A new federal financial package to try, once again, to kick start the economy is on pace to become law just before next month's Presidents' Day break.
The $303 billion measure, $276 billion of it specifically dealing with taxes, was approved yesterday by the House Ways and Means Committee. House leaders are planning a full vote next Wednesday, Jan.28. Then it goes to the Senate, where pressure is coming from not only colleagues on the other side of Capitol Hill, but also the new Administration to get a bill on President Obama's desk by Feb. 16.
Another prepaid credit: So just what's in this rapidly progressing tax bill for you and me?
The heart of the measure, which for now is going by the creatively and patriotically named title of American Recovery and Reinvestment Tax Bill of 2009, is the $145.3 billion Making Work Pay tax credit.
The refundable credit, meaning you could get money even if you don't owe any taxes, would equal 6.2 percent of a taxpayer's adjusted gross income up to a maximum credit of $500 for single taxpayers or $1,000 for joint filers. The credit would phase out for taxpayers with adjusted gross income of more than $75,000 or double that threshold amount for joint filers.
When and how: You can start making your shopping (or bill paying or saving) list now, but folks working on the measure say you're not likely to see the cash until June.
Lawmakers want to deliver the credit by having employers reduce the amount of withholding taken out of worker paychecks. Folks dealing with the logistics say that it would likely take Treasury until June 1 to give employers the updated withholding schedules so that the paycheck adjustments could be made.
Other tax measures: The new worker credit is the core of the first tax bill of the 111th Congress, but the measure also contains several other provisions that could help taxpayers, such as:
- Waiving the repayment requirement of the first-time home buyer tax credit;
- Increasing the Earned Income Tax Credit (EITC) for 2009 and 2010;
- Modifying the HOPE scholarship credit, currently worth $1,800, to create a new American Opportunity tax credit that would be worth up to $2,500 of the cost of tuition and related expenses; and
- Extending through 2009 increased small-business Section 179 expensing.
I know this measure is targeted in an effort to get our economy percolating properly, but I still hate it when I see all these "through" dates. These temporary tax law changes just create more problems down the road by making future tax planning uncertain and allowing the very real possibility that they won't be renewed or worse, extended at the last legislative minute.
No more special Sec. 382 losses: And folks still up in arms about the special treatment banks have received under the bailout should be pleased with the measure's tighter restrictions on a controversial Treasury-ordered IRS notice that allowed some merging banks a substantial tax break.
The American Recovery and Reinvestment Tax Bill of 2009 would repeal the notice that loosened Section 382 tax code rules and allowed banks to claim losses that were previously incurred by financial institutions that they acquired.
Not only will this help quiet critics of the move, it will raise almost $7 billion over 10 years.