But score at least one 'win' for simplification.
by Rick Telberg/At Large
The Working Families Tax Relief Act of 2004, more commonly known as "the extenders" bill, flew through Congress last month. Democrats and Republicans alike approved the bill despite the fact it would add $146 million to the federal deficit, and despite the senate rules requiring offsetting expenses with revenues.
The new tax law's key provisions extend four tax cuts from the 2001 and 2003 tax acts scheduled to expire this year, and a package of regularly expiring tax provisions that would otherwise expire at the end of this year.
But in the true sprit of election-year politics, Congress added a variety of unrelated tax breaks. Among the winners: soldiers in combat, businesses with research and development costs, Caribbean distillers and teachers who spend their own money on classroom supplies."
"Who would contest these types of things?" said Rep. Charles B. Rangel (D-N.Y.), the ranking Democrat on the House Ways and Means Committee (who was, in fact, one of only two on the conference committee to vote against the bill).
So it's with not a little irony that the new bill it may actually be good news for tax professionals, if only to the extent that it keeps many things unchanged.
"In effect, the Act smoothes out ups and downs in these tax benefits to keep them in effect at basically their current level through 2010," said CCH Principal Federal Tax Analyst Mark Luscombe.
And the profession did gain a significant advance in the battle for simplification. Tom Ochsenschlager, the AICPA vice president-taxation in the Washington office, notes that 30 pages of the bill are dedicated to creating a uniform definition of "child" under IRS rules.
But the big battle over tax law may be yet to come. Congress is working on a 900-page bill known variously as the "J.O.B.S." bill (for "jumpstart our business strength") or the "ETI-FSC repeal" bill (for "extraterritorial income exclusion-foreign sales corporation"). It's supposed to mollify United States trade partners who have slapped heavy and still-escalating tariffs on U.S. farm goods in retaliation for U.S. moves to subsidize manufacturers.
It could come out before the election, but more likely will surface next year. Hopefully it won't complicate the tax season with a raft on new complexities.
But it could have a longer-lasting effect. Ochsenschlager points out that the ETI-FSC bill could set up a new regime in which corporate income would need to be categorized between "manufacturing" and "services." Under this concept, McDonald's is already lobbying to be classified as a manufacturer.
Stay tuned. The election isn't over and tax season is just around the corner.
