The Tax Increase Prevention and Reconciliation Act

A summary of key points treasurers should know.

Church Finance Today

The Tax Increase Prevention and Reconciliation Act

A summary of key points treasurers should know.

In May Congress enacted the Tax Increase Prevention and Reconciliation Act. There are a few provisions in this new law that will be of interest to church treasurers. The Act:

  • Extends reduced capital gains and dividend tax rates through 2010. Capital gains and dividend income will be taxed at a maximum rate of 15 percent through 2010. For taxpayers in the 10 and 15 percent income tax brackets, the tax rate will be 5 percent through 2007 and zero in 2008 through 2010.
  • Extends through 2009 the enhanced “section 179 deduction” of up to $100,000 for purchases of depreciable business assets.
  • Requires that a taxpayer make a down payment of 20 percent of any lump sum offer-in-compromise with any application for an offer. For periodic payment offers, taxpayers are required to comply with their own payment schedule while their offer is being considered. The Act also provides that an offer is deemed accepted if the IRS does not make a decision with respect to the offer within two years from the date that the offer was submitted.
  • Increases the age of minors subject to the tax on unearned income (i.e., passive income such as interest) from 14 to 18.
  • Allows more taxpayers to convert to Roth IRAs by removing the modified adjusted gross income limitations on rollovers from an IRA to a Roth IRA beginning in 2010. And, taxpayers can elect to pay tax on amounts converted in 2010 in equal installments in 2011 and 2012.
  • Reforms the rules applicable to U.S. citizens working abroad by (1) accelerating indexing of the $80,000 foreign earned income exclusion cap; (2) tying the employer-provided housing exclusion to the foreign earned exclusion cap and applying an objective standard in determining the amount of reasonable housing expenses; and (3) applying a “stacking rule” to ensure that these citizens are subject to the same U.S. tax rates as individuals living and working in the U.S.

This article first appeared in Church Treasurer Alert, October 2006.

Richard R. Hammar is an attorney, CPA and author specializing in legal and tax issues for churches and clergy.

This content is designed to provide accurate and authoritative information in regard to the subject matter covered. It is sold with the understanding that the publisher is not engaged in rendering legal, accounting, or other professional service. If legal advice or other expert assistance is required, the services of a competent professional person should be sought. "From a Declaration of Principles jointly adopted by a Committee of the American Bar Association and a Committee of Publishers and Associations." Due to the nature of the U.S. legal system, laws and regulations constantly change. The editors encourage readers to carefully search the site for all content related to the topic of interest and consult qualified local counsel to verify the status of specific statutes, laws, regulations, and precedential court holdings.

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