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Managing America: Taxes

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Week Ending November 9, 2007

H.R.3996 To amend the Internal Revenue Code of 1986 to extend certain expiring provisions, and for other purposes.

This tax-package bill makes amendments to the US Tax Code regarding the alternative minimum tax, mortgage debt, and tax administration. Also included are extensions of expiring tax credits, deductions and other incentives. Most provision in the bill are from bills passed in the House earlier this year.

Alternative Minimum Tax

Alternative minimum tax relief for non-refundable personal credits is extended to cover taxable years beginning after December 31, 2006.

Extension of expiring tax provisions

Continued through FY 2008 are the deductions for:

State and local sales taxes;

Out-of-pocket expenses, related to classroom activities, for elementary and secondary teachers (To $250);

Travel expenses for State legislators while away from home;

Tax-free distributions from IRAs for charitable purposes;

Taxpayer options to include combat pay as earned income for the purposes of the earned income tax credit;

Tax incentives for mortgage bond writers to finance home purchases by veterans; and

Tax-free distributions from retirement plans for individuals called to active military service.

Expiring tax provisions

For businesses, tax incentives are extended through FY 2008 for:

Expenses for increasing research, hiring workers on Indian reservations, new market investment, rail road track maintenance and for hiring workers in areas affected by Hurricane Katrina;

Accelerated depreciation for restaurant, motor sports entertainment complexes and business property on Indian reservations improvements allowing for a on-time deduction rather than spread out over a depreciations schedule;

 Environmental remediation costs;

Contributions of food and book inventories and computer equipment for educational purposes; and

For investment incentives in the District of Columbia and American Samoa.

Authorities extended

For issuing qualified zone academy bonds and making disclosures of tax information to facilitate student loan repayments;

For combating terrorist activities; and

For IRS undercover operations.

Home mortgages

Up to $2 million can be excluded from gross income attributable to discharging a home mortgage debt. A discharged mortgage debt after foreclosure has been considered taxable income. Mortgage insurance premiums are tax deductible through 2014.

Certain cooperative housing corporations receive a tax deduction for payments to the corporation.

The exclusion from gross income from the sale of a principal residence is limited by provisions such as the amount of time spent in the residence over a period of years.

Miscellaneous

The IRS is no longer authorized to enter into debt collection contracts with private businesses.

Taxes paid to the US Virgin Islands government are considered taxes paid to the US treasury.

Expatriates, individuals who give up US citizenship to gain a tax advantage will be taxed more quickly and at a higher rate.

Tax penalties are increased for filing and inaccurate tax return and the 36-month suspension of interest and penalties on tax underpayments when not notified of the error by the IRS is repealed.

Wines of the same color are deemed to be commercially interchangeable for the purpose of duty drawback for unused merchandise.

Sponsor:  Rep. Charles B. Rangel (D-NY-15^th)

Vote: Passed the House 216 to 193 November 9, 2007  RC 1081. Amended by the Senate December 6, 2007. Agreed to in the House December 17, 2007 352 to 64 RC 1183

Cost to the taxpayers:

Earmark Certification:  

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