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Employer Tax Extenders
 

   12/30/2009
 

On December 9, the U.S. House of Representatives passed legislation that extends many expiring tax provisions scheduled to expire at the end of 2009.  The bill (
H.R. 4213) contains provisions that would extend certain tax provisions for individuals, businesses and philanthropic organizations.     

As currently drafted, the legislation would extend $31 billion in existing tax cuts, along with a variety of measures.  Those of interest to HR professionals include:

  • Extension of the employer wage credit for activated military reservists.  The bill would extend for one year (through 2010) the provision that provides eligible small business employers with a credit against the taxpayer’s income tax liability for a taxable year in an amount equal to 20percent of the sum of differential wage payments to activated military reservists.  This proposal is estimated to cost $4 million over 10 years.
  • Extension of the enhanced charitable deduction for corporate contributions of computer equipment for educational purposes.  The bill would extend for one year (through 2010) the provision that encourages businesses to contribute computer equipment and software to elementary, secondary, and post-secondary schools by allowing an enhanced deduction for such contributions.  This proposal is estimated to cost $195 million over 10 years.

  • Extension of the tax-free distributions from individual retirement plans for charitable purposes.  The bill would extend for one year (through 2010) the provision that permits tax-free distributions to charity from an Individual Retirement Account (IRA) of up to $100,000 per taxpayer, per taxable year.  This proposal is estimated to cost $591 million over 10 years.

  • Extension of the Indian employment credit.  The bill would extend for one year (through 2010) the business tax credit for employers of qualified employees that work and live on or near an Indian reservation.  The credit is for wages and health insurance costs paid to qualified employees (up to $20,000) in the current year over the amount paid in 1993.  This proposal is estimated to cost $49 million over 10 years.

  • Extension of the Work Opportunity Tax Credit (WOTC) for Hurricane Katrina Employees.  The bill would extend for one year (through August 28, 2010) the work opportunity tax credit for certain employers hiring in the Hurricane Katrina core disaster area.  This proposal is estimated to cost $7 million over 10 years.

  • Extension of the 5-year carry-back period for certain losses relating to federal disasters.  The bill would extend for one year (through 2010) the provision that allows businesses to carry back to the previous five years the following losses: (1) casualty losses that are attributable to a federally-declared disaster; and (2) Qualified Disaster Expenses.  This proposal is estimated to cost $129 million over 10 years.

Despite the fact that these tax provisions are set to expire on December 31, 2009, the Senate has announced it will consider the House-passed legislation early in 2010.

“Although the House and Senate were unable to come to agreement on a package to extend several expiring tax provisions before Congress adjourned, these measures must be addressed as soon as possible,” Finance Committee Chairman Max Baucus (D-Mont.) and ranking member Charles Grassley (R-Iowa) said in a joint statement.

“In an effort to provide a seamless extension of these provisions with the fewest disruptions and administrative problems, we will take up legislation as quickly as possible in the New Year."

The Senate is expected to pass H.R. 4213 prior to recessing for the year.

 

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