The House Ways and Means passed an AMT patch to extend the provision from 2006 through the 2007 year-end. But, at what cost?
Where it sits right now, the Senate will probably not pass the House Ways and Means bill.
There are two problems with it:
- AMT brings a lot of money into the government’s coffers. The “pay as you go” provision for new bills means that something must be done to generate tax income to cover the trillions (yes, with a “t”) that AMT brings in. As it is, the few tax changes aren’t enough.
- Ironically, a completely different argument from a different political camp: The tax changes to pay for part of the AMT bill hit investors and business owners. For example, long term capital gains tax treatment goes away…it would be taxed at an ordinary tax rate.
Now, let’s add another wrinkle – the IRS is screaming “foul” at Congress! They say they are programming their computers to follow current law and they’ll just delay tax season (ie refunds) if Congress tries to come up with a last minute tax change.
This all reminds me of December 1985. Boy, am I about to date myself…. We huddled around the fax machine (way before the days of Internet use) for the 1986 Tax Reform Act. We pulled off the sheets of paper and rushed to the copy machine to give everyone a copy of the Act to read over Christmas and then figure out how we were going to implement tax strategies for our clients. In the end, the changes were so big, we did all we could to just file tax returns by extension dates.
I don’t think that Congress can pull the “mother of all tax changes” (ala Rangel) for 2007, but maybe for 2008.
It’s never been more important to keep up to date on tax changes and even more importantly, make sure your tax advisors are as well.