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Thursday, May 11, 2006

MAJOR TAX BILL ON ITS WAY!

After failing to reach agreement late last year, tax conferees of the House of Representatives and the Senate have reached an agreement on H.R. 4297, the “Tax Increase Prevention and Reconciliation Act” or TIPRA. Assuming passage by the House and Senate, and a non-veto by President Bush, a new tax law can be expected shortly. Highlights of the new law include:

... Favorable Code Sec. 179 expensing provisions to remain in place through the end of 2009 (instead of through the end of 2007).

... Favorable tax rates for capital gains and qualified dividend income will remain in place through 2010 (instead of sunsetting after 2008).

... For 2006, the alternative minimum tax exemption amount for married taxpayers would increase to $62,550 and for unmarried individuals to $42,500 (instead of dropping to $45,000 and $33,750, respectively).

... The exception under subpart F for active financing and insurance income would be extended for two years, to tax years of foreign corporations beginning before Jan. 1, 2009, and for any tax year of a U.S. shareholder with or within which the tax year of the foreign corporation ends.

... The active business test for tax-free corporate spin-offs would be simplified .

... At the election of a taxpayer, the sale or exchange of musical compositions or copyrights in musical works created by his personal efforts would be treated as the sale or exchange of a capital asset.

... Corporations with assets of at least $1 billion would face a modified schedule of estimated tax payments.

... The $100,000 modified AGI limit on conversions of traditional IRAs to Roth IRAs, would be eliminated for tax years beginning after Dec. 31, 2009.

... The 50% W-2 wage limit on the Code Sec. 199 domestic production deduction would be modified.

... For tax years beginning after 2005, the age at which the kiddie tax applies would be changed from under 14 to under 18 years of age.

... Information reporting would be required for interest paid on tax-exempt bonds after Dec. 31, 2005.

... Taxpayers would have to make partial payments to IRS while an offer-in-compromise is being considered by IRS.
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