May 2008 Legislation

From TaxAlmanac

House Reaffirms Commitment to America’s Armed Forces

Bill would provide essential tax relief to military families

WASHINGTON, D.C. - The House of Representatives approved bipartisan legislation to deliver tax relief to the men and women of our nation’s armed services, as well as others volunteering in service in America. The bill, H.R. 6081, the Heroes Earnings Assistance and Relief Tax (HEART) Act of 2008, also makes a critical change to current law that will enable thousands of active duty military families to qualify for economic stimulus payments. H.R. 6081 passed the House by a vote of 403-0.

“This bill is called the HEART Act, but I would prefer to call it the thank you bill – thank you to the tens of thousands of American men and women who have responded to America’s call to fight this war and place themselves in harm’s way to serve this nation,” said Chairman Charles B. Rangel (D-NY), chief sponsor of the HEART Act. “This bill enhances their ability to get tax benefits such as the Earned Income Tax Credit, buy homes, make penalty-free withdrawals from their pension plans, access amounts held in a Flexible Savings Account, and remove other impediments that keep them from getting the relief they deserve.

“The HEART Act would also make an important change to the recently-passed stimulus bill to allow thousands of active duty military families to receive a stimulus check they were previously denied because one spouse did not have a Social Security number,” said Chairman Rangel. “This legislation corrects this injustice to ensure that our active duty military families are not disadvantaged under our tax laws.”

Both the House and Senate have passed earlier versions of the HEART Act. H.R. 6081 is an attempt to streamline provisions in those bills for final passage.

Among other things, the Heroes Earnings Assistance and Relief Tax Act of 2008 would:

• Clarify that active military who file a joint tax return would be eligible for the stimulus rebate payment even if the spouse does not have a Social Security number.
• Make permanent the ability to include combat pay as earned income for purposes of the Earned Income Tax Credit (EITC);
• Make permanent and modify qualified mortgage bonds used to finance residences for veterans;
• Modify the Uniformed Services Employment and Re-employment Rights Act (USERRA) to allow the day prior to the date of death to be treated as the date the employee returned to work for purposes of triggering payment of benefits under a qualified plan;
• Permit an employer to make certain contributions to a qualified pension plan on behalf of an employee who is killed or become disabled in combat;
• Make permanent the expiring Internal Revenue Code provision that permits active duty reservists to make penalty-free withdrawals from retirement plans;
• Permit recipients of military death benefit gratuities to roll over the amounts received, tax-free, to a Roth IRA or an Education Savings Account;
• Provide a tax credit for small employers with respect to differential wage payments to employees who are on active military duty;
• Permit members of the reserves members called to active duty to withdraw amounts held in a Flexible Spending Account (FSA) without penalty;
• Extend current law excise tax for failure to comply with the mental health parity requirements for benefits for services furnished on or after the date of enactment through December 31, 2008;
• Ensure fairer treatment of military families with disabled children who depend on Supplemental Security Income (SSI) payments.

Source: House Committee on Ways and Means

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Farm Bill’s Disaster Aid, Reforms & Tax Relief Become Law As Senate Overrides Veto

Finance Chairman Baucus led fight for new disaster assistance trust fund, $2 billion in farm tax reforms funding farm tax relief

Washington, DC – The U.S. Senate voted 82-13 to override a presidential veto of the 2008 farm bill, giving America’s farming families a permanent agriculture disaster assistance trust fund and nearly $2 billion in farm tax relief as part of comprehensive farm legislation. Senate Finance Committee Chairman Max Baucus (D-Mont.) led the creation and the passage of the reliable disaster assistance program and the bill’s tax and trade title, as well as the successful effort to fully pay for the bill’s $10 billion in new spending over the next ten years. The bill’s farm tax relief is also fully funded with nearly $2 billion in strong farm tax reforms. “When the sun sets on farm country tonight, hard-working folks can know that this Congress believes in America’s agricultural sector. By voting to override the President’s veto, we did what’s right for farm families in Montana and across the country today,” said Baucus. “Farm life will never be easy, but the disaster assistance and tax relief in this new law will help American ag producers shoulder the load of providing food and fuel to the world. Strong reforms make the farm bill fairer and require everyone to do their share. I’m proud to stand up for Montana and for all of America to support this farm bill.”

2008 Farm Bill Tax Package: Relief for Farmers and Ranchers

America’s farming families sacrifice a lot to feed this country – and the farm bill can lighten the load that agricultural producers carry with well-targeted tax relief. The final farm bill conference report will include a number of tax relief provisions to encourage and enable the major financial investments that farmers make throughout their lives – helping them start farming, helping them stay financially afloat, and making the tax code fairer for those who make a living working the land.

A number of the tax relief provisions include are outlined below. In addition to those listed here, additional provisions promote homegrown energy independence, endangered species recovery, and land conservation.

• Help for Farmers Starting Out: “Aggie Bonds” are tax-exempt bonds that provide low-interest loans for first-time ranchers and farmers. The Aggie Bond program has not been updated in 26 years – in which time farm costs have risen exponentially. The bill will increase the loan limit for an individual beginning farmer from $250,000 to $450,000, and index the limit amount for inflation. The proposal also allows more beginning farmers – including those with a previous stake in family farm land – to qualify for Aggie Bonds. This provision costs $20 million over ten years.
• Tax Relief for Retired and Disabled Farmers: Retired and disabled farmers frequently live on small incomes. Many participate in conservation programs to preserve their land while they live there, and the Conservation Reserve Program provides payments to landowners who rest environmentally sensitive land and engage in certain conservation practices. The bill will keep CRP payments to retired or disabled individuals from reducing Social Security or disability payments, and also exempt the income from self-employment taxes. The cost is $192 million over ten years.
• Support for Agricultural Businesses: Agricultural chemicals and pesticides purchased for legitimate uses are increasingly vulnerable to theft because of the drug trade and national security threats. Some agricultural businesses may pay tens of thousands of dollars on new measures to secure their storage sites. This proposal will help agricultural businesses afford the increasing expenses of protecting agricultural chemicals and pesticides. The bill will provide a credit for 30 percent of costs for the protection of agricultural chemicals or pesticides, with a $2 million annual limit and a per facility limitation of $100,000. The cost is $14 million over ten years.
• Equal tax treatment for equine livestock: The current depreciation schedule for the cost of a race horse does not recognize that most horses held for sporting purposes end their sporting careers by age four. Right now, a sporting horse bought at less than two years old and trained for racing must be depreciated over seven years. Racing horses bought at more than two years old can be depreciated over three years. The bill creates a uniform depreciation period of three years for all race horses. The provision costs an estimated $126 million over ten years.
• Flexibility for Landowners with Water Rights: Some state water rules keep farmers and ranchers from selling their land when they need or want to. The bill will allow the tax-free exchange of stock that represents a holding of water rights, just as allowed for real property under Section 1031 of the tax code. The cost is $2 million over ten years.
• Kansas Tornado Disaster Relief: Farm country is often tornado country, and this proposal provides timely, temporary tax relief to the victims of tornados and storms that hit the Greensburg, Kansas area. Temporary assistance including increased ability to deduct personal losses, increased business expense deductions, and help for affected businesses that continued to pay their employees after the disaster struck are available only to individuals and businesses in the presidential disaster declaration area. The cost is $60 million over ten years.

Source: United States Senate Committee on Finance

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