Capital Corner: “’Twas the Night before Christmas”

Jim Brandenburg, CPA, MST , Shareholder - Tax   email | bio
January 2010

"'Twas the Night before Christmas"
'Twas the night before Christmas, when all through the House
Not a creature was stirring, not even Pelos.
The bacon was hung in the Senate with care,
In hopes that St. Harry soon would be there.

Okay, my apologies to Clement C. Moore, but perhaps a change in writing styles offers a contrast to over 2000 pages of technical language in the health care reform bill. This year's never-ending saga to reform health care went right up until Christmas Eve. In a dramatic vote, the Senate passed its bill by the narrowest of margins. Among the various provisions in the Senate bill is a new payroll tax of 0.9 percent on wages over $200,000 for single taxpayers and over $250,000 for married couples.

As the New Year dawns, a conference committee will aim to combine the House version of health care reform with the recently passed Senate bill. Portions of each bill may be used and new provisions may be added, all with the goal of securing sufficient votes in the House and the Senate. Remember, the exact same bill must pass the House and the Senate, before being sent to the president. Thus, the conferees might barter to gain a vote in the House, possibly costing them a vote in the Senate or vice versa. Many contentious issues are contained in the two bills. The leaders of both chambers of Congress as well as the administration have invested such significant political capital that failure to pass a health care bill does not appear to be an option. Many side deals have already been made (i.e., for those in Louisiana, Nevada, New York, Florida, and most recently Nebraska), and others may follow.

The health care debate in Congress stifled most other legislation, leaving the following tax bills to be addressed in 2010.

• Estate Tax – In a move that surprised many, Congress did not enact estate tax legislation before the end of 2009. Consequently, the estate tax was repealed as of January 1, 2010. Congressional leaders hope to pass an estate tax bill early in 2010, but it is uncertain whether it will be retroactive to January 1, 2010 or effective on some other date. It can be risky politically, practically, and perhaps even legally to make retroactive estate tax law changes.
   
• Extenders - The extender bill was also overlooked at the end of 2009. It will probably receive attention early in 2010, and many provisions will likely be effective back to January 1, 2010. Enacting retroactive provisions for income taxes are less problematic than with estate tax measures.
   
• Business and Jobs Bill - Before adjourning for the year, the House passed a bill addressing tax and unemployment issues for employees and added new federal work projects. The Senate did not act on this legislation, but will likely in 2010 after the health care bill is finalized. It is unsure what will be incorporated in the final bill, but it may include jobs credits for businesses and an extension of the tax depreciation rules that lapsed December 31, 2009.

The first part of 2010 stands to be busy as Congress has many bills to address that were not completed during 2009. We'll see what happens. It will be an interesting year.

"Now Nelson! Now Collins! Now Franken and Sanders!
On Stupak! On Rangel! On Grassley and Baucus!
To the top of the floor! To the top of the Hill!
Now clash away! Clash away! Clash away all!"