Download Economic Stabilization Act of 2008

Tax Provisions Included in the Bail Out Bill
We thought we had sent out this email back in November or so. But we’ve been
receiving a few questions on the extenders and found out we neglected to send this.
Its real name is the Emergency Economic Stabilization Act of 2008 (Public Law 110343). You will also find references to this Act as the Energy Improvement and Extension
Act of 2008 and the Tax Extenders and Alternative Minimum Relief Act of 2008. These
additional two titles are referring to specific Divisions of Public Law 110-343.
This Act has many extenders and a few other provisions. Here are various provisions
included in this Act.
1) First a nontax provision, but one clients ask us about, is the temporary increase in the
amount of deposits that are FDIC or FCU insured. For the rest of 2008 and through the
end of 2009, the FDIC & FCU limits are increased from $100,000 to $250,000. Since
this is a financial institution issue, taxpayers should be contacting their financial
institutions for the exact rules that apply to them.
2) Sale of Certain Preferred Stock – Gain or loss from the sale or exchange of certain
preferred stock by any applicable financial institution is treated as ordinary income/loss.
Applicable stock is preferred stock in FNMA or FHLMC and held on September 6, 2008
or sold by the institution on or after January 1, 2008 and before September 7, 2008.
3) Deduction Limit for Executive Compensation – Any applicable employer participating
in the Trouble Assets Relief Program (a nontax part of this Act) is limited to a maximum
of $500,000 as a deduction for compensation to covered executives. More details are
found in Section (m) of IRC Section 162.
4) The credit for Renewable Wind and Refined Coal Facilities is extended through 2009
(formerly 2008). The credit for solar energy property is extended through 2016 (formerly
2008). The credit for certain other facilities is extended through 2010 (formerly 2008).
The credit for fuel cell property is extended through 2016 (former 2008) and is increased
from $500 to $1,500.
8) Nonbusiness Energy Credit – This credit for storm windows, insulation, etc., was last
available as of December 31, 2007. Now Congress has put it back into law for one year,
BUT NOT FOR 2008. It is put back into law for the calendar year 2009. Also the water
heater provision is reduced from a thermal efficiency of at least 90 percent to 80 percent.
The credit is also expanded to asphalt roofs with cooling granules. It also now includes
pellet stoves that burn products made from grain or wood.
9) Energy Efficient Commercial Buildings Deduction – This deduction under section
179D (up to $1.80/square foot) is extended to expenses incurred through December 31,
2013 (formerly December 31, 2008).
10) New Energy Efficient Home Credit – This $1,000/$2,000 credit allowed for builders
of energy efficient homes is extended through 2009 (formerly 2008).
5) Plug-In Electric Drive Motor Vehicles – A new credit is available for these certified
vehicles if placed in service after December 31, 2008. IRS will issue news releases for
qualified vehicles.
6) Percentage Depletion – The suspension of the taxable income limit on percentage
depletion for oil and natural gas produced from marginal properties which expired for
taxable years beginning in 2008 is returning for taxable years beginning in 2009. (This
means the limitation applies for calendar year returns for 2008 and for 2010 and later, but
the limitation does not apply for calendar year returns for 2009.)
7) Transportation Fringe for Bicycle Commuters – Employers can provide a nontaxable
reimbursement for the purchase of a bicycle, and improvements, repairs, and storage, if
the bicycle is regularly used for a substantial portion of the travel between the employee’s
residence and the place of employment. This reimbursement has a maximum of $20
times the number of months the bicycle is used to commute during the year. This
nontaxable reimbursement is not allowed for any employee already receiving nontaxable
reimbursement under the qualifying transit vehicle, parking, etc. provisions.
11) Broker Reporting of Basis – Brokers of securities will have to start informing
taxpayers and IRS of the taxpayer’s basis in securities which have been sold. This only
applies to 1) stock in a corporation which is acquired through the broker on or after
January 1, 2011, and 2) stock for which an average basis method is permissible (mutual
funds) which is acquired through the broker on or after January 1, 2012. Details of this
are included in IRC section 6045. Since this is not effective until 2011, we are not
providing details on the special rules for wash sales, transfers from other accounts, etc. in
this email.
13) AMT & Credits:
- - For one more year (2008), personal tax credits will offset AMT (formerly this ended
after 2007)).
- - The AMT exemption amount is increased for 2008 to $69,960 for taxpayers filing
MFJ, and $46,200 for Single & HH filers. Again this is a one-year fix of the AMT issue
– for 2009 and future years the exemption amounts return to the old amounts we had
years ago.
- - Refundable AMT Credit – The percentage of long-term unused MTC that is
refundable is increased to the greater of 1) 50 percent of the long-term unused MTC, or
2) The refundable MTC allowed on the prior year’s return. The former 20% limitation,
$5,000 limit and phase-out have been removed from the computation.
- - Refundable AMT Credit – Any penalty and interest (P&I) the taxpayer has been
assessed for AMT created as a result of the exercise of ISOs prior to January 1, 2008 is
abated. If a taxpayer has already paid P&I in connection with these ISOs, the taxpayer’s
refundable AMT credit is increased by the paid P&I. This increase is taken into account
50 percent in 2008 and 50 percent in 2009.
17) Additional Child Tax Credit – For 2008 only the calculation of the additional child
tax credit will be based on 15% of the earned income over $8,500 instead of the normal
$10,000 (as indexed). This may result the refundable credit kicking in a little earlier for
some taxpayers.
18) GO ZONE Type of Relief – The GO ZONE type of relief is now available for areas
damaged by the 2008 midwestern severe storms, tornados, and flooding.
19) Other extenders:
-- a) The following items have been renewed for 2008 and 2009:
----- 1) State and local sales tax deduction
----- 2) Qualified tuition deduction
----- 3) Teachers’ deduction
----- 4) Nontaxable distributions from IRAs directly to charitable organizations
----- 5) Research credit (and is modified)
----- 6) 15-year straight-line cost recovery period for qualified leasehold improvements
and qualified restaurant improvements.
----- 7) Reduced basis adjustment to S corporation stock for charitable contributions of
property
----- 8) Indian employment credit
----- 9) Accelerated depreciation for business property on Indian reservations
----- 10) Seven-year recovery period for motorsports’ racing track facilities
----- 11) Enhanced deduction for qualified computer contributions
----- 12) Tax incentives for investment in D.C.
----- 13) Contributions of food and book inventories
-- b) Items available in 2008 and extended through 2009 include:
----- 1) The additional standard deduction for real estate taxes
----- 2) The mine rescue team training credit
-- c) New items that are applicable for 2009 only:
----- 1). A 15-year straight-line cost recovery period for “qualified retail improvement
property.” This includes any improvement to an interior portion of nonresidential real
property if the portion is open to the general public, used in the retail trade or business of
selling tangible personal property to the generally public, and the improvement is placed
in service more than three years after the date the building was first placed in service.
Certain improvements are not eligible. This is effective only for property placed in
service during the calendar year 2009.
----- 2) NEW (cannot be used) farming machinery and equipment (other than any grain
bin, cotton ginning asset, fence, or other land improvement) placed in service during
2009 is treated as 5-year property with an alternative life of 10 years.
This text has been shared with you courtesy of: David & Mary Mellem, EAs &
Ashwaubenon Tax Professionals, 920-496-1065 (920-496-9111).
[email protected], [email protected], [email protected],
[email protected].
©2009 Ashwaubenon Tax Professionals. No reproduction of this article is permitted
without the express written consent of Ashwaubenon Tax Professionals, 2140 Holmgren
Way, Suite 1040, Green Bay, WI 54304.
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