Small business and other tax cuts on Congress’ agenda

A package of small business tax incentives could be enacted in Congress this spring.  Lawmakers are also looking at beefing up taxpayer protections against such growing crimes as identity theft and "phishing". Also on the agenda are expanded tax breaks for Hurricane Katrina victims, some energy incentives and possibly AMT reform.

Small Business Tax Incentives

Originally, some small business tax incentives were planned to be attached to legislation to raise the federal minimum wage. Lawmakers intended that these incentives help small businesses absorb the cost of a higher minimum wage. The incentives and the minimum wage increase are now part of a much larger Iraq war funding bill. However, President Bush has threatened to veto any war funding bill that includes a timetable for withdrawing troops from Iraq so the fate of these incentives is very uncertain.

Any business tax cut package will likely be smaller than previous tax cuts. The House is especially reluctant to pass any business tax cuts beyond what is necessary to help small businesses deal with the higher minimum wage. The Senate's approach is different. Many senators want expanded business tax breaks tied to revenue raisers, such as new curbs on tax shelters, higher fines and penalties for tax evasion and some limits on deferred compensation.

As things are shaping up, any final small business tax cut bill will likely include the following:

Taxpayer Protection Act and Katrina Relief

Two less controversial tax bills have already passed the House. The Taxpayer Protection Act of 2007 (H.R. 1677) targets identity theft and online fraud. If the IRS discovers that your personal information may have been compromised, it would be required immediately to notify you. The bill also raises the penalties for "phishing" (con artists sending out bogus IRS emails) and misuse of the IRS name and symbol on the internet. Additionally, taxpayers would have more time to bring an action against the IRS for a wrongful levy.

The Katrina Housing Tax Relief Act of 2007 (H.R. 1562) extends and expands the lower-income housing credit rules for qualifying buildings and modifies the rules for Gulf Opportunity Zone (GO Zone) bonds. The bill would also deny the right to a pre-levy collection due process hearing in an employment tax collection action.

Energy, AMT reform and more

Both the House and Senate have held hearings on how energy tax incentives promote conservation and encourage the development of renewable sources of energy.  While many lawmakers support AMT "reform," very little has happened in Congress. The Senate is likely to try to extend the now-expired  and higher AMT exemption amounts for one more year.

Our office will continue to monitor tax legislation in Congress. If any of these or other tax bills pass, we'll alert you and let you know how they could impact your tax planning.

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