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3/17/10 — HIRE Act cleared for President's signature.
On March 17, the Senate by a vote of 68-29 approved H.R. 2847, carrying the Hiring Incentives to Restore Employment (HIRE) Act, as passed by the House. Thus, the HIRE Act is cleared for the President's signature. The HIRE Act:

Exempts employers from paying the employer share of Social Security employment taxes on wages paid in 2010 to newly hired qualified unemployed workers. These are workers who: (1) begin employment with the employer after February 3, 2010 and before January 1, 2011, (2) were previously unemployed and (3) do not replace other employees of the employer. The payroll tax relief applies only for wages paid with respect to employment beginning on the day after the enactment date (the date the HIRE Act is signed into law by the President) and before 2011.
Provides employers with an up-to-$1,000 tax credit for retaining qualified unemployed workers. The workers must be employed by the employer for a period of not less than 52 consecutive weeks, and their wages for such employment during the last 26 weeks of the period must equal at least 80% of the wages for the first 26 weeks of the period.
For tax years beginning in 2010, boosts to $250,000 the maximum amount that can be expensed under Code Sec. 179, and boosts to $800,000 the beginning of the investment based phaseout amount.
Allows issuers of certain tax credit bonds to elect to receive a direct payment instead of a tax credit to the bondholder.
Enacts a comprehensive set of measures to reduce offshore noncompliance.
Delays the application of worldwide allocation of interest for an additional three years.
Tinkers with estimated tax payments of large corporations in future tax years.

For highlights of the various HIRE Act provisions, see RIA Special Study: Hiring and Business Stimulus Provisions in the HIRE Act of 2010 at Weekly Alert - 03/25/2010, and RIA Special Study: Foreign Compliance and Other Revenue Raising Provisions in the HIRE Act at Weekly Alert - 03/25/2010.

3/17/10 — House Ways & Means Committee Approves Small Business and Infrastructure Jobs Tax Act.
On March 17, the House Ways and Means Committee approved H.R. 4849, the Small Business and Infrastructure Jobs Tax Act. This bill would provide for:

A 100% Code Sec. 1202 exclusion of gain from the sale of small business stock would apply for qualifying stock acquired after Mar. 15, 2010 and before Jan. 1, 2011. Under existing law, a 75% exclusion applies for qualifying stock acquired in 2009 and 2010.
A limitation on the Code Sec. 6707A penalty for failure to disclose certain reportable transactions (including listed transactions) on a return that would generally make the penalty proportionate to the underlying tax savings, effective for penalties assessed under Code Sec. 6707A after 2006.
An exception to the "at-risk" rules for nonrecourse loans that are guaranteed by the Small Business Administration (SBA).
For tax years beginning in 2010 or 2011, the limit on the tax deduction for trade or business start-up expenditures would be increased from $5,000 to $20,000, and the threshold amount for reducing the limit would be increased from $50,000 to $75,000.
An extension of the exemption from the alternative minimum tax (AMT) for private activity bonds; the exemption would apply for such bonds issued in 2011.
Owners of tax-exempt bond-financed buildings, placed in service after the date of enactment and before Dec. 31, 2010 could elect to receive a direct payment in lieu of low-income housing tax credits. The amount of the direct payment would be equal to 85% of the present value of the low-income housing tax credits that would otherwise have been awarded with respect to the building.
An extension of Build America Bonds (BABs) through March 31, 2013. For direct-pay BABs issued in 2011, the direct payment amount would be reduced from 35% to 33% of the coupon interest; for bonds issued in 2012, it would be reduced to 31%; and for bonds issued in 2013, to 30%. The bill would also allow issuers to issue BABs to effect a current refunding of outstanding BABs.
An extension of the authorization for issuing Recovery Zone bonds through 2011.
The New Markets Tax Credits could be claimed against the AMT for qualified investments made between Mar. 15, 2010 and Jan. 1, 2012.
Distributions of debt securities in a tax-free spin-off transaction would be treated in the same manner as distributions of cash or other property where a subsidiary corporation distributes its own debt securities to a parent before a spin off transaction.
The "80/20 company" rules would be repealed, along with the 80/20 rules for interest paid by resident alien individuals. Under existing law, dividends and interest paid by a domestic corporation are generally considered U.S.-source income to the recipient and are generally subject to gross basis withholding if paid to a foreign person. If at least 80% of a corporation's gross income during a 3-year period is foreign source income and is attributable to the active conduct of a foreign trade or business (i.e., an "80/20 company"), dividends and interest paid by the corporation will generally not be subject to the gross basis withholding rules.
Information reporting would be required on payments of $600 or more to a service provider in the course of earning rental income (such as a plumber, painter, or accountant). Under existing law, reporting requirements for rental real estate expenses are limited to taxpayers whose rental real estate activity is considered a trade or business (as opposed to holding real estate for investment). Under the bill, taxpayers would not be subject to the provision for rental payments received for a principal residence or one residence owned and used for personal purposes at least part of the year.
A minimum 10-year term would be required for grantor retained annuity trusts (GRATs) and the value of the remainder interest would have to be greater than zero and the annuity could not decrease during the first 10 years of the GRAT term.

