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PRESIDENT SIGNS ECONOMIC STIMULUS ACT OF 2008
On February 13, President Bush signed the Economic Stimulus Act 0f 2008. The tax provisions of the Act include recovery rebates for individuals and investment incentives for businesses. The legislation is intended to jump start the economy through increased spending by individuals and by encouraging businesses to increase their investments in new equipment by the end of 2008.
The recovery rebate (technically known as "advance credit payments") checks will be as high as $600 for individuals to $1,200 for married couples. There is also an additional rebate amount of $300 for each qualifying child. The amount of the rebate will phase out at a rate of 5% of adjusted gross income above $75,000 ($150,000 for joint filers). Most taxpayers will receive the "credit" in the form of a check issued by the Treasury. The amount of the check will be computed on the basis of tax returns filed for 2007. The payments will be mailed out as rapidly as possible to taxpayers who file their tax returns timely. Taxpayers who file late or on extension will receive their checks later. No rebate checks will be issued after December 31, 2008.
For businesses, the 2008 Act provides two tax incentives. The first increases the amount of equipment and other tangible personal property purchases that a business may expense or write-off in the current year, rather than depreciate over the life of the asset. The new expense amount is $250,000. The expensing amount applies to property purchased and placed in service in tax years beginning in 2008. The legislation also increases the threshold for reducing this deduction to $800,000. The second incentive allows businesses an additional depreciation deduction equal to 50% of the cost of an asset acquired and placed into service during 2008. This additional incentive is known as "bonus' deprecation.
ANNUAL ELECTRONIC FILING REQUIREMENT FOR SMALL EXEMPT ORGANIZATIONS
Prior to the Pension Protection Act (PPA) of 2006, exempt organizations whose average annual gross receipts did not exceed $25,000 had no filing requirement with the Internal Revenue Service. Thanks to the PPA, small tax-exempt organizations whose gross receipts are normally $25,000 or less may be required to electronically submit form 990-N, also known as the e-Postcard.
The purpose of the e-Postcard is to ensure that the IRS and potential donors have current information about the organization. The first e-Postcards are due in 2008 for tax years ending on or after December 31, 2007.
If an organization does not timely file an e-Postcard, the IRS will send a reminder notice, but will not assess a penalty for late filing. However, an organization that fails to file required e-Postcards for three consecutive years will automatically lose its tax exempt status. The revocation of the organization's exempt status will not take place until the filing due date of the third year.
FLURRY OF LAST MINUTE 2007 LEGISLATION INCLUDES AMT RELIEF
On December 26, 2007, the President signed into law the Tax Increase Prevention Act of 2007. The Act provides for a one-year "patch" of the Alternative Minimum Tax ("AMT"). The patch essentially increases the AMT exemption amounts for the 2007 tax year. Without the patch, Treasury and the IRS predicted that for the 2007 tax year, as many as 25 million taxpayers would have faced on average a $2,000 tax increase.
The AMT is the excess, if any, of the tentative minimum tax for the year over the regular tax for the year. In arriving at the tentative minimum tax, an individual begins with taxable income, modifies it with various adjustments and preferences, and then subtracts an exemption amount The result is Alternative Minimum Taxable Income, which is subject to an AMT rate of 26% or 28%.
The AMT patch is only a temporary fix. Unless there is additional Congressional action, the 2008 AMT exemption amounts for individuals will revert back to the 2000 tax year levels.
To find out if you can take advantage of any of these new or extended provisions, please
contact Ed Doran in our tax department.
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