Monday, December 11, 2006

Great job to Congress!

Congress Passes Extension of Tax Breaks
The House approved the Tax Relief and Health Care Act of 2006 (H.R. 6408), which was then combined with H.R. 6111 before being sent to the Senate.

Effect of passage of the bill on HEALTH SAVINGS ACCOUNTS-
The HSA provisions will permit rollovers from health flexible spending accounts and health reimbursement accounts into an HSA for a limited time and allow a one-time rollover from an IRA to an HSA. The limit on the annual deductible contributions that can be made to an HSA will also be modified so the maximum deductible contribution is not limited to the annual deductible under a high-deductible health plan.

Among those tax relief measures commonly referred to as "extenders," the bill makes retroactive to the beginning of 2006 and extends through 2007:
* an expanded and modified version of the research credit;
* the deduction for state and local sales taxes;
* the above-the-line deduction for qualified higher education expenses;
* the above-the-line deduction for teachers' classroom expenses;
* state and local governments' authority to issue qualified zone academy bonds;
* expensing for brownfields remediation costs;
* tax incentives for investment in the District of Columbia;
* tax incentives for Indian employment and business property depreciation on Indian reservations;*
the 15-year straight-line cost recovery for qualified leasehold and restaurant improvements;
*the taxable income limit on percentage depletion for oil and natural gas produced from marginal properties;
*the availability of Archer medical savings accounts;
* additional provisions related to distilled spirits, corporate donations of scientific property, and American Samoa.
-The legislation also extends for two years the work opportunity and welfare-to-work tax credits and will combine the two credits beginning in 2007.
-Other provisions in the bill extend the new markets tax credit through 2008, extend through 2008 the election to include combat pay as earned income for purposes of the earned income tax credit, and extend for one year a provision related to mental health benefits.
-An extension of the traditional alternative minimum tax relief "patch," which prevents additional taxpayers from becoming subject to AMT, was not included in the final package. One provision does modify the AMT refundable credit for individuals.
-The section 199 manufacturing deduction is extended to Puerto Rico, and tax incentives for mine safety equipment and mine rescue team training are created.
-Also, bonus depreciation for qualified Gulf Opportunity (GO) Zone property is extended through 2010.

Other tax provisions also made their way into the Senate bill, along with technical corrections related to the GO Zone Act of 2005 and the controlled foreign corporation look-through provision included in this year's tax reconciliation bill. The bill extends most expiring energy and excise tax provisions. Among those provisions, the bill extends and modifies the section 45 renewable electricity production credit. The placed-in-service date is extended through 2008 for qualified facilities.Other provisions extend for one year a number of energy incentives, including the deduction for energy-efficient commercial buildings; the business credit for energy-efficient new homes; the credit for residential energy-efficient property purchases; and a business credit for the installation of qualified fuel cells and stationary microturbine power plants and the purchase of solar energy property.