The following material can also be found on Checkpoint:

JCX-14-10, the Joint Committee on Taxation's Description Of An Amendment In The Nature Of A Substitute To The Provisions Of H.R. 4849, The "Small Business And Infrastructure Jobs Tax Act Of 2010;"
JCX-15-10, the Joint Committee on Taxation's "Estimated Revenue Effects Of The Chairman's Amendment In The Nature Of A Substitute To H.R. 4849, The "Small Business And Infrastructure Jobs Tax Act Of 2010" Scheduled For Markup By The Committee on Ways And Means On March 17, 2010;
JCX-13-10, the Joint Committee on Taxation's Description Of H.R. 4849, The "Small Business And Infrastructure Jobs Tax Act Of 2010;" and
JCX-12-10, the Joint Committee on Taxation's "Estimated Revenue Effects Of H.R. 4849, The "Small Business And Infrastructure Jobs Tax Act Of 2010," Scheduled For Markup By The Committee on Ways And Means On March 17, 2010.

3/17/10 — House considers bills with tax provisions under the suspension calendar.
On March 17, the House was scheduled to consider the following bills by way of the House suspension calendar:

H.R. 4851, Continuing Extension Act of 2010. This bill was introduced by House Ways and Means Acting Chair Sander Levin (D-MI) on March 16 to extend unemployment insurance and the COBRA subsidy, to provide a Medicare physician fix, and to address other issues.
H.R. 4853, a bill to amend the Internal Revenue Code of 1986 to extend the funding and expenditure authority of the Airport and Airway Trust Fund. The bill was referred to but not considered by the House Ways and Means Committee.
S. 1147, a bill to prevent tobacco smuggling, to ensure the collection of all tobacco taxes, and for other purposes. The bill was approved by the Senate by unanimous consent on March 11.

3/17/10 — House game plan for expiring Bush tax cuts, estate tax and extenders.
On March 16, House Ways and Means Committee Acting Chair Sander Levin (D-MI) said that he would like to take up the "Bush" tax cuts and the estate tax after returning from the April recess scheduled for March 29 through April 9. "The sooner we do it the better," said Levin.

"We need to renew the Bush tax cuts for middle class families, and not for the very high income families; renew and continue the estate tax as it was in place," Levin said. He also said that he expects Congress to reinstate the estate tax using the 45% top rate and $3.5 million exemption that were in effect in 2009.

"We need to get going on the estate tax. I think we have to write it so that we don't disrupt estate planning in this country. The sooner we do it the better. The longer the vacuum the more difficult it becomes. We ought to do this if not before we leave, when we come back," Levin said.

He said he would be working next week in committee on the Senate extenders bill. He said the committee would be talking in "some detail" about the Senate provisions, and that it was likely that they would go to conference with the Senate on the bill. "We have to work on the payfors because black liquor was in the Senate bill and in the health bill. "It will be in the health bill – can't use it twice, so we will have find another payfor," said Levin.

Levin also said that the Committee would likely look at a two-year extension of the Alternative Minimum Tax (AMT).

Acknowledging that he would have a hard time finding ways to pay for his legislative agenda, Levin said that using abusive tax havens as a way to pay for them was on the table. "Tax haven issues are so clear cut, we can include them. I think an issue like deferral needs to be considered as part of overall tax reform," Levin said.

3/16/10 — Senate set to vote on HIRE Act.
On March 15, the Senate by a vote of 61-30 approved the motion to invoke cloture on the motion to proceed to H.R. 2847, which carries the Hiring Incentives to Restore Employment (HIRE) Act, as passed by the House. A vote on final passage of the bill is expected to take place on March 17. If the bill passes the Senate as expected, it will be cleared for the President's signature.

The HIRE Act would create a limited "payroll tax holiday" and a tax credit to encourage companies to hire unemployed workers in 2010. It also would boost expensing for 2010, make important changes for tax credit bond issuers, extend highway and transit programs, create new anti-offshore tax abuse measures, and delay the implementation of worldwide allocation of interest.

The Senate passed the measure on February 24 (see Weekly Alert - 03/04/2010 for details on the Senate-passed bill). The House of Representatives passed the bill on March 4, but with several important amendments that the Senate is expected to accept. For more details on how the House amended the Senate's version of the HIRE Act, see Weekly Alert - 03/11/2010.

