proposal is effective for
contributions made during taxable years beginning after December 31, 2007. The estimated cost
of this proposal is $356 million over ten years.
Child Tax Credit. Currently, a taxpayer receives $1,000 tax credit for each qualifying child
under the age of 17. If the amount of a taxpayer’s child tax credit is greater than the amount of the taxpayer’s income tax, the taxpayer may receive a refund if the income threshold is met.
EGTRRA set the income threshold for child tax credit refundability at $10,000 (indexed). The
threshold for 2008 is $12,050. The proposal lowers the refundable threshold for the child tax
credit to $8,500 for the 2008 tax year. The proposal is effective for tax years beginning after
December 31, 2007. The estimated cost of the proposal is $3.129 billion over ten years.
Modification of Penalty on Understatement of Taxpayer’s Liability by Tax Return
Preparer. The proposal changes the standards for imposition of the tax return preparer penalty. The preparer standard for undisclosed positions is reduced to “substantial authority.” The preparer standard for disclosed positions is “reasonable basis.” For tax shelters and reportable transactions to which section 6662A applies (i.e., listed transactions and reportable transactions with significant avoidance or evasion purposes), a tax return preparer is required to have a reasonable belief that such a transaction was more likely than not to be sustained on the merits. The proposal is effective for returns prepared after May 25, 2007. The estimated cost of the proposal is $22 million over ten years.
Expansion of Hope Scholarship and Lifetime Learning Credit. Current law allows a Hope Scholarship Credit in the first two years of post-secondary education equal to 100% 13 of the first $1,200 of qualified tuition and related expenses, and 50% of the next $1,200 for a maximum credit of $1,800. There is also a Lifetime Learning Credit available to students enrolled in one or more courses at the undergraduate or graduate level (whether or not pursuing a degree), equal to 20% of the first $10,000 in qualified tuition and related expenses. The proposal doubles the Hope Credit dollar amounts so the maximum credit would be $3,000, and doubles the Lifetime Learning Credit percentage from 20% to 40%, for a maximum Lifetime Learning Credit of $4,000 for students attending undergraduate or graduate institutions in the Midwestern disaster area. Room, board, books and fees would also be considered qualified expenses. This proposal applies to tax years 2008 and 2009. The estimated revenue loss of this proposal is $121 million over ten years.
Plug-in Electric Drive Vehicle Credit. The bill establishes a new credit for plug-in electric drive vehicles. The credit for passenger vehicles and light trucks ranges from $2500 to $7500.
Taxpayers may claim the full amount of the allowable credit up to the end of the first calendar
quarter after the quarter in which the total number of qualified plug-in electric drive vehicles sold in the U.S. exceeds 250,000. The credit is available against the alternative minimum tax (AMT). The estimated cost of this proposal is $758 million over 10 years.
Bicycle Commuters. The bill allows employers to provide employees who commute to work by bicycle limited fringe benefits to offset the costs of such commuting (e.g., storage). The estimated cost of this proposal is $10 million over 10 years.
AMT Patch. Currently, a taxpayer receives an exemption of $33,750 (individuals) and $45,000 (married filing jointly) under the AMT. Current law also does not allow personal credits against the AMT. At the end of last year, H.R. 3996 increased the exemptions to $44,350 and $66,250, respectively, and allowed the personal credits against the AMT to hold the number of taxpayers subject to the AMT at bay. The provision expired December 31, 2007. The proposal increases the exemption amounts to $46,200 (individuals) and $69,950 (married filing jointly) for 2008. The proposal will also allow the personal credits against the AMT. The estimated cost of this proposal is $61.817 billion over ten years.
Qualified Tuition Deduction. The Economic Growth and Tax Relief Reconciliation Act
(EGTRRA) created an above-the-line tax deduction for qualified higher education expenses. The
maximum deduction was $4,000 for taxpayers with AGI of $65,000 or less ($130,000 for joint
returns) or $2,000 for taxpayers with AGI of $80,000 or less ($160,000 for joint returns). This
deduction expired on December 31, 2007. The proposal would extend the deduction to the end of 2009. The estimated cost of this proposal is $5.333 billion over ten years.
