A Special CCH Tax Briefing will be available online later today athttp://www.cch.com/rescue.

For both individuals and businesses, the main effect of the tax items inthe measure is to remove uncertainty about a number of provisions that hadexpired, extending many of them through 2009 and beyond. But there are alsotax benefits for individuals in the form of new, expanded or extended creditsrelated to energy efficiency and tax-related relief for those impacted byMidwestern disasters and Hurricane Ike. Businesses also see an extension ofexisting credits, enhanced energy incentives and help with disaster-relatedexpenses.

"Dozens of these tax proposals had been languishing in Congress formonths," noted Mark Luscombe, JD, LLM, CPA, CCH principal federal tax analyst."For some reason, when combined with a financial 'bailout' that had failedpassage in the House, the total package became irresistible."

AMT Fix

A "fix" or "patch" to the alternative minimum tax, or AMT, with the goalof minimizing the reach of the alternative levy (but not eliminating it) is asignificant part of the tax provisions in the new law.

In 2007, the AMT exemption, which largely determines who falls under thealternative system, was set at $44,350 for single individuals and $66,250 formarried couples filing jointly, but for this year these amounts were set torevert to just $33,750 for individuals and $45,000 for married couples filingjointly. The new law sets the exemption amounts at $46,200 for individuals and$69,950 for joint filers for 2008.

The measure also extends and liberalizes the ability to take personal taxcredits against the AMT and mitigates the effects of AMT when it is triggeredby "phantom income" from incentive stock options, through a refundable credit.

"Overall, these measures are estimated to keep about 21 million taxpayersfree of the clutches of the AMT for 2008, but what will happen in 2009 andsubsequent years is still anybody's guess," said Luscombe.

Deductions, Other Provisions Extended

Itemized deductions for state and local sales tax, the qualified highereducation expenses deduction and the ability of educators to take an above-the-line deduction for school supplies have been extended to the end of 2009by the new law. So has the additional standard deduction for property taxes,added to the tax code only this year, and originally set to expire at its end.

Congress also extended the ability of people over age 701/2 to contributean IRA distribution of up to $100,000 to charity and exclude the amount fromincome.

"This allows people who have to take mandatory distributions from theirIRAs an opportunity to avoid a tax 'hit' while helping out a favorite cause,"Luscombe noted.

Also helped are taxpayers whose mortgage debt has been reduced throughforeclosure or reduced through a restructuring. This kind of reduction indebt traditionally counted as income under the tax code, but was made exemptin 2007. The new measure extends this protection from the end of 2009 through2012.

The new law also enhances the child tax credit by lowering the "floor" forthe refundability of the credit from approximately $12,050 to $8,500.

"This will allow more low-income people to claim the credit, and increasethe size of the credit they can claim," Luscombe said.

Breaks for Business, Others

A long list of credits and deductions for businesses, or aiding variousworthy causes, also made it into the new law. The extension and expansion ofthe research tax credit is by far the largest on the list in terms of dollars,projected to cost the Treasury over $8 billion in 2009.

Other items include enhanced deductions for contributions of food tocharitable organizations and contributions of books and computer equipment toqualifying schools; depreciation provisions benefiting leasehold, restaurantand retail improvements; the mine rescue training team credit; the Indianemployment credit; the railroad track maintenance credit; the American Samoaeconomic development credit; Qualified Zone Academy Bonds, which subsidizeconstruction of schools in low-income areas; and a credit to encourage first-time homebuyers in the District of Columbia.

"Some odd and specialized tax provisions usually are found in large taxlaws, and this is no exception," Luscombe observed. "There are provisions thathelp Puerto Rican and American Virgin Islands distillers, manufacturers ofwooden practice arrows for children, owners of motorsports tracks and acontinuation of a tax mechanism for aiding something called the Wool ResearchFund."

Save Taxes by Saving Energy

The new law continues and expands on a trend to use the tax code topromote energy efficiency. Most of the incentives in this area are aimed atbusiness, but individuals can benefit from a number of new and extendedprovisions in the new law.

First, there is an extension of the credit for residential solar propertyfor eight years through 2016, with no credit cap for solar electricinvestments. (The current credit cap is $2,000.) Added to the credit forresidential energy-efficient property are residential small wind investments,capped at $4,000, and geothermal heat pumps, capped at $2,000, as qualifyingproperty.

Credits for energy-efficient improvements to existing homes, such asenergy-efficient doors and windows, have been extended through 2009.

Plug-in electric cars are not yet commercially available, but when theyare, purchasers will be eligible for a new credit, ranging from $2,500 to$7,500 for passenger vehicles and light trucks and up to $15,000 for heaviervehicles. The credit will expire at the end of the first calendar quarterafter the quarter in which the total number of qualified plug-in vehiclesexceeds 250,000. The credit is available against the AMT.

Employees who commute to work by bicycle may get some indirect helpthrough their employers, who can offer limited fringe benefits to offset thecosts of commuting, such as bicycle storage.

Disaster Relief

The new law contains special provisions regarding the "Midwestern DisasterArea" that mirror many of the ones enacted after Hurricane Katrina in 2005.The Midwestern Disaster Area encompasses presidentially declared disasterareas in Arkansas, Illinois, Indiana, Iowa, Kansas, Michigan, Minnesota,Missouri, Nebraska and Wisconsin between May 20, 2008 and before August 1,2008.

Some of these include the increased ability to write off demolition,environmental remediation and clean-up costs and enhanced depreciation forqualified disaster property. Individuals benefit from an easing of rules ondistributions and loans from qualified retirement plans. They can also takean additional exemption if they house a "Midwestern displaced individual."

A smaller package of benefits, mainly oriented toward business andhousing, is available for the Hurricane Ike Disaster Area, which encompassesparts of Louisiana and Texas, which were declared disaster areas by thepresident on September 13, 2008.

"None of these provisions is strikingly new, and all were probablydestined to pass sooner or later," Luscombe noted. "But the financial crisisprovided an opportunity for bundling many tax provisions together and ensuringpassage of the entire lot."

About CCH, a Wolters Kluwer business

CCH, a Wolters Kluwer business (http://www.CCHGroup.com) is a leadingprovider of tax, accounting and audit information, software and services.Wolters Kluwer is a leading global information services and publishingcompany.

To access CCH resources on the plan, please visithttp://www.cch.com/rescue. This site will be updated with new information,including briefings and white papers, on an ongoing basis.

SOURCE CCH, a Wolters Kluwer business