Tax Watch Archive

5/7/2008 -- Senate bill would impose 25% windfall profit tax and repeal domestic production activities deduction for major oil and gas companies.
On May 7, Senate Majority Leader Harry Reid (D-NV) said he would introduce a bill, "the Consumer-First Energy Act of 2008," before wrap up of that day's business. The bill would impose a 25% tax on the "windfall profits" of major oil companies. Excess profits of oil companies invested in domestically produced renewable alternative fuels, expanding refinery capacity and utilization, or renewable electricity production, would be exempt. Revenue from this tax would be deposited into an Energy Independence and Security Trust Fund. The bill also would repeal the deduction for domestic production under Code Sec. 199 for major oil and gas companies, and tighten the rules restricting the use of foreign tax credits on oil and gas related income.

5/2/2008 -- Conferees announce agreement on farm bill; preliminary details released on tax title.
On May 2, Senator Tom Harkin (D-IA), Chairman of the Senate Committee on Agriculture, Nutrition and Forestry and of the Senate-House conference committee on H.R. 2419, the farm bill, announced that the conference committee had agreed upon and approved all major elements of the bill. Staff for the Senate and House agriculture committees and for conferees will continue to iron out details and get official budget scoring from the Congressional Budget Office. Negotiators are expected to give their formal stamp of approval to the bill on Tuesday, May 6. From the description in Harkin's press release of the bill's final steps ("The completed legislation will have to be approved by both the Senate and House before being sent to the White House") it appears as if the Administration has signed off on the bill.

A Senate Finance press release dated May 2 provided some preliminary details about the tax title in the bill. It will include a number of excise tax changes, plus self-employment tax relief for retired or disabled farmers who are receiving conservation reserve program (CRP) payments, an extension of the deduction for conservation easements, tax changes for timber sales, new limitations on farming losses for certain taxpayers, revised depreciation rules for holders of equine livestock, plus new agriculture-related credits described as an "Agriculture Business Security Tax Credit," and a "Cellulosic Biofuels Credit." The text of the May 2 Senate Finance press release announcing agreement on the tax title of the farm bill is available in PDF form on Checkpoint.

4/30/2008 -- Conferees are once again said to be close to agreement on farm bill differences.
Without providing details, House Agriculture Committee Chair Collin Peterson (D-MN) announced Apr. 29 that conferees had reached agreement on H.R. 2419, the farm bill. A formal meeting of the House and Senate conferees to announce their agreement had been postponed twice as negotiators struggled with core agricultural issues. The last scheduled formal meeting of conferees on Apr. 29 was postponed after negotiators met with Agriculture Secretary Ed Schafer and Deputy Secretary Chuck Conner to address the Administration's concerns. It was reported that a formal meeting of conferees could convene on Apr. 30.

On Apr. 24, Senate Finance Committee Chair Max Baucus (D-MT) and Senate Budget Committee Chair Kent Conrad (D-ND) said that most of the tax package in the farm had been agreed to, and that the final bill would include a provision exempting Social Security and disability payment recipients from having to pay self-employment taxes on conservation reserve program (CRP) payments. He also said the bill would include revised rules for holders of equine livestock. Peterson added that there "is reform in this bill--it's a big one, it's on Schedule F Net Operating Loss provisions, which was written too broadly originally.... The people who are going to take the hit on this [change] are going to be those people who are not really farmers. If you have over a $200,000 loss you can not use it against your non-farm income." The cost of the bill reportedly will be approximately $10 billion, and the tax package will be outside of the cost of the overall bill with a cost of approximately $1.4 billion.

4/30/2008 -- Senate begins debate on FAA bill; trouble looms over tax title.
On Apr. 29, the Senate began debate on H.R. 2881, the FAA Reauthorization Act of 2007. A substitute bill was offered by Commerce Subcommittee on Aviation Chair Jay Rockefeller (D-WV), and Senators began offering amendments to the bill on Apr. 30. The substitute bill carries a substantial, and controversial, tax title with many proposed tax changes that have nothing to do with aviation. For example, the revenue raising provisions in the bill include a revision in the effective date of Code Sec. 7874 for certain corporate inversions, a denial of deductions for punitive damages, restructuring of tax credits for the New York Liberty Zone, increased information penalties, and revised tax rules for expatriation.

Commerce Aviation Subcommittee ranking member Kay Bailey Hutchinson (R-TX) told reporters said she was concerned about extraneous tax provisions that have nothing to do with aviation. "They've added a whole litany of taxes that have nothing to do with aviation. I don't support the pay-fors in this bill," she said. The White House in a statement of administration policy has threatened to veto the Senate bill because it doesn't include critical aviation reforms outlined by the Administration.