3/16/10 — Health care reform reconciliation process taking shape; House vote in sight.
Although the procedure for bringing the health care reform reconciliation bill before Congress may be fine-tuned, the latest information indicates that it will involve the following steps:

The reconciliation bill will be assembled by the House Rules Committee (with the aid of legislative language drafted outside of this Committee over the past several weeks). The reconciliation bill will modify the health reform bill that passed the Senate on December 28 (H.R. 3590, the Patient Protection and Affordable Care Act, see Article #1684 and Article #1685), with elements of the President's reform proposals unveiled on March 3 (see Article #1721).
The reconciliation bill that emerges from the House Rules Committee will then head for the House for a vote. The House is expected to be in session this weekend, and is likely to vote on the reconciliation package on Sunday, March 20. Speaker of the House Nancy Pelosi (D-CA) said on March 15 that she is considering a rule that would allow House members to avoid a direct vote on the underlying health care bill as passed by the Senate last year. Pelosi is proposing an unusual self-executing rule that would deem the Senate bill passed upon House passage of the reconciliation bill.
The reconciliation package, if passed by the House, would head for the Senate, where a simple 51 vote majority would send it to the White House for the President's signature.

3/15/10 — Draft of new small business jobs package released; markup scheduled.
On March 15, House Ways and Means Acting Chair Sander Levin (D-MI) released a discussion draft of a small-business tax bill, the "Small Business and Infrastructure Jobs Tax Act." The Committee on Ways and Means is expected to mark up the bill on March 17. According to a summary of the draft bill provisions and a discussion draft of the bill language, the small business package would, among other items, contain the following provisions:

A 100% Code Sec. 1202 exclusion of gain from the sale of small business stock would apply for qualifying stock acquired after Mar. 15, 2010 and before Jan. 1, 2011. Under existing law, a 75% exclusion applies for qualifying stock acquired in 2009 and 2010.
A limitation on the Code Sec. 6707A penalty for failure to disclose certain reportable transactions (including listed transactions) on a return would generally make the penalty proportionate to the underlying tax savings. Under existing law, the penalty for failure to disclose a reportable transaction (other than a listed transaction) is $10,000 for individuals and $50,000 for others; for listed transactions, the penalty is $100,000 for individuals and $200,000 for others.
RIA observation: The by-now infamous Code Sec. 6707A anti-tax-shelter penalty provision has been strongly criticized as imposing draconian penalties on small businesses and other taxpayers that unwittingly invest in transactions that turn out to be tax shelters. On February 9, the Senate by unanimous consent passed S. 2917, the Small Business Penalty Fairness Act of 2009. The main purpose of this bill is to put new limits on Code Sec. 6707A (see Weekly Alert - 02/18/2010). On Mar. 3, 2010, IRS Commissioner Doug Shulman notified Congress that IRS was extending until June 1, 2010 the current moratorium on collection enforcement actions relating to tax shelter penalties assessed under Code Sec. 6707A. In addition, IRS will continue to hold off on filing new notices of lien on amounts due solely related to Code Sec. 6707A penalties until June 1, 2010. See Weekly Alert - 03/11/2010.
An exception to the "at-risk" rules would be provided for nonrecourse loans that are guaranteed by the Small Business Administration (SBA). The passive activity loss rules would still apply to these expenses.
For tax years beginning in 2010 or 2011, the limit on the tax deduction for trade or business start-up expenditures would be increased from $5,000 to $20,000, and the threshold amount for reducing the limit would be increased from $50,000 to $75,000.
The exemption from the alternative minimum tax (AMT) for private activity bonds would be extended to such bonds issued in 2011 and would allow the refunding of private activity bonds issued after 2003 and refunded during 2011. Under existing law, private activity bonds are excluded from AMT if they are issued in 2009 or 2010, and AMT relief is allowed for current refunding of private activity bonds issued after 2003 and refunded during 2009 and 2010.
Owners of tax-exempt bond-financed buildings, placed in service after the date of enactment and before Dec. 31, 2010 could elect to receive a direct payment in lieu of low-income housing tax credits. The amount of the direct payment would be equal to 85% of the present value of the low-income housing tax credits that would otherwise have been awarded with respect to the building.
Build America Bonds (BABs) could be issued in 2011, 2012, and 2013. For direct-pay BABs issued in 2011, the direct payment amount would be reduced from 35% to 33% of the coupon interest; for bonds issued in 2012, it would be reduced to 31%; and for bonds issued in 2013, to 30%. The bill would also allow issuers to issue BABs to effect a current refunding of outstanding BABs. Under existing law, BABs issued in 2009 and 2010 can be treated as tax credit bonds that provide a Federal tax credit to investors equal to 35% of the coupon interest payable by the issuer.
An additional allocation of Recovery Zone bonds would be made to ensure that local municipalities receives a minimum allocation equal to at least its share of national unemployment in December 2008. The bill would also extend the authorization for issuing Recovery Zone bonds through 2011.
The New Markets Tax Credits could be claimed against the AMT for qualified investments made between Mar. 15, 2010 and Jan. 1, 2012.
Distributions of debt securities in a tax-free spin-off transaction would be treated in the same manner as distributions of cash or other property where a subsidiary corporation distributes its own debt securities to a parent before a spin off transaction.
The "80/20 company" rules would be repealed, along with the 80/20 rules for interest paid by resident alien individuals. Under existing law, dividends and interest paid by a domestic corporation are generally considered U.S.-source income to the recipient and are generally subject to gross basis withholding if paid to a foreign person. If at least 80% of a corporation's gross income during a 3-year period is foreign source income and is attributable to the active conduct of a foreign trade or business (i.e., an "80/20 company"), dividends and interest paid by the corporation will generally not be subject to the gross basis withholding rules.
Information reporting would be required on payments of $600 or more to a service provider in the course of earning rental income (such as a plumber, painter, or accountant). Under existing law, reporting requirements for rental real estate expenses are limited to taxpayers whose rental real estate activity is considered a trade or business (as opposed to holding real estate for investment). Under the bill, taxpayers would not be subject to the provision for rental payments received for a principal residence or one residence owned and used for personal purposes at least part of the year.
A minimum 10-year term would be required for grantor retained annuity trusts (GRATs) and the value of the remainder interest would have to be greater than zero and the annuity could not decrease during the first 10 years of the GRAT term.

