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TheWeekInCongress.com - March 4, 2010 - The House and Senate acted this week on two bills intended to create jobs and extend tax breaks for individuals and business. The bill, HR 2847, that originated as the appropriations bill for the Departments of Commerce, Justice and Science programs has been amended by the House and Senate to include pay-as-you-go budgeting restrictions, a job stimulus bill and a bill that increases scrutiny of international investing and tax havens.

Amendments to HR 2847 promise to reward employers for hiring out-of-work employees who do not replace other employees. The employers would benefit by exemption from paying their share of the employees Social Security employment taxes for wages paid in 2010 for any new employee hired after February 3, 2010 and before January 1, 2011. The exemption covers 6.2% of the first $106,800 of wages. The provision is estimated to reduce revenues by $12.9 billion over ten years.

The bill also continues the popular expensing mechanism that began in 2005 through which a business can write off expenses completely in the current year rather than extending the write off over a period of years. The Recovery Act temporarily increased the amount that small businesses could write-off for capital expenditures incurred in 2009 to $250,000 and increased the phase-out threshold for 2009 to $800,000. The bill would extend these temporary increases for capital expenditures incurred in 2010, the Majority reported. The provision is estimated to cost $35 million over ten years.

To stimulate construction and energy related jobs, State and local governments may issue special purpose tax credit bonds for school construction, energy conservation and renewable energy. The tax credit bonds allow investors to claim a federal tax credit in lieu of interest income. HR 2847 provides investors the option of a direct payment from the federal government equaling 45% of the interest that would have been payable on those bonds. Investors participating with municipalities that issue less than $30 million in tax-exempt and tax credit bonds in a year can receive a direct payment of 65% of the amount of the interest payable on these bonds. This provision is estimated to cost $2.520 billion over 10 years.

The bill arrived from the Senate with an extension of unemployment benefits and additional money to extend highway and bridge projects. Such projects, by the formula that Congress follows tend to provide a greater return on the investment estimated at $1.25 or more per dollar invested.

The bill aims to increase revenues by delaying a 2004 tax provision that would have allowed for the allocation of interest expense between United States sources and foreign sources for purposes of determining a taxpayer's foreign tax credit limitation, the Majority reported.

Among other foreign investment revenue gathering provisions the bill aims at U.S. individuals who, through foreign financial institutions, foreign trusts, and foreign corporations, evade U.S. taxes. The bill requires more disclosure from US bank to determine if US individuals are hiding assets in foreign accounts and adds weight to the reporting requirement by imposing a 30% withholding tax on certain income from U.S. financial assets held by a foreign financial institution "unless the foreign financial institution agrees to disclose the identity of any U.S. individual with an account at the institution."

The House agreed to the Senate amendments to the House amendments in a vote of 217 to 201, clearing the bill for the President's signature.

HR 2847 original appropriations bill report, amendments and votes.

HR 2847 Majority summary of the current bill as amended by the House and Senate.

HR 4213 deals with more familiar tax mechanisms that regularly come up for renewal each year or so. Included in the bill is the write off of state sales taxes for taxpayers in states that do not have a state income tax, write offs for real property taxes will be continued. Estate taxes, taxes on inheritances will be exempt for individuals if the estate is less than $3.5 million and $7 million for couples. The Senate is yet to act on a repeal of the 45% tax on estates over the $3.5 million and $7 million thresholds. The exemption expired at the end of 2009. The House, however, voted to repeal the 45% tax.

Businesses can expect the continuation of various tax breaks to include expensing flexibility in the areas of new capital investments, environmental mediation costs, research and more industry-specific breaks.

Tax breaks for renewable fuels, energy research, disaster relief, community development, and charitable organizations are continued.

The Senate continues consideration of amendments to HR 4213.

HR 4213 bill report and explanations of tax provisions, amendments, and votes.

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Bills Regulate insurance agents; Emphasize importance of the Census; Set limits on restraining school children; and reorganize disaster agencies.

Insurance Regulation

Insurers must gain license to sell products

HR 2554

Census Counts

Reasons why the Census is important include $400 billion in aid to states.

HRES 1096

Restraining Students

Prohibitions put on physical and chemical restraint of students.

HR 4247

Disaster Response

Agencies are reassigned to address earthquake and hurricane response.

HR 3820

The House is adjourned until March 5th.

The Senate is in session.