The FAA bill that emerges from the Senate is likely to be different from the version passed by the House last fall, so a conference may have to be convened to iron out the differences. A PDF version of the text of JCX-36-08, the Joint Committee Staff estimate of the cost of the tax provisions contained in the Senate amendment to H.R. 2881, is available on Checkpoint.

4/25/08 -- Conferees reportedly close to agreement on farm bill which will include a tax title.
House and Senate conferees are reported to be close to reaching an agreement on H.R. 2419, the farm bill. Senate Finance Committee Chair Max Baucus (D-MT) and Senate Budget Committee Chair Kent Conrad (D-ND) said that most of the tax package had been agreed to.

House Agriculture Committee Chair Collin Peterson (D-MN) told reporters on Apr. 25 that the final bill will include a provision exempting Social Security and disability payment recipients from having to pay self-employment taxes on conservation reserve program (CRP) payments. He also said the bill would include revised rules for holders of equine livestock. Peterson added that there "is reform in this bill -- it's a big one, it's on Schedule F Net Operating Loss provisions, which was written too broadly originally.... The people who are going to take the hit on this [change] are going to be those people who are not really farmers. If you have over a $200,000 loss you can not use it against your non-farm income." The cost of the bill reportedly will be approximately $10 billion, and the tax package will be outside of the cost of the overall bill with a cost of approximately $1.4 billion.

Conferees are expected to have a formal meeting on the bill on Apr. 28 at 4:00 p.m, and agree in principle on what is to be in the bill. However, bill language isn't expected to be available on Apr. 28.

4/25/08 -- Senate close to action on FAA bill with excise tax changes.
Senate Majority Leader Harry Reid (D-NV) Apr. 24 filed a cloture motion on the motion to proceed to H.R. 2881, the FAA Reauthorization Act of 2007. A vote on cloture is scheduled for Monday, Apr. 28. The tax title of the House bill was favorably reported out of the House Ways and Means Committee on Sept. 18, 2007, and then was included in a comprehensive FAA bill passed by the House. According to a Congressional Research Service summary, the House bill would (1) impose an excise tax on aviation-grade kerosene of 35.9¢ cents per gallon (4.3¢ per gallon for commercial aviation uses); (2) increase to 24.1¢ per gallon the tax rate for aviation gasoline; and (3) extend through FY2011 the excise tax on the transportation by air of persons and property and the excise tax on aviation gasoline and aviation-grade kerosene.

The Senate bill is expected to include provisions of S. 2345 (S. Rept. 110-228), which was reported to the Senate by Finance Committee Chair Max Baucus (D-MT) on Nov. 13, 2007, and legislation from the Senate Commerce Committee. According to a Senate Finance Committee staffer the final details of the tax package have yet not been worked out.

4/18/08 -- Offsets in Senate Finance's farm bill include Schedule F loss limits, optional self-employment tax, and information reporting.
On April 18, the Senate Finance Committee conferees on the farm bill announced $2.4 billion of reforms/offsets--"double the reforms in the House or Senate bills alone"--that could be used to fully offset the farm bill. These reforms/offsets (along with a slight decrease in the ethanol tax credit) would include:

• Preventing the use of farm losses as a tax shelter. This provision would address the use of complex farming operations to reduce taxable income by limiting the amount of Schedule F (agricultural) losses that can be use to reduce non-agricultural business income. Agricultural losses would be limited to $200,000, if the taxpayer receives any Farm Bill commodity payments. A farmer's or rancher's ability to use agricultural losses against their agricultural gains wouldn't be limited.
• Allowing farmers to pay additional self-employment taxes to qualify for Social Security. This provision would modify the farm optional method so that farmers and ranchers can pay more in optional self-employment taxes (and so be eligible for Social Security benefits). Qualifying for Social Security benefits can be difficult for self-employed farmers and ranchers because they don't always have a steady stream of income. When there are no earnings, no Social Security taxes are paid and no quarters are accrued. The payment thresholds in the farm optional methods, in which farmers and ranchers can voluntarily pay Social Security taxes in order to earn quarters (and so receive Social Security benefits), are outdated and no longer allow farmers and ranchers to earn enough Social Security credits per year.

  Ensuring that farmers know their tax obligations. The provision would requires the Commodity Credit Corporation (CCC) to always provide IRS and the farmer with information returns showing the amount of market gain the farmer realizes when he repays a CCC market assistance loan. As a result, income that is subject to information reporting would be less likely to be underreported to IRS.

In addition to the above, Senate conferees are committed to $600 million more in agriculture tax-related reforms to complete the package.

In response to word that House conferees would score any temporary tax provision as if it were permanent, Senate Finance Committee Ranking Member Chuck Grassley (R-IA) complained that this imposed a double standard because none of the 5-year spending proposals were considered as if they were permanent. In particular, Grassley noted that this approach overlooked that the largest agricultural tax revenue raiser, a reduction in the ethanol credit, is temporary, expiring at the end of 2010 (roughly the same period as some of the temporary tax relief provisions in the bill). Grassley objected that if the House was going to look at the agricultural tax package over ten years, then the same test should be applied on the spending side.