The following material can also be found on Checkpoint:

a summary of the discussion draft of the "Small Business and Infrastructure Jobs Tax Act of 2010," Mar. 15, 2010; and
the legislative language for a Discussion Draft of the "Small Business and Infrastructure Jobs Tax Act of 2010."

3/15/10 — Health care reconciliation process proceeds.
On March 15, the House Budget Committee met to mark up the "Reconciliation Act of 2010," a bill that would move the process forward for House consideration of the Senate-passed health care reform bill. The Budget Committee by a vote of 21-16 went through a procedural vote to report the Reconciliation Act to the House without recommendation. As previously agreed to by Budget Committee Chair John Spratt (D-SC), and Ranking Minority Member Paul Ryan (R-WI), each side will be allowed to offer 10 non-binding motions, that will be presented to the Chair of the House Rules Committee. While the Budget Committee will go through a markup process, the House Rules Committee, which is expected to meet sometime on Wednesday, will actually be responsible for drafting the final language of the Reconciliation Act. The text of the Reconciliation Act of 2010 is available on the House Budget Committee website at http://budget.house.gov.

The House Democratic leadership is expected to move H.R. 3590, the "Patient Protection and Affordable Care Act," as passed by the Senate to the floor as early as the end of this week. If the measure is approved by the House, the House would then consider the Reconciliation Act, which would make changes to the Senate bill.

On March 12, Speaker of the House Nancy Pelosi (D-CA) said that they were still waiting for a final analysis of the reconciliation bill from the Congressional Budget Office (CBO). Pelosi told reporters that House members were "much more comfortable about the fact that this reconciliation will happen." She also said that, "[n]onetheless, there are certain assurances that they want and that we will get for them before I ask them to take the vote."

3/12/10 — HIRE Act inches to finish line in the Senate.
Late on Thursday, March 11, Senate Assistant Majority Leader Dick Durbin (D-IL) filed cloture on the motion to proceed to H.R. 2847, carrying the Hiring Incentives to Restore Employment (HIRE) Act, as passed by the House.

The Senate is scheduled to vote on cloture on H.R. 2847 on Monday, Mar. 15 at 5:30 p.m. The Senate will temporarily suspend consideration of H.R. 1586, the Federal Aviation Administration (FAA) bill, which contains fuel-related excise tax changes, to consider H.R. 2847.

The Senate passed the measure on February 24 (see Weekly Alert — 3/4/2010 for details on the Senate-passed bill). The House of Representatives passed the bill on March 4, but with several important amendments. Senate passage of the measure as amended by the House will clear it for the President's signature.

For more details on how the House amended the Senate's version of the HIRE Act, see Weekly Alert — 3/11/2010.

3/12/10 — House Democrats prepare for vote on health care reform bill.
On Friday, March 12, Speaker of the House Nancy Pelosi (D-CA) told members of her caucus to prepare for a vote on health care reform during the week of March 15. She said the House will be in session into next weekend if necessary to vote on the measure.

To prepare for a vote, the House Budget Committee is expected to mark up a health care reconciliation bill early next week.

3/11/10 — CBO releases revised score of Senate-passed health bill.
On March 11, the Congressional Budget Office (CBO) and the staff of the Joint Committee on Taxation (JCT) issued a revised score of the direct spending and revenue effects of H.R. 3590, the Patient Protection and Affordable Care Act (PPACA), as it was passed by the Senate on December 24, 2009. The estimate differs from an earlier estimate in that it encompasses all of the amendments that were adopted by the Senate, reflects a revised assumption about its enactment date (spring of 2010, as opposed to the earlier assumed enactment in December, 2009), and incorporates some technical revisions.

