Small Business Taxes & Management^TM--Copyright 2006, A/N Group, Inc.

Selected Provisions

The Joint Committee on Taxation has issued its technical explanation of the Tax Relief and Health Care Act of 2006. The Act extends a number of tax provisions that expired at the end of 2005 (such as the deduction for state and local sales taxes, the tuition deduction, the research credit, etc.) as well as some new provisions including one that liberalizes the treatement of Health Savings Accounts. We've reproduced below selected tax provisions from the table of contents to the technical explanation. We'll cover some of the more important provisions in a future article. For the complete technical explanation, go to www.house.gov/jct/x-50-06.pdf.

TITLE I--EXTENSION AND MODIFICATION OF CERTAIN PROVISIONS

• Above-the-line deduction for higher education expenses (sec. 222 of the Code)

• Extension and modification of the new markets tax credit (sec. 45D of the Code)

• Deduction of state and local general sales taxes (sec. 164 of the Code)

• Extension and modification of the research credit (sec. 41 of the Code)

• Work opportunity tax credit and welfare-to-work tax credit (secs. 51 and 51A of the Code)

• Election to treat combat pay as earned income for purposes of the earned income credit (sec. 32 of the Code)

• Extension and modification of qualified zone academy bonds (sec. 1397E of the Code)

• Above-the-line deduction for certain expenses of elementary and secondary school teachers (sec. 62 of the Code)

• Extension and expansion to petroleum products of expensing for environmental remediation costs (sec. 198 of the Code)

• Tax incentives for investment in the District of Columbia (secs. 1400, 1400A, 1400B, and 1400C of the Code)

• Fifteen-year straight-line cost recovery for qualified leasehold improvements and qualified restaurant property (sec. 168 of the Code)

• Expand charitable contribution allowed for scientific property used for research and expand and extend the charitable contribution allowed computer technology and equipment (sec. 170 of the Code)

• Availability of Archer medical savings accounts (sec. 220 of the Code)

• Taxable income limit on percentage depletion for oil and natural gas produced from marginal properties (sec. 613A of the Code)

• Extension of placed-in-service deadline for certain Gulf Opportunity Zone property (sec. 1400N of the Code)

• Authority for undercover operations (sec. 7608 of the Code)

• Disclosures of certain tax return information (sec. 6103 of the Code)

• Special rule for elections under expired provisions

TITLE II--ENERGY TAX PROVISIONS

• Extension of placed-in-service date for tax credit for electricity produced at wind, closed-loop biomass, open- loop biomass, geothermal energy, small irrigation power, landfill gas, trash combustion, or qualified hydropower facilities (sec. 45 of the Code)

• Extension and expansion of clean renewable energy bonds (sec. 54 of the Code)

• Modification of advanced coal credit with respect to subbituminous coal (sec. 48A of the Code)

• Extension of energy efficient commercial buildings deduction (sec. 179D of the Code)

• Extension of energy efficient new homes credit (sec. 45L of the Code)

• Extension of credit for residential energy efficient property (sec. 25D of the Code)

• Extension of business solar and fuel cell energy credit (sec. 48 of the Code)

• Special rule for qualified methanol and ethanol fuel produced from coal (sec. 4041 of the Code)

• Special depreciation allowance for cellulosic biomass ethanol plant property (new sec. 168(l) of the Code)

• Modification of credit for fuel from a non-conventional source (sec. 45K of the Code)

TITLE III--HEALTH SAVINGS ACCOUNTS

Provisions relating to health savings accounts (sec. 223 of the Code)

TITLE IV--OTHER TAX PROVISIONS

• Deduction allowable with respect to income attributable to domestic production activities in Puerto Rico (sec. 199 of the Code)

• Alternative minimum tax credit relief for individuals; returns required for certain options (secs. 53 and 6039 of the Code)

• Frivolous tax submissions (sec. 6702 of the Code)

• Make permanent the tax treatment of certain settlement funds (sec. 468B of the Code)

• Make permanent the active business rules relating to taxation of distributions of stock and securities of a controlled corporation (sec. 355 of the Code)

• Make permanent the capital gains treatment for certain self-created musical works (sec. 1221 of the Code)

• Modify tax on unrelated business taxable income of charitable remainder trusts (sec. 664 of the Code)

• Make permanent the special rule regarding treatment of loans to qualified continuing care facilities (sec. 7872(h) of the Code)

• Tax technical corrections

TITLE III--OTHER PROVISIONS

Exclusion of 25 percent of capital gain for certain sales of mineral and oil leases for conservation purposes

--Last Update 12/11/06