4/18/08 -- Senate leaders introduce bill providing AMT relief and host of other business and individual tax extenders.
On April 17, Senate Finance Committee Chairman Max Baucus (D-MT) and Ranking Member Chuck Grassley (R-IA) introduced a bill that would extend almost 50 tax provisions, including relief from the alternative minimum tax (AMT), tax incentives for renewable energy, the research and development credit, the college tuition tax deduction, and the state and local sales tax deduction. Under the Baucus-Grassley bill, the AMT exemption amounts would increase to $46,200 for individuals ($69,950 for married filing jointly) for 2008, and personal credits would be allowed against the AMT. Currently, the AMT exemption is $33,750 ($45,000 for married couples filing jointly), and personal credits aren't allowed against AMT.

The bill would also extend the following energy provisions: the renewable electricity and refined coal production credit; the credit for clean renewable energy bonds (CREBs); the credit for residential energy efficient property; the business energy credit; the deduction for energy efficient commercial buildings; the credit for energy efficient appliances; the credit for energy efficient new homes; and the credit for nonbusiness energy property.

The following individual provisions would be extended: the deduction for state and local sales taxes; the qualified tuition deduction; the provision allowing taxpayers to make tax free contributions from their IRA plans to qualified charitable organizations; the teacher expense deduction; and the tax-favored treatment of certain RIC dividends and contributions of property interests conservation purposes.

The business provisions extended by the bill include: the research and development credit; 15-year straight-line depreciation for qualified leasehold and restaurant improvements; the new markets tax credit; expensing of brownfields environmental remediation costs; qualified zone academy bonds; the deduction for domestic production activities in Puerto Rico; enhanced charitable deduction for food and book inventory; the Indian employment credit; and the basis adjustment to stock of S corporations making charitable contributions of property.

4/16/08 -- House approves bill that would liberalize return preparer standards.
On April 15, the House approved H.R. 5719, the "Taxpayer Assistance and Simplification Act of 2008" by a vote of 238 to 179. A key provision in this bill would conform the penalty standards for return preparers with the standards for taxpayers. For undisclosed positions, the penalty standard for return preparers would be reduced to substantial authority. For disclosed positions, a return preparer generally would be required to have a reasonable basis for the position. For positions involving tax shelters and certain reportable transactions, a return preparer would be required to have a reasonable belief that the position would more likely than not be sustained on the merits.

The bill would also require substantiation of health savings account information, increase information return penalties, and increase the penalties for failure to file partnership or S corporation returns.

Other provisions in the bill would remove cell phones from the "listed property" category, delay the application of withholding on certain governmental payments for goods and services, prohibit IRS from providing debt indicators to private parties if it is determined that the resulting refund anticipation loan plus related fees are predatory, and repeal IRS's authority to enter into private debt collection contracts.

On April 14, the White House threatened to veto the "Taxpayer Assistance and Simplification Act," stating that it strongly opposed the ban in the bill on IRS hiring private debt collectors to pursue delinquent taxpayers.

The following are available on Checkpoint in PDF format:

• the text of the "Taxpayer Assistance and Simplification Act of 2008," to be marked up by the Ways & Means Committee on Apr. 9;
• a summary of the "Taxpayer Assistance and Simplification Act of 2008," to be marked up by the Ways & Means Committee on Apr. 9;
• the Joint Committee on Taxation staff's Estimated Revenue Effects Of The "Taxpayer Assistance and Simplification Act of 2008," to be marked up by the Ways & Means Committee on Apr. 9;
• the Joint Committee on Taxation staff's Description of the Taxpayer Assistance and Simplification Act of 2008, Scheduled for Markup by the House Committee on Ways & Means on April 9, 2008; and
• the Joint Committee on Taxation staff's Description of the Chairman's Amendment in the Nature of a Substitute to H.R. 5719, the Taxpayer Assistance and Simplification Act of 2008, Scheduled for Markup by the House Committee on Ways & Means on April 9, 2008.

4/15/08 -- House debates bill that would liberalize return preparer standards.
Late April 15, the House began to debate H.R. 5719, the "Taxpayer Assistance and Simplification Act of 2008." The most important provision in this bill would conform the penalty standards for return preparers with the standards for taxpayers. For undisclosed positions, the penalty standard for return preparers would be reduced to substantial authority. For disclosed positions, a return preparer generally would be required to have a reasonable basis for the position. For positions involving tax shelters and certain reportable transactions, a return preparer would be required to have a reasonable belief that the position would more likely than not be sustained on the merits.