The revised CBO-JCT score of the Senate-passed Patient Protection and Affordable Care Act (PPACA) can be found on Checkpoint.

3/11/10 — Senate won't consider HIRE Act until next week.
On March 11, a member of Senate Majority Leader Harry Reid's (D-NV) staff said the Senate would not vote on the House's version of H.R. 2847, which carries the Hiring Incentives to Restore Employment (HIRE) Act before next week. The HIRE Act would create a limited "payroll tax holiday" and a tax credit to encourage companies to hire unemployed workers in 2010. It also would boost expensing for 2010, make important changes for tax credit bond issuers, extend highway and transit programs, create new anti-offshore tax abuse measures, and delay the application of worldwide allocation of interest.

The Senate passed the measure on February 24 (see Weekly Alert - 03/04/2010 for details on the Senate-passed bill). The House of Representatives passed the bill on March 4, but with several important amendments. For more details on how the House amended the Senate's version of the HIRE Act, see Weekly Alert - 03/11/2010.

3/11/10 — Ways and Means working on new small business jobs package.
On March 10, House Ways and Means Acting Chair Sander Levin (D-MI) told reporters following a meeting with committee Democrats that he would file a small-business tax bill on Friday, March 12, and mark up the bill next week. Levin said that he would be prepared to file his bill after discussing his proposal with Ways and Means Committee Ranking Republican Dave Camp (R-MI). According to Levin, committee members had a very fruitful discussion on the provisions of the bill and had resolved most issues.

According to an "unofficial" discussion draft, the small business package, described as the "second W&M Jobs Package" (the HIRE Act being the first), could contain, among other items:

A 100% exclusion of gain from the sale of small business stock.
A limitation on the penalty for failure to disclose certain reportable transactions.
RIA observation: Evidently this refers to the by-now infamous Code Sec. 6707A anti-tax-shelter penalty provision, which has been strongly criticized as imposing draconian penalties on small businesses and other taxpayers that unwittingly invest in transactions that turn out to be tax shelters. On February 9, the Senate by unanimous consent passed S. 2917, the Small Business Penalty Fairness Act of 2009. The main purpose of this bill is to put new limits on Code Sec. 6707A (see Weekly Alert - 02/18/2010). On Mar. 3, 2010, IRS Commissioner Doug Shulman notified Congress that IRS was extending until June 1, 2010 the current moratorium on collection enforcement actions relating to tax shelter penalties assessed under Code Sec. 6707A. In addition, IRS will continue to hold off on filing new notices of lien on amounts due solely related to Code Sec. 6707A penalties until June 1, 2010. See Weekly Alert - 03/11/2010.
A provision addressing the deductibility of cell phones.
RIA observation: In January, IRS Commissioner Douglas Shulman said he was optimistic that Congress would enact legislation this year to make it clear that personal use of employer-provided cell phones is not subject to taxation. See Weekly Alert - 01/21/2010.
Increased deduction for startup expenditures.
Pension funding and 401(k) plan fee disclosure.
AMT exemption for private activity bonds.
Extension of Build America Bonds.

An "unofficial" discussion draft, dated March 8 and titled "Discussion Draft: W&M Committee Jobs Agenda" can be found on Checkpoint.

3/10/10 — Senate passes bill carrying extenders and many other tax changes.
On March 10, the Senate by a vote of 66 to 33 passed H.R. 4213, carrying the "American Workers, State, and Business Relief Act" (AWSBRA). The Senate bill retroactively reinstates and extends through 2010 a number of provisions that expired at the end of 2009. It also carries new provisions, such as special funding relief for pension plans that suffered losses due to recent stock market reversals, a provision allowing corporations to elect to utilize unused alternative minimum tax (AMT) credits, and extended unemployment insurance and COBRA subsidy benefits. The Senate-passed bill will have to be reconciled with the version of H.R. 4213 that the House of Representatives passed on Dec. 9, 2009 as the "Tax Extenders Act of 2009" (see Article 1671). For a summary of key provisions in AWSBRA, and how it differs from the extenders bill passed by the House, see Weekly Alert - 03/18/2010.

JCX–9–10, the Joint Committee on Taxation's "Estimated Revenue Effects of the Revenue Provisions Contained in the American Workers, State and Business Tax Relief Act of 2010," as Passed by the Senate on March 10, 2010 can be found on Checkpoint.

3/10/10 — House passes bill allowing 2010 Chilean relief and additional Haitian relief contributions to be deducted on 2009 returns.
On March 10, the House by voice vote approved H.R. 4783, a bill that would accelerate to the 2009 tax year the income tax benefits of cash charitable contributions for victims of the earthquake in Chile, and would extend the period for which contributions for victims of the earthquake in Haiti could be accelerated to 2009. The bill will be sent to the Senate for consideration.

