Tax extenders bill passed by House

[Roland Slugg]

On December 15, 2015 the U.S. House of Representatives passed a bill that would extend or make permanent many popular tax deductions, credits and other benefits. Before it becomes law the Bill must be passed by the Senate, and if the Senate's version is different, both houses of Congress must pass a negotiated compromise Bill, which would then go to the President for his signature. It is probably fairly safe to assume, however, that most of the provisions of the Bill just passed by the House will end-up in the final Bill signed into law.

A few of the provisions of the Bill are the following:

(1) The deduction for sales taxes is made permanent.
(2) The §179 limit of $500,000 is made permanent.
(3) The QCD (funds sent from IRAs to charitable organizations by IRA owners required to take RMDs) is made permanent.

Not all "extenders" are permanent. Many extend the previous law by one to three years. The Bill contains hundreds of provisions and may be read in its entirety by clicking the following link:

http://docs.house.gov/billsthisweek/20151214/R121515.006.xml

[kathyc2]

I keep hoping someone will bring suit regarding the inequity of the sales tax deduction for some but not all. Either residents of all states should receive the deduction or no one should.

[Y2KEA]

Sec. 410. Clarification of enrolled agent credentials

Something nice to see:

SEC. 410. CLARIFICATION OF ENROLLED AGENT CREDENTIALS.
Section 330 of title 31, United States Code, is amended—

(1) by redesignating subsections (b), (c), and (d) as subsections (c), (d), and (e), respectively, and

(2) by inserting after subsection (a) the following new subsection:

“(b) Any enrolled agents properly licensed to practice as required under rules promulgated under subsection (a) shall be allowed to use the credentials or designation of ‘enrolled agent’, ‘EA’, or ‘E.A.’.”.

[Nashville]

What is inequitable about it?

I keep hoping someone will bring suit regarding the inequity of the sales tax deduction for some but not all. Either residents of all states should receive the deduction or no one should.

Of course, living in such a state I may be biased, but why is the sales tax deduction not fair? Tennessee (and Missouri) is the nation's most contiguous state with eight continguous neighboring states, ALL of whom have an income tax. I believe the sales tax deduction is available for all US taxpayers, it is simply that the taxpayer is entitled to deduct the HIGHER of sales tax or state income tax. For example, in Indiana you may deduct sales tax if it is higher than your state income tax. You are NOT entitled to the total of both, and that is the case in every state.

A simple fact of the matter for states without an income tax is that virtually all other taxes are higher (deductible or not). In border communities with Mississippi, Alabama, and Georgia our property tax rates are triple what they are in those states. Our corporate tax structure is more onerous as well. For example, in neighboring Kentucky an LLC has to pay a token tax whereas in Tennessee an LLC is subject to full corporate taxation.

Tennessee, New Hampshire, Nevada, Texas, Florida, South Dakota, Washington have no income tax on ordinary citizens (I think I might be leaving out someone). Montana has no sales tax. But everyone in these states pay taxes of some kind. I am told Washington is a tax-happy state for every conceivable kind of tax because of no income tax (but I don't really know).

[kathyc2]

Of course, living in such a state I may be biased, but why is the sales tax deduction not fair? Tennessee (and Missouri) is the nation's most contiguous state with eight continguous neighboring states, ALL of whom have an income tax. I believe the sales tax deduction is available for all US taxpayers, it is simply that the taxpayer is entitled to deduct the HIGHER of sales tax or state income tax. For example, in Indiana you may deduct sales tax if it is higher than your state income tax. You are NOT entitled to the total of both, and that is the case in every state.

A simple fact of the matter for states without an income tax is that virtually all other taxes are higher (deductible or not). In border communities with Mississippi, Alabama, and Georgia our property tax rates are triple what they are in those states. Our corporate tax structure is more onerous as well. For example, in neighboring Kentucky an LLC has to pay a token tax whereas in Tennessee an LLC is subject to full corporate taxation.

Tennessee, New Hampshire, Nevada, Texas, Florida, South Dakota, Washington have no income tax on ordinary citizens (I think I might be leaving out someone). Montana has no sales tax. But everyone in these states pay taxes of some kind. I am told Washington is a tax-happy state for every conceivable kind of tax because of no income tax (but I don't really know).

The major taxes to fund state and localities is property, income and sales tax and to a lesser extent various excise taxes. A state like TN pays the majority in the combo of property and sales tax and gets federal deductibility of both if itemizing, therefore the majority of their total state/local taxes. In contrast states that split the obligation between the 3 only get to deduct a portion of the total state/local tax total obligation. If the concept is to have a deduction for all state/local tax then everyone should get to deduct property, income AND sales taxes rather than an either/or for the income or sales tax.

I don't if you've been around long enough but prior to 86 reform, everyone could deduct sales tax.

[taxea]

the passing by the House is like being almost pregnant. It means nothing.

[TaxGuyBill]

Somebody just gave me a link to a good AICPA article that summarizes the potential extenders.

http://www.thetaxadviser.com/news/2015/dec/tax-extender-legislation-in-congress-201513571.html

[David1980]

Sales tax vs. Income tax

Really when looking at Sales tax vs. Income tax, BOTH are unfair. It would be to the taxpayer's benefit to be in a state that has a sales tax but no income tax, or an income tax but no sales tax. When the state only has one they're sort of forced to charge more on that one vs. states that have both - so states that only have one get a benefit. Whether that be Oregon and their income tax with no sales tax or Washington with their sales tax and no income tax.

That is to say, it's not that the sales tax deduction is unfair. "the inequity of the sales tax deduction" is equivalent to "the inequity of the income tax deduction" - you could blame either for the unfairness but really it's the choice.

There is one often overlooked benefit to the sales tax deduction in states that tend to deduct income tax. The taxable amount of a state refund is limited to the excess over what could have been deducted as a sales tax deduction.

[MAMalody]

the passing by the House is like being almost pregnant. It means nothing.

Hmmm. I thought it started in the House, then to the Senate and then for Presidental approval/disapproval. Looks like the House action does mean something.....just may not go anywhere.

[taxea]

thats exactly what I was saying...goes frm House to Senate the back to house, if any changes then to Pres.

[taxea]

so now it has passed and been signed by the almighty Obama who has landed in Hawaii for hopefully the last time. What a pain.
By the way, you might want to check out the bill because many of the credits have finally made permanent status. Others will require extra due diligence on our part when doing prior years returns

[Y2KEA]

so now it has passed and been signed by the almighty Obama who has landed in Hawaii for hopefully the last time. What a pain.
By the way, you might want to check out the bill because many of the credits have finally made permanent status. Others will require extra due diligence on our part when doing prior years returns

The almighty Obama will land again in Hawaii next year at this time since he will still be the POTUS. He will no doubt continue on into 2017 as the lame duck he will be while milking any actual US taxpayers for his vacation.