The bill, which was approved by the Ways & Means Committee on April 9, also includes a Chairman's amendment requiring substantiation of health savings account information, increasing information return penalties, and the penalties for failure to file partnership or S corporation returns.

Other provisions in the bill would remove cell phones from the "listed property" category, delay the application of withholding on certain governmental payments for goods and services, prohibit IRS from providing debt indicators to private parties if it is determined that the resulting refund anticipation loan plus related fees are predatory, and repeal of IRS's authority to enter into private debt collection contracts.

On April 14, the White House threatened to veto the "Taxpayer Assistance and Simplification Act," stating that it strongly opposed the ban in the bill on IRS hiring private debt collectors to pursue delinquent taxpayers.

The following are available on Checkpoint in PDF format:

• the text of the "Taxpayer Assistance and Simplification Act of 2008," to be marked up by the Ways & Means Committee on Apr. 9;
• a summary of the "Taxpayer Assistance and Simplification Act of 2008," to be marked up by the Ways & Means Committee on Apr. 9;
• the Joint Committee on Taxation staff's Estimated Revenue Effects Of The "Taxpayer Assistance and Simplification Act of 2008," to be marked up by the Ways & Means Committee on Apr. 9;
• the Joint Committee on Taxation staff's Description of the Taxpayer Assistance and Simplification Act of 2008, Scheduled for Markup by the House Committee on Ways & Means on April 9, 2008; and
• the Joint Committee on Taxation staff's Description of the Chairman's Amendment in the Nature of a Substitute to H.R. 5719, the Taxpayer Assistance and Simplification Act of 2008, Scheduled for Markup by the House Committee on Ways & Means on April 9, 2008.

4/15/08 -- House passes bill barring government contracts or grants to seriously delinquent taxpayers.
On April 14, the House by voice vote approved H.R. 4881, the "Contracting and Tax Accountability Act of 2007." The bill bars any person (individual, partnership, or corporation) who has a seriously delinquent tax debt from obtaining a federal government contract or grant. It requires federal agency heads to require prospective contractors or grantees to: (1) certify that they do not have such a debt; and (2) authorize the Secretary of the Treasury to disclose information describing whether such contractors or grantees have such a debt.

Representative Tom Davis (R-VA) has stated that the effect of the bill would be "largely symbolic" because the Administration is currently working on regulations that would similarly bar companies that fail to pay taxes from government contracts and require federal contractors and grantees to certify that they haven't been notified by IRS of a liability for delinquent taxes.

A PDF version of the text of the "Contracting and Tax Accountability Act of 2007" is available on Checkpoint.

4/14/08 -- Details of Senate agriculture tax package announced
On Apr. 14, Senate Finance Committee Chairman Max Baucus (D-MT) and Ranking Member Chuck Grassley (R-IA) announced details of the $2.5 billion agriculture tax package included in the Senate's recent offer to House conferees in ongoing farm bill negotiations.

Key provisions of the tax package in the Senate offer would:

• Provide that conservation reserve program (CRP) payments to retired or disabled individuals are treated as rental payments for tax purposes and so are excluded from self-employment taxes from a trade or business. Accordingly, these payments wouldn't be used to calculate any potential reductions in retirement or disability checks.
• Extend for two years the enhanced tax incentive for contributions of conservation easements included in the Pension Protection Act.
• Create tax incentives for taxpayers who take voluntary measures to aid in the recovery of species that are either threatened, endangered, or deemed to warrant protection.
• Include tax incentives to help timber companies remain competitive globally.
• Improve "Aggie Bonds," tax-exempt bonds that provide low-interest loans for first-time ranchers and farmers, and help retiring farmers sell their land to young farmers.
• Include tax incentives to help make more medications available to veterinarians and owners of minor species (such as sheep, goats, aquaculture), and bring capital gains treatment for equine property in line with general holding periods.
• Help make important farm equipment more affordable by shortening the recovery period for certain farm equipment and machinery to five years.
• Create a 30% investment tax credit for 2009 (capped at $4,000 per year) for qualified residential and commercial applications of small wind energy property, not to exceed 100 kilowatts.
• Create a new production tax credit for cellulosic biofuels equal to the difference between $1.01 per gallon and the per-gallon ethanol blender tax credit (currently 51¢ per gallon). The credit could be claimed on up to 60 million gallons per taxpayer, and would be available through 2013.
• Extend through 2009 the $1 per gallon and 50¢ per gallon biodiesel credits, as well as the 10¢ per gallon credit for first 15 million gallons of biodiesel from "small producers." The proposal also would extend the $1.00 renewable diesel credit through 2009, while adding jet fuel as a qualifying use of renewable diesel.
• Reduce the 51¢ per gallon credit for ethanol by 5¢ in the year after which the 7.5 billion-gallon threshold mandated by the Energy Policy Act of 2005 is reached.

Tax Watch Archive