The bill would allow taxpayers who make cash charitable contributions for Chilean earthquake victims to elect to claim an itemized charitable deduction on their 2009 tax return (instead of having to wait until next year to claim the deductions on their 2010 tax return). The election would apply to relief contributions made after Feb. 26, 2010 and on or before Apr. 15, 2010. The bill would also relieve recordkeeping requirements for Chilean relief contributions. For these contributions, a telephone bill would satisfy the Code Sec. 170(f)(17) recordkeeping requirements if it shows the name of the donee organization, the date of the contribution, and the amount of the contribution.

In addition, the bill would extend the period under current law for which taxpayers who make cash charitable contributions to aid Haitian earthquake victims may elect to claim an itemized charitable deduction on their 2009 tax return (instead of having to wait until next year to claim the deductions on their 2010 tax return). P.L. 111-126, enacted on Jan. 22, 2010, only allows this election for Haitian relief contributions made after Jan. 11, 2010 and before Mar. 1, 2010. The bill would extend the period for which the election can be made to contributions made on or before Apr. 15, 2010.

The following material can also be found on Checkpoint:

the Joint Committee on Taxation's Technical Explanation of H.R. 4783 (JCX-8-10), A Bill to Accelerate the Income Tax Benefits for Charitable Cash Contributions for the Relief of Victims of the Earthquake in Chile, and to Extend the Period From Which Such Contributions for the Relief of Victims of the Earthquake in Haiti May Be Accelerated; and
the legislative text of the bill allowing accelerated income tax benefits for charitable cash contributions to earthquake victims in Chile and Haiti.

3/9/10 — Senate invokes cloture on extenders bill, clearing the way for vote.
On March 9, the Senate by a vote of 66-34 invoked cloture (i.e., voted to cut off debate) on the motion to proceed to a vote on final passage of H.R. 4213, which carries the "American Workers, State, and Business Relief Act of 2010" (AWSBRA). The Senate is expected to vote on the bill on March 10. The bill would then have to go back to the House of Representatives since its version of H.R. 4213 differs from the Senate's.

The Senate bill, like the House's version, is first and foremost an extenders bill. It would retroactively revive and extend through 2010 a number of provisions that expired at the end of 2009. However, the bill that the Senate will vote on is different from the House-passed bill in that it carries more extender provisions, plus special relief rules for pension plans that suffered significant losses in asset value due to the steep market slide in 2008. The Senate also adopted a number of amendments that increased the size and scope of the bill, including a provision allowing unused alternative minimum tax credits to be used for certain new investments. Finally, the offsets in the Senate bill are completely different from those in the House-passed bill.

3/8/10 — Bill would allow 2010 Chilean relief and additional Haitian relief contributions to be deducted on 2009 returns.
On March 8, House Ways and Means Acting Chair Sander Levin (D-MI) joined Committee Ranking Minority Member Dave Camp (R-MI) to introduced a bill that would accelerate to the 2009 tax year the income tax benefits of cash charitable contributions for victims of the earthquake in Chile, and would extend the period for which contributions for victims of the earthquake in Haiti could be accelerated to 2009. The bill is expected to be considered by the House as early as March 10.

The legislative text of the bill allowing accelerated income tax benefits for charitable cash contributions to earthquake victims in Chile and Haiti can be found on Checkpoint.

3/4/10 — House tweaks Senate version of Hiring Incentives to Restore Employment Act.
On March 4, the House, by a vote of 217-201, passed H.R. 2847 with a somewhat different version of the "Hiring Incentives to Restore Employment Act of 2010" (HIRE Act) than had passed the Senate on February 24. As a result, given the back and forth between the two chambers on this bill, either the Senate will accept the House's changes (a vote likely won't take place before next week) or the two chambers will have to reconcile their differences over the HIRE Act. For more details on how the House amended the Senate's version of the HIRE Act, see Weekly Alert - 03/11/2010.

The following material can also be found on Checkpoint:

the legislative text of the Senate-passed amendment of H.R. 2847 carrying its version of the "Hiring Incentives to Restore Employment Act" (HIRE Act); and
he legislative text of the House passed amendment to the Senate Amendment to H.R. 2847.

3/4/10 — Levin takes helm of the House Ways and Means Committee.
On March 4, it was announced that Sander M. Levin (D-MI) would take over as Acting Ways and Means Committee Chairman. Rep. Pete Stark (D-CA) had been named acting Chair 3 to replace Charles B. Rangel (D-NY), who took a temporary leave, but Stark decided not to take the Ways and Means post due to his other obligations.

