During May, Congress tried to complete legislation that would have extended tax breaks that had expired at the end of 2009. However, concern over the cost of the bill slowed the process down. Finally on May 28, the House passed the “American Jobs and Closing Tax Loopholes Act.”
The House bill would have extended the following tax breaks generally through 2010:
* The optional itemized deduction for state and local sales taxes.
* A modified deduction for qualified higher education expenses.
* The additional standard deduction for property taxes paid by those who don’t itemize.
* The business research and development credit.
* 15-year straight-line cost recovery for qualified leasehold, restaurant, and retail improvements.
Among the tax increases in the House bill were provisions changing the tax treatment of carried interest for partnerships and addressing the use of S corporations, LLCs, or LLPs by certain service professionals to avoid payroll taxes on their earnings.
During June, the Senate made several attempts to pass its version of the extenders bill, but after three failed votes, tabled the bill. Senate Majority Leader Harry Reid said it is unclear what the next step for this bill will be and indicated that he intends to move on to a small business bill.
As you do your midyear tax and business planning, contact us to review the effect of any pending 2010 legislation on your situation.