Congress is back and ready to legislate. First out of the box will be the long-anticipated economic stimulus package. Unlike previous efforts, the current push has the benefit of support from leadership in the House, Senate, and the new Administration, so we expect a sizable package to reach the President’s desk prior to the February recess.
What exactly will the package include? Details are being negotiated right now but the broad outline remains the same — a large package of spending on infrastructure, relief to cash-strapped states in the form of increased federal Medicaid payments, and tax relief to businesses and families. What has changed is the relative size of the tax relief, which continues to grow as the economy shrinks.
According to our friends in the press, the Obama team is currently targeting a package of $775 billion, including approximately $300 billion in tax relief. On the tax side, contending provisions include:
- Relief to Working Taxpayers: Some variation of candidate Obama’s “Making Work Pay” proposal is likely to form the core of the tax/refund relief, perhaps as a permanent adjustment to employer withholding totaling $500 per taxpayer.
- Small Business Expensing: The higher $250,000 limit on small business expensing expired at the end of 2008. Package will likely include a two year extension of that higher limit.
- Other Business Provisions: In addition to expensing, other business breaks could include extending loss carry-backs, bonus depreciation, tax credits for firms that hire new workers, and other business incentives.
- Local Government Relief: This proposal would remove the applicable Alternative Minimum Tax on certain municipal bonds.
Also part of the mix is the S Corporation Association priority of Built-In Gains tax reform. As S-Corp readers know, such relief would help small businesses strapped for cash access much-needed capital by unlocking valuable assets they have had to hold for an overly restrictive time period.
As far as process goes, negotiators from the pertinent committees and the Obama team are meeting right now. The Senate Finance Committee had earlier indicated it might mark up a stimulus package this Thursday, January 8th. That target date appears to be pushed back to later in the month due to logistical as well as policy concerns, but the Committee has made clear to Senate Leadership and the Obama team that they intend to be part of the process of putting together this bill.
That’s good news for S corporations, since many of our champions on built-in gains and other reforms are Senate Finance Committee members. We’re continuing to reach out to them, our Ways and Means Committee friends, and the Obama economic team to make sure they understand the value to the economy and job creation of helping S corporations better access their capital.
Bottom line – the stimulus package is being actively developed and we expect it to move from proposal to law within the next six weeks.