Tax provisions are often included as revenue raisers in non-tax bills and this year is no exception. A massive trade package making its way through Congress contains a number of tax measures, impacting both individuals and businesses. At the same time, some stand-alone tax bills are moving forward in the House and Senate.
Child tax credit
Under current law, a U.S. citizen or resident living abroad may be eligible to elect to exclude from U.S. taxable income certain foreign earned income and foreign housing costs. If enacted, the trade package would provide that taxpayers who elect to exclude from gross income for a tax year any amount of foreign earned income or foreign housing costs would not be able to claim the refundable portion of the child tax credit for the tax year. The change in treatment would be effective for tax years beginning after December 31, 2014.
Lawmakers are also considering a revision to the rules for information reporting on unreported and underreported financial accounts. Generally, current provisions require that every person who makes a payment of reportable interest of $10 or more to any other person during any calendar year must report the aggregate amount of the payment and information identifying the recipient on an information return (Form 1099-INT) to the IRS. The trade package would eliminate the minimum interest threshold of $10 and apply information reporting requirements and penalties for banks and other persons that hold non-interest bearing deposits. The change would apply to returns filed after December 31, 2015.
The Health Coverage Tax Credit (unrelated to the Code Sec. 36B premium assistance tax credit) is intended to help trade-displaced workers to offset the cost of health insurance. The U.S. Department of Labor (DOL) generally certifies if an individual is eligible for the HCTC.
The HCTC was created as a temporary measure but has frequently been renewed, typically in a tax extenders package. Last year, however, the HCTC was not included in the Tax Increase Prevention Act of 2014 (TIPA). The pending trade package would extend the HCTC through 2019 for qualified individuals and their families. The package also makes some technical changes to the credit and clarifies that an individual who claims the HCTC cannot also claim the code Sec. 36B credit.
The trade package would deny a U.S. passport (or renewal of a passport) to an individual who has a seriously delinquent tax debt. The U.S. State Department could also revoke passports previously issued to individuals with seriously delinquent tax debts. Generally, a “seriously delinquent tax debt” is any outstanding federal tax debt in excess of $50,000, including interest and penalties, for which a notice of lien or a notice of levy has been filed. However, if the individual has entered into an installment agreement or an offer in compromise, or collection has been suspended, the individual would be exempt from the passport rules. The proposal, if enacted, would take effect on January 1, 2016.
Corporate estimated taxes
The trade package also includes a corporate estimated tax shift between fiscal years (FY) 2020 and 2021. For corporations with at least $1 billion in assets, the package would increase the portion of corporate estimated payments due from July through September in 2020, with a subsequent reduction for the increase.
More tax bills
Research tax credit. Just before their Memorial Day recess, the House approved the American Research and Competitiveness Act of 2015 (H.R. 880). The bill would make permanent the research tax credit, which expired after 2014.
Highway funding. Lawmakers also approved a stop-gap highway and transportation funding bill. The short-term bill does not include any additional revenue raisers but congress could add some when it debates a long-term highway bill. Some lawmakers have called for an increase in the federal gasoline tax. A bipartisan proposal in the Senate would use revenues from repatriated foreign earnings to pay for highway and transportation spending.
Public safety officers. In May, Congress approved the Don’t Tax Our Fallen Public Safety Heroes Bill (HR 606), which President Obama signed into law. The bill clarifies federal law to ensure that both federal and state benefits for fallen public safety officers are treated the same in the Tax Code. Under the legislation, neither would be subject to federal taxation.
Medical device excise tax. In June, the House is likely to take up legislation to repeal the medical device excise tax. The Patient Protection and Affordable Care Act (PPACA) created the excise tax, which is generally imposed on manufacturers and distributers of certain medical devices.
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