Posts tagged sandy levin

It looks like Congress might actually
complete some long-delayed tax legislation.

The House and Senate had been aiming
for renewal of the package of popular tax breaks that expired Dec. 31,
2009, by the Memorial Day weekend. Then they hit some bumps in the road.

But today Ways and Means Chair Sandy
Levin (D-Mich.) and Senate Finance Chair Max Baucus (D-Mont.) swear the tax extenders deal is done.

The
latest version is The American Jobs and Closing Tax Loopholes Act.
Levin and Baucus issued a summary of the bill. Key individual tax breaks that
will soon be back on the books are:

Deduction of state and local general sales taxes.

The bill would extend for one year (through 2010) the election to
take an itemized deduction for state and local general sales taxes in
lieu of the itemized deduction permitted for state and local income
taxes. This proposal is estimated to cost $1.800 billion over 10 years.

Additional standard deduction for real property
taxes.
The bill would extend for one year (through 2010)
the additional standard deduction for State and local real property
taxes. This proposal is estimated to cost $1.551 billion over 10 years.

Above-the-line
deduction for qualified tuition and fees.
The bill would
extend for one year (through 2010) the above-the-line tax deduction for
qualified education expenses. This proposal is estimated to cost $1.501
billion over 10 years.

Above-the-line deduction for certain expenses of
elementary and secondary school teachers.
The bill would extend for one year (through
2010) the $250 above-the-line tax deduction for teachers and other
school professionals for expenses paid or incurred for books, supplies
(other than non-athletic supplies for courses of instruction in health
or physical education), computer equipment (including related software
and service), other equipment, and supplementary materials used by the
educator in the classroom. This proposal is estimated to cost $215
million over 10 years.

Extension of tax-free
distributions from individual retirement plans for charitable purposes.

The bill would extend for one year (through 2010) the provision
that permits tax-free distributions to charity from an Individual
Retirement Account (IRA) of up to $100,000 per taxpayer, per taxable
year. This proposal is estimated to cost $627 million over 10 years.

Paying with carried
interest: The final
obstacle was how to make up the
tax revenue lost by
keeping the above (and more) tax breaks alive. Lawmakers finally came up
with some of the money by agreeing
on how to change the taxation of income received by hedge fund
managers.

Such earnings had
been treated as "carried
interest," which meant the recipient paid taxes at the lower capital
gains rate rather than at his or her ordinary income tax level.

Under
the compromise, when such earnings accurately reflects a return on
invested capital
would continue to be taxed at the 15 percent (for now) top capital gains
rate.

But when carried interest does not reflect such
a return on invested
capital, the
bill would require investment fund managers to treat 75 percent of that
interest
income as ordinary income. The other 25 percent would be taxed at the
lower
capital gains rate.

More details on carried interest taxes
will be available in a transition rule that will apply to transactions
before Jan. 1, 2013.

And
just how much money will this change make? We don't know yet. The
carried interest cost is still being estimated by the Joint Committee on
Taxation.

Just a year: Finally, we'll have to do this
all again in seven or so months.

Despite speculation that the expired breaks
might be extended beyond 2010, the expiration date is once again Dec.
31.

Related posts:

• Ways to pay for extenders grows
• Extenders outlook from W&M chair
• Bank tax to fund extenders?
• House OKs extending tax breaks
• Congressional tax wrap-up
• Tax break extenders on tap

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