3/3/10 — President signs the Temporary Extension Act of 2010 extending and modifying COBRA premium subsidy.
Late, on March 2, the President signed into law H.R. 4691, the "Temporary Extension Act of 2010" (the Act), which, among other provisions extends the COBRA continuation premium subsidy for one month and makes a number of other clarifying and substantive changes to it. For details on the Act's changes affecting the COBRA continuation premium subsidy, see the Special Study at Weekly Alert - 03/11/2010.

3/3/10 — President unveils his proposal for comprehensive health care reform.
On March 3, the President unveiled his long-awaited proposal for a comprehensive overhaul of the health care system. (http://www.whitehouse.gov/health-care-meeting/proposal) The game plan apparently will be to try to move the legislation under the reconciliation rules, which will require a simple majority in the Senate for passage, the chamber mostly likely to be a stumbling block. Legislative language has not yet been released, but the White House did make available summaries of various elements of the President's proposal. Here's a summary of the tax-related portions.

All Americans who can afford to purchase insurance but who choose to remain uninsured would have to make a payment to offset the cost of care they will inevitably need. The Senate's approach had set the payment as a flat dollar amount or percentage of income, whichever is higher (although not higher than the lowest premium in the area). The President's proposal adopts the Senate approach but lowers the flat dollar assessments, and raises the percent of income assessment that individuals would pay if they choose not to become insured. Specifically, it lowers the flat dollar amounts from $495 to $325 in 2015 and $750 to $695 in 2016. Subsequent years are indexed to $695 rather than $750, so the flat dollar amounts in later years would be lower than the Senate bill as well. The President's proposal raises the percent of income that is an alternative payment amount from 0.5 to 1.0% in 2014, 1.0 to 2.0% in 2015, and 2.0 to 2.5% for 2016 and subsequent years—the same percent of income as in the House bill. A married couple with income below $18,700 would not have to pay the assessment. Individuals and families wouldn't have to buy health insurance if coverage is unaffordable (premiums exceed 8% of income). In addition, exceptions would be made for religious objectors and Indian tribe members. Americans under the age of 30 and other Americans who would be exempt from the requirement to purchase insurance would be eligible for a low-cost catastrophic plan that covers serious illness and injury.
Larger companies offering health care coverage would have to automatically enroll any new eligible employees. Any company with 50 or more employees that does not offer coverage and whose employees access taxpayer supported health programs would have to help offset the costs. Small business owners would not have to enroll an employee or to offset health costs to taxpayers. Additionally, small business owners would receive incentives to cover employees through tax credits and would be given greater buying power and insurance choices in newly established insurance exchanges.
"Middle class" individuals would benefit from new tax credits which would help them reduce their premium costs and purchase insurance.
The proposal would improve enforcement and close tax loopholes. Crackdowns would include: (a) expanding corporate information reporting requirements; (b) closing the loophole that allows certain byproducts of paper production to be eligible for the cellulosic biofuels producer credit; and (c) clarifying the definition of when activities have true "economic substance" beyond evading taxes.
The proposal would include an additional 0.9% Hospital Insurance tax for households with incomes exceeding $200,000 for singles and $250,000 for married couples filing jointly. In addition, for these higher-income households it would add a 2.9% tax on unearned income including interest, dividends, annuities, royalties and rents (excluding income from active participation in S corporations).
Beginning in 2018, an excise tax would be imposed on insurance companies. The excise tax would only apply to premiums above $27,500 for families and $10,200 for singles in 2018 and would be adjusted at the consumer price index plus one thereafter. The excise tax would carry new permanent reforms that would focus its impact on plans that provide the highest-cost benefits, not those that happen to cover the highest-cost workers. There would be permanent adjustments based on age, gender and high-risk professions.
Fees would be imposed on various sectors of the health industry, including: (1) a fee on branded prescription drug pharmaceutical companies in proportion to their federal sales; (2) an excise tax on medical devices; (3) an annual fee on health insurance companies; and (4) an excise tax on indoor tanning services.
An additional 10% penalty would be imposed on non-health withdrawals from HSAs and Archer MSA.
Flexible spending accounts under cafeteria plans would be limited to $2,500.
Starting in 2012, the deduction for employer subsidies for retiree drug coverage under Part D would be eliminated.
The floor beneath the itemized deduction for major medical expenses would be raised from 7.5% to 10% of AGI for the non-elderly and non-disabled.
Excessive compensation paid by certain health insurance companies would be limited.
The proposal would include new tax breaks, such as the establishment of simple cafeteria benefit plans for small businesses, a qualifying therapeutic discovery project tax credit, an exclusion from income of assistance provided to participants in State student loan repayment programs for certain health professionals, and an expansion of the adoption credit and adoption assistance programs.

3/3/10 — Stark replaces Rangel as Chairman of the House Ways and Mean Committee.
On March 3, Rep. Pete Stark (D-CA) was named the new Chairman of the House Ways and Means shortly after Rep. Charles B. Rangel (D-NY) requested Speaker Nancy Pelosi to grant him a temporary leave of absence from that post until the completion of action by the Committee on Standards in looking at alleged improprieties involving Mr. Rangel. Whether he will ever return to the post remains to be seen.