Additional Standard Deduction for Real Property Taxes. The Housing and Economic
Recovery Act of 2008 added a real property tax calculation to the standard deduction for
taxpayers who do not itemize. The real property tax deduction is the lesser of the amount
allowable as a deduction of State and local and foreign real property taxes, or $500 ($1,000 in the case of a joint return). The provision expires at the end of 2008. The proposal extends the
provision to the end of 2009. The proposal is effective on the date of enactment. The estimated
cost of the proposal is $1.495 billion over ten years.
Enhanced Charitable Deduction for Qualified Computer Contributions. The bill would extend for two years, through 2009, a provision that encourages businesses to contribute
computer equipment and software to elementary, secondary, and postsecondary schools by
allowing an enhanced deduction for such contributions. The proposal is effective for
contributions made during taxable years beginning after December 31, 2007. The estimated cost
of this proposal is $356 million over ten years.
Child Tax Credit. Currently, a taxpayer receives $1,000 tax credit for each qualifying child
under the age of 17. If the amount of a taxpayer’s child tax credit is greater than the amount of the taxpayer’s income tax, the taxpayer may receive a refund if the income threshold is met.
EGTRRA set the income threshold for child tax credit refundability at $10,000 (indexed). The
threshold for 2008 is $12,050. The proposal lowers the refundable threshold for the child tax
credit to $8,500 for the 2008 tax year. The proposal is effective for tax years beginning after
December 31, 2007. The estimated cost of the proposal is $3.129 billion over ten years.
Modification of Penalty on Understatement of Taxpayer’s Liability by Tax Return
Preparer. The proposal changes the standards for imposition of the tax return preparer penalty. The preparer standard for undisclosed positions is reduced to “substantial authority.” The preparer standard for disclosed positions is “reasonable basis.” For tax shelters and reportable transactions to which section 6662A applies (i.e., listed transactions and reportable transactions with significant avoidance or evasion purposes), a tax return preparer is required to have a reasonable belief that such a transaction was more likely than not to be sustained on the merits. The proposal is effective for returns prepared after May 25, 2007. The estimated cost of the proposal is $22 million over ten years.
Expansion of Hope Scholarship and Lifetime Learning Credit. Current law allows a Hope Scholarship Credit in the first two years of post-secondary education equal to 100% 13 of the first $1,200 of qualified tuition and related expenses, and 50% of the next $1,200 for a maximum credit of $1,800. There is also a Lifetime Learning Credit available to students enrolled in one or more courses at the undergraduate or graduate level (whether or not pursuing a degree), equal to 20% of the first $10,000 in qualified tuition and related expenses. The proposal doubles the Hope Credit dollar amounts so the maximum credit would be $3,000, and doubles the Lifetime Learning Credit percentage from 20% to 40%, for a maximum Lifetime Learning Credit of $4,000 for students attending undergraduate or graduate institutions in the Midwestern disaster area. Room, board, books and fees would also be considered qualified expenses. This proposal applies to tax years 2008 and 2009. The estimated revenue loss of this proposal is $121 million over ten years.
Plug-in Electric Drive Vehicle Credit. The bill establishes a new credit for plug-in electric drive vehicles. The credit for passenger vehicles and light trucks ranges from $2500 to $7500.
Taxpayers may claim the full amount of the allowable credit up to the end of the first calendar
quarter after the quarter in which the total number of qualified plug-in electric drive vehicles sold in the U.S. exceeds 250,000. The credit is available against the alternative minimum tax (AMT). The estimated cost of this proposal is $758 million over 10 years.
Bicycle Commuters. The bill allows employers to provide employees who commute to work by bicycle limited fringe benefits to offset the costs of such commuting (e.g., storage). The estimated cost of this proposal is $10 million over 10 years.
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