The American Recovery and Reinvestment Act of 2009 (Stimulus Bill), H.R. 1
Both the U.S. House and U.S. Senate have approved the conference agreement and the President is to sign H.R. 1 today, 2/27. Summaries of provisions are provided below.
Individual Tax Provisions - There are no tax provisions targeted directly at timberland owners, but many non-tax provisions that will impact indirectly, discussed in the section below. Selected tax provisions are briefly summarized here for general information.
Making Work Pay Credit - This is a credit against an employee's share of FICA tax for taxpayers with earned or self-employment income. Employer's share stays at 6.2 percent. The credit is capped at $400 ($800 for married couples) and will be taken as a reduction in withholding by employers. It is phased out for taxpayers with adjusted gross income exceeding $75,000 or $150,000 for married couples. The credit applies for calendar years 2009 and 2010.
$250 Economic Recovery Payment - These are one-time direct payments of $250 to individuals on Social Security, railroad retirees, and disabled veterans.
Alternative Minimum Tax "Patch" - Congress continued its year-to-year change to the AMT to avoid catching millions of middle income taxpayers with the AMT. The 2009 AMT exempt amounts are $70,950 for joint filers and $46,700 for single filers.
First-Time Homebuyer Tax Credit - First-time homebuyers of their residence get a tax credit of $8,000, an increase from last years $7,500. The higher credit applies to purchases after December 31, 2008. The credit phases out for AGI's above $75,000, $150,000 for joint filers. There is no pay-back of the credit if the residence is occupied for at least 36 months.
New Car Deduction - Provides an "above-the line deduction" of state and local sales taxers or excise taxes paid on the purchase of new vehicles. Thus, the deduction is available for those taxpayers not itemizing.
Education Credit - The HOPE education credit is increased from $1,800 to $2,500 per year
Unemployment Compensation - Unemployment compensation is subject to income tax. The new law excludes up to $2,400 of such compensation for 2009. Amounts over $2,400 remain taxable.
Business Tax Provisions -
Bonus Depreciation - The 50-percent first year bonus depreciation is extended retroactive to January 1, 2009.
Code Section 179 Expensing - The increased deduction of $250,000 allowed in 2008 is extended to 2009. The increased threshold of $800,000 is also extended. If not extended the deduction in $2009 would have been $125,000 with a cap of $500,000.
Net Operating Loss (NOL) Carryback - Qualified small businesses with average gross receipts of $15 million or less get a five-year carryback. This means filing an amended return and potential receipt of a refund.
Work Opportunity Tax Credit - The existing categories of groups qualifying for this credit is expanded to include unemployed veterans and "disconnected youth."
Refundable Credits in Lieu of Bonus Depreciation - This provision provides a way for certain businesses to get a refund by monetizing accumulated AMT and R&D credits taken in lieu of bonus depreciation.
Cancellation of Indebtedness - The cancellation of a debt results in taxable income to business no longer having to payoff the debt. This provisions allows this recognition to be spread over 5 years.
Exclusion of Gain on Qualified Small Business Stock - Currently investors can exclude 50 percent of gain from the sale of qualified small business stock acquired and held for more than five years. The exclusion is increased to 75 percent for stock purchased after February 17, 2009 and before January 1, 2011. A small business is one with assets not over $50 million. The entity must conduct an active trade or business.
S Corporation Built-In Gain Period - This provision helps C Corporations not able to survive under C Corporation tax treatment by reducing the built-in gains subject to taxation upon conversion. The holding period for assets subject to the built-in gains is reduced to seven years from 10 years. This applies to C Corporations converting in tax years 2009 and 2010.
Estimated Tax Payments of Individuals Reliant on Income From Small Businesses - Such individuals are required to make quarterly estimated tax payments equal to 90 percent, instead of 100 percent, of the amount of tax paid in 2008.
Non-Tax Provisions - Perhaps the biggest in the long-term is the support for research and production of renewable energy. The trend was well underway already, but the new incentives will redefine the meaning of "fuelwood" and change timber management strategies in many forest regions. The many incentives provided to the housing sector should bring this market back a little faster than otherwise expected, reviving wood products markets. There is also an additional $650,000,000 for USDA, USFS for `Capital Improvement and Maintenance', , to remain available until September 30, 2010, which shall include remediation of abandoned mine sites and support costs necessary to carry out this work. Also included is an additional amount for 'Wildland Fire Management', $485,000,000, to remain available until September 30, 2010, for hazardous fuels reduction and hazard mitigation activities in areas at high risk of catastrophic wildfire, of which $260,000,000 is available for work on State and private lands using all the authorities available to the Forest Service: Provided, That of the funds provided for State and private land fuels reduction activities, up to $50,000,000 may be used to make grants for the purpose of creating incentives for increased use of biomass from national forest lands. On the tax side the exclusion for the individual alternative minimum tax will increase slightly.There's also relief for the tax on built-in gains of S-corporations that transitioned from being a C-corporation. We'll provide more complete summaries when the language signed by the President is available.