Friday Afternoon Tax Legislation Update

Friday Afternoon Tax Legislation Update

I was supposed to be cruising the Navesink River with the rest of my firm’s tax eggheads today, but personal conflicts arose and left me land-locked for the day.Just to rub it in, theysent me the following videoshowing just how much fun they were having without me:

Here’s to hoping they get marooned on a deserted island, only to find that their in-depth understanding of Section 263A and like-kind exchanges is of limited usefulness when dinner needs to be caught.

On to more important things: Like the toddler who caps a long day with a burst of energy before passing out on the floor, Congress entered its month-long recess with a flurry of activity. Let’s recap:

• A Senate sponsored committee voted to extend the majority of tax provisions that either expired on December 31, 2011 or are set to expire on December 31, 2012. Chief among the expired provisions are the R&D credit, the options state sales tax deduction, and the “patch” to increase the AMT exemption. The “extenders package” isn’t expected to go to a full Congressional vote until after the November election.
• In the meantime, the House was simultaneously passing a bill to fast-track Code simplification and reform, a task that would be made decidedly more complex by…you guessed it…passing the extender package. The bill would reduce our current six tax brackets to only two, with the top individual and corporate rate reduced to 25%, while also eliminating the AMT. This bill is widely perceived to be little more than a nod from the Republican party to its constituents that it serious about cleaning up the tax law, while the Democrats continue to push for additional breaks and preferences that add to the deficit.
• Countering the Senate vote to repeal the Bush tax cuts for those earning in excess of $250,000, the House defied a veto threat and voted to extend the Bush tax cuts for all taxpayers, leaving the top rates uninterrupted at 33 and 35%.

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