Congress Faces Pressing Tax Items 

Tax issues will take center stage when Congress re-convenes this month in a possible lame-duck session after the November elections.
After failing to secure passage before the recess, the Senate on September 14 is expected to take up a small business bill (HR 5297) that, among other things, would extend the special 50 percent bonus depreciation allowance through 2011; increase Section 179 small business expensing up to $500,000 (from $250,000) for 2010 and 2011; and allow a five-year carryback of general business tax credits generated in 2010, including the Low-Income Housing Tax Credit, instead of the one year allowed under current law.

Notably, when the Senate reconvenes, it will also consider dueling Democratic and Republican amendments to mitigate extremely onerous information-reporting requirements applicable to business purchases of property in excess of $600 enacted as part of health care reform legislation. NAA/NMHC are strongly advocating for such relief.
Lawmakers are also under pressure to address the expiring 2001 and 2003 tax cuts. Democrats and Republicans are at odds over whether to extend them for everyone or only for individuals earning $200,000 or less ($250,000 for married couples.) The Obama Administration has further proposed that higher-income taxpayers see capital gains and dividend tax rates rise from 15 percent to 20 percent. It is unclear how a final compromise will be constituted, but many observers contend no solution is likely until November at the earliest.

If such a tax bill does move, some key Senators would also use it to address estate taxes, which were temporarily repealed this year but are slated to re-emerge at their 2001 level ($1 million exemption, 55 percent tax rate) in 2011. To date, efforts to develop a bipartisan compromise on this issue have been elusive.

It is also unclear whether a pending tax bill will include an extension of expiring tax provisions, such as the Tax Credit Exchange Program for affordable housing development and the brownfields expensing provisions. Past efforts to enact these extensions have been paid for with an NAA/NMHC-opposed increase on the taxation of carried interest. Given growing concerns over the deficit, NAA/NMHC expect that the carried interest provisions will once again be considered this fall.

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