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The bailout: more on the tax provisions

October 02, 2008

While most of the tax provisions attached to the bailout bill that passed the Senate yesterday were extensions of the "expiring" tax breaks that never actually seem to expire, there are a few new ones. The three original tax provisions of the failed House bill are in there, but there are also a few odd new provisions.

For example, the bill makes all machinery and equipment placed in service in a farming business in 2009 5-year property. Considering that farmers already qualify for the $125,000 Sec. 179 deduction for such property, this is a nice little spiff for an industry enjoying some of its most profitable times ever.

The bill also extends the Section 199 domestic production boondoggle to our strategic film and television production industry; this will enable the economy to pull itself up by its sitcoms.

Oddly, the bill caps the Section 199 deduction for domestic oil production at 3%, vs. the usual 6%, so as not to encourage too much of that; heaven knows we don't need any more domestically-produced oil.

ISO-AMT victims will get to claim as cash refunds up to 50% of their unused long-term AMT credits, starting in 2008. The bill also abates all interest and penalties attributable to unpaid taxes on ISOs, with a credit for those who have already paid such interest and penalties.

The bill imposes information reporting on brokers, requiring them to report on 1099s the basis and gain on securities trades, starting in 2011.

And perhaps most importantly, the bill exempts children's wooden practice arrows from the 39-cent-per-shaft excise tax otherwise imposed on arrows. And why shouldn't Congress shaft us a bit more?

A roundup of the provisions is below the fold. You can check with the TaxProf and the TaxGrrl for additional coverage.

Links:

Text of Senate Bill

Key "extender" provisions include

- AMT "patch" increases the AMT exemption to $69,950 for joint filers and $46,200 for single filers for 2008.
- Tax credit for wind and clean coal facilities extended through 2009.
- Solar energy property credit, fuel cell property credit, and microturbine credit extended through 2016.
- "Small wind property" energy credit extended through 2016.
- Credits for biodiesel and renewable diesel extended through 2009, but only at 50-cents per gallon, rather than $1.
- A new credit for plug-in electric drive cars is enacted through 2010.
- The tax credit for non-business energy property - efficient water heaters and so on - is extended through 2009.

Other provisions extended through 2009 include:
-Deduction for State and local sales taxes.
-Deduction of qualified tuition and related expenses.
-Deduction for certain expenses of elementary and secondary school teachers.
-Additional standard deduction for real property taxes for nonitemizers.
-Tax-free distributions from individual retirement plans for charitable purposes.
-Basis adjustment for S corporations making charitable contributions.

If you don't see your favorite extension here, don't despair; go to the bill text and look for it; there's much more there. Remember, the House still has to pass this thing; that vote is slated for tomorrow.

Tags: AMT.AMT patch.section 199.Tax Grrrl.TaxProf.