Last week, the House passed H.R. 3996, the Temporary Tax Relief Act of 2007, by a voted of 216 – 193. The Senate has said they will act on this issue by the year's end but they have not settled on the final bill language. NFIB sent a letter urging Congress to provide relief from the AMT without raising taxes on other taxpayers. NFIB also urged Congress to act quickly to avoid potential compliance and administrative burdens during the upcoming filing season. NFIB will continue to encourage the Senate to not include the revenue raisers included in the House bill.
What is the AMT?
- The AMT, or Alternative Minimum Tax, was originally designed to ensure that the wealthiest Americans could not avoid paying income taxes.
- It requires taxpayers to calculate their taxes twice, and then pay the larger amount.
- However, it was not indexed for inflation, which has had the side effect of hitting taxpayers – increasingly middle-class taxpayers – when they can't afford the bill.
How will this bill affect NFIB members?
- H.R. 3996 provides a one-year "patch" for the AMT, however the bill pays for the patch by increasing other taxes – NFIB believes this is counterproductive.
- Under a rule passed by this Congress, any new tax cut or mandatory spending bill must be "paid for" – meaning they must either raise taxes or cut spending.
- This rule is referred to as "PAYGO" or pay-as-you-go.
- The NFIB has urged quick action of this legislation as the 2007 tax filing season is fast approaching. Tax complexity and compliance is a major challenge to small-business owners – acting quickly to ensure a one-year patch for the AMT is especially important.
- Failure to act prior to December could negatively impact 50 million taxpayers and delay $75 billion in refunds.
- The IRS has already sent the 2007 individual income tax forms (1040s) to the printer and changes in the law passed after December means that they will be forced to recalibrate processing systems.
- H.R. 3996 also includes an extension of a number of expiring tax provisions. Of importance to NFIB members are extensions of:
- The deduction for state and local sales taxes; and
- The 15 year depreciation period for improvements to restaurant and leasehold properties.
- A shortened depreciation period provides many of these business owners with the opportunity to make necessary improvements to their businesses. Because restaurants are traditionally opened longer hours and more days per week than other businesses, the 15 year period is a more suitable schedule.
NFIB's work on the Hill
- NFIB supports full repeal of the AMT – without raising other taxes to "pay for" the repeal.
- In absence of full repeal, NFIB supports temporary AMT relief.
- NFIB sent a letter urging Congress to provide relief from the AMT without raising taxes on other taxpayers. NFIB also urged Congress to act quickly to avoid potential compliance and administrative burdens during the upcoming filing season. NFIB will continue to encourage the Senate to not include the revenue raisers included in the House bill.
