1st Quarter, 2010
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1st Quarter, 2010 |
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Legislative Possibilities
By Mira J. Finé, CPA, National Director of Tax OperationsWhile the health care bill and the climate bill are massive pieces of legislation containing many tax provisions, Congress was not able to conclude anything in the climate area prior to the end of 2009. However, at the last moment, the Senate did pass a health care bill. The House and Senate will attempt to reconcile a final health care bill early this year. 2010 will be a busy legislative year as Congress will seek to finalize health care legislation, enact some type of climate legislation and consider a number of other items as well. We will keep you posted on developments as they occur. We had hoped to be able to declare that Congress had added some certainty to the estate tax provisions of the law by enacting some last-minute legislation. House Majority Leader Hoyer stated in early December that, "this week [the week of December 1] we will be dealing with the estate tax." Action did happen in the House but not in the Senate. The bill that the House passed, and that many in the Senate felt was appropriate, would have provided for a permanent estate tax extension. It offered an estate tax exclusion of $3.5 million per individual, or $7 million per couple, and a tax rate that would continue to be set at a top rate of 45%. While the tax rate would remain constant, the exclusion amount would be adjusted upward each year for inflation. As noted, Senate Democrats failed to reach a deal with Senate Republicans to make permanent estate tax changes or even to temporarily extend the current tax rules into 2010 when the tax is scheduled to expire. Even though the estate tax is scheduled to be repealed for the 2010 tax year, this does not mean that Congress cannot reinstate the tax with changes on a retroactive basis early in 2010. It appears at this point that action in the new year will temporarily extend the tax for a year or two until permanent changes can be enacted. Unfortunately, imposing a tax retroactively can create administrative and planning headaches for accountants, lawyers, and heirs of estates. Further, it is highly likely that the Internal Revenue Service (IRS) will face challenges from heirs of estates arguing that they do not owe tax if a decedent died during the months when the repeal was in place. As a practical matter, not enacting changes in 2009, even temporary changes, creates a potential mess in tax administration going forward. This will be interesting in 2010! In addition, Congress will need to extend a number of provisions of the tax code that are scheduled to expire in 2009. The Tax Extenders Act of 2009 will extend more than forty provisions that are scheduled to expire at the end of 2009. These items encourage charitable contributions, provide community development incentives, supply tax relief in the event of a presidentially declared disaster, and support the use of alternative vehicles and alternative fuels. A few of the specific items extended include the extension of:
Because extension legislation was not approved prior to year end 2009, we are looking at a retroactive bill as discussed above in the estate tax area. Other articles in this newsletter:
Recent IRS Developments Your Audit Risk |
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Mira has over 30 years of professional experience providing tax planning and compliance services to both individuals and business organizations. Mira assists clients with significant transactions, corporate reorganizations, partnerships, estates and trusts and succession planning. Mira’s expertise extends to highly specialized areas such as revenue recognition, FASB 109, capital formation, mergers and acquisitions, and Section 382 issues (Net Operating Losses).