3/2/10 — House vote on Senate-passed jobs bill set for March 4.
On March 2, House Majority Leader Steny Hoyer (D-MD) told reporters that he hoped to have a vote on the Senate passed jobs bill (H.R. 2847, the Hiring Incentives to Restore Employment (HIRE) Act) on Thursday, March 4. It appears that there are enough House Democratic votes to pass the bill.

The HIRE Act would create a limited "payroll tax holiday" and a tax credit to encourage companies to hire unemployed workers in 2010. It also would boost expensing for 2010, make important changes for tax credit bond issuers, extend highway and transit programs, create new anti-offshore tax abuse measures, and delay the application of worldwide allocation of interest. See Weekly Alert - 03/04/2010 for more details on this important bill.

The following material can also be found on Checkpoint:

the text of JCX-4-10, the Joint Committee on Taxation Staff's Technical Explanation of the Revenue Provisions Contained in Senate Amendment 3310, the "Hiring Incentives to Restore Employment Act," Under Consideration by the Senate (i.e., the Jobs bill passed by the Senate on Feb. 24, 2010);
the text of JCX-5-10, the Joint Committee on Taxation's Estimated Revenue Effects of the Revenue Provisions Contained in Senate Amendment 3310, the "Hiring Incentives to Restore Employment Act," Under Consideration by the Senate (i.e., the jobs bill passed by the Senate on Feb. 24, 2010); and
the text of Senate Amendment 3310, to H.R. 2847, which was passed by the Senate on February 24. Senate Amendment 3310, the "Reid Amendment," carries the "Hiring Incentives to Restore Employment Act."

3/1/10 — House to consider Senate-passed jobs bill this week.
On February 26, Speaker of the House Nancy Pelosi (D-CA) said that the House of Representatives would consider the Senate passed jobs bill (H.R. 2847, the Hiring Incentives to Restore Employment (HIRE) Act) during the week of March 1. However, it is still unclear if Pelosi can muster the necessary Democratic votes for House passage of the bill.

The bill passed the Senate by a wide margin on February 24, but reportedly has garnered criticism on various grounds in the House.

The HIRE Act would create a limited "payroll tax holiday" and a tax credit to encourage companies to hire unemployed workers in 2010. It also would boost expensing for 2010, make important changes for tax credit bond issuers, extend highway and transit programs, create new anti-offshore tax abuse measures, and delay the application of worldwide allocation of interest. See Weekly Alert - 03/04/2010 for more details on this important bill.

The following material can also be found on Checkpoint:

the text of JCX-4-10, the Joint Committee on Taxation Staff's Technical Explanation of the Revenue Provisions Contained in Senate Amendment 3310, the "Hiring Incentives to Restore Employment Act," Under Consideration by the Senate (i.e., the Jobs bill passed by the Senate on Feb. 24, 2010);
the text of JCX-5-10, the Joint Committee on Taxation's Estimated Revenue Effects of the Revenue Provisions Contained in Senate Amendment 3310, the "Hiring Incentives to Restore Employment Act," Under Consideration by the Senate (i.e., the Jobs bill passed by the Senate on Feb. 24, 2010); and
for the text of Senate Amendment 3310, to H.R. 2847, which was passed by the Senate on February 24. Senate Amendment 3310, the "Reid Amendment," carries the "Hiring Incentives to Restore Employment Act."

3/1/10 — Baucus amendment to H.R. 4213 carries Senate extenders bill.
On March 1, Senate Finance Committee Chair Max Baucus (D-MT) offered a substitute amendment to H.R. 4213 (the Tax Extenders Act of 2009, which passed the House on Dec. 9, 2009; see Article #1671).

The amendment to H.R. 4213 is titled the "American Workers, State, and Business Relief Act of 2010" and would, among other provisions, extend:

Important business tax breaks that expired at the end of 2009, including the research tax credit, and energy incentives.
The active financing exception to Subpart F.
Unemployment insurance and COBRA premium subsidies.
Tax relief provisions for victims of natural disasters.
A number of tax breaks for individuals, including the additional standard deduction for state and local real property taxes, the option to deduct state and local sales taxes, and the above-the-line deductions for qualifying teachers' expenses and the qualified tuition deduction.

The Senate measure also would, in Baucus's words, carry "temporary, targeted and appropriate" pension funding relief for employers struggling to make pension contributions due to factors such as the stock market slide and general recession.

Offsets would include a prohibition on claiming the alternative fuel credit and alternative fuel mixture credit for "black liquor," and codification of the economic substance doctrine.

The legislative text of the "American Workers, State, and Business Relief Act of 2010" (Baucus amendment to H.R. 4213) can be found on Checkpoint.

Tax Watch Archive

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