Just after Thanksgiving, we put together a list of the must-pass items that Congress would turn to in December, including the AMT/Extender package, omnibus spending bill, farm bill, S-CHIP, energy bill, and Medicare Doctors payment legislation.
With just a few hours to go in this congressional session, it looks like many of these items will clear the Congress “in one form or another” and be sent to the President. In just the last day, the two bodies dealt with the omnibus spending bill (including $70 billion to fund the war in Iraq), a six-month extension of doctors’ payments under Medicare and an 18 month extension of the State Children’s Health Insurance Program. Meanwhile, the President signed a slimmed-down energy bill this morning.
For S corporations, perhaps the biggest news is that the House adopted today a one-year extension of the higher exemption under the Alternative Minimum Tax. This higher exemption will apply to individual taxes due for tax-year 2007 (the current year) and it will protect 20 million-plus taxpayers from having to pay a higher tax bill under the AMT when they file this spring. As recently as Monday, there was some doubt whether this much needed extension would actually take place.
Just this morning, the cloud in this silver lining was that the House would include a new rule that will apply to next year’s tax bills. In effect, the rule would have required the House to ”make up” the $50 billion revenue impact of extending the AMT patch before additional tax items can be adopted in 2008. This plan fell through, however, and the House has just adopted a clean one-year AMT extension.
That’s particularly good news for the package of extenders that were left undone this year, including the R&E tax credit, state and local sales tax deduction, and the S corporation charitable donation provision. It will also put less pressure on Congress next year to adopt tax increases on S corporation payroll taxes, LIFO repeal, or repeal of the IC-DISC.
Tax Victory for S Corp Exporters!
In case you missed it, the truncated 2-week comment period for the Tax Technical Correction Act of 2007 ended on December 3rd. Despite the tight window (that included the Thanksgiving holiday break), dozens of exporters and trade associations from around the country weighed in with the Finance and Ways and Means Committees to oppose the proposed tax increase.
Did the tax writers pay attention? You bet they did. Yesterday, the House adopted a technical corrections bill that did not include the rate increase on US exporters.
Many Senate and House offices weighed in with concerns about raising taxes on exporters. Special thanks go out to the offices of Senators Cantwell (D-WA), Smith (R-OR), Wyden (D-OR), Specter (R-PA), and Kohl (D-WI), whose letter to the Finance Committee raised the concern about this provision to the member level. On the House side, senior Ways and Means Member Jim McDermott (D-WA) weighed in directly with Chairman Rangel and let him know the adverse impact this provision would have on exporters in his district.
The net effect of all these communications was the House tax writers decided, earlier this week, to forego the IC-DISC technical correction, preserving this extremely important benefit for Americab�s small and closely held exporters.
This is a BIG victory for exporters and those whose jobs rely on the growth of American exporting. Congrats to those companies and trade associations who worked so hard together to block this harmful tax increase. Of course, now we have to prepare for next year.