On Oct. 3, President Bush signed into law H.R. 1424, the Emergency Economic Stabilization Act of 2008. Earlier in the day on Oct. 3, the House of Representatives by a vote of 263-171 approved the bill, and the Senate had previously passed the measure on Oct. 1.

The centerpiece of H.R. 1424 is, of course, the financial bailout package, but it also includes a host of tax changes affecting individuals, corporations, and businesses in general, including the following:

• Financial bailout-related tax changes. Emergency economic stabilization related tax measures consist of a three-year extension for home mortgage debt forgiveness relief under Code Sec. 108 , tax relief for community banks by permitting them to treat losses on Fannie Mae and Freddie Mac preferred stock holdings as ordinary losses, and a tax crackdown on compensation and severance pay for certain financial executives.
• AMT relief for individuals. The 2008 Act boosts AMT exemption amounts for individuals for 2008, and also provides that for 2008, personal nonrefundable credits may offset AMT and regular tax. Additionally, the 2008 Act also liberalizes the AMT refundable credit amount rules.
• Extended tax breaks. More than 30 tax breaks that either expired at the end of 2007 or are soon to expire have been extended by the 2008 Act. For example, all of the following individual tax breaks are retroactively revived to apply for the 2008 tax year and are extended to apply to the 2009 tax year as well: the election to deduct state and local general sales tax, the above the line deduction for higher education expenses, the above the line deduction for educator expenses, and the ability of taxpayers age 70 1/2; or older to make nontaxable IRA transfers to eligible charities. The business tax breaks that are extended by the 2008 Act include the research credit (which is also modified), the 15-year writeoff for qualified leasehold improvements and qualified restaurant property (which is also liberalized), enhanced deductions for certain charitable contributions (which is also liberalized for farmers), and the expensing option for qualified environmental remediation expenses. 
• New tax relief measures. These include relaxed writeoff rules for film and TV productions, quick 5-year depreciation for many types of farm property, modified rules for the penalty on understatement of a taxpayer's liability by a tax return preparer, mental health parity rules, and liberalized rules for the refundable child tax credit.
• Energy incentives. These includes extensions for the alternative energy credit, the residential energy efficient property credit, the energy efficient buildings deduction, the credit for energy efficient improvements to new homes, and a new credit for plug in electric vehicles. Many other tax incentives for alternative energy creation are either extended or created. 
• Disaster relief. The 2008 Act provides a host of tax relief measures for disaster victims (both individuals and businesses) in ten Midwestern states and also creates new national disaster relief for all federally declared disasters occurring after 2007 and before 2010. This relief includes eased loss deduction rules for individuals, fast writeoffs for business cleanup expenses, and a 5-year carryback for NOLs attributable to qualified disaster expenses. 
• Revenue raisers. The revenue raisers in the 2008 Act include broker reporting of customers' basis in securities transactions, an extension of the 0.2% FUTA surcharge, a limited Code Sec. 199 domestic production activities deduction for the oil and gas industry, and new rules for nonqualified deferred compensation from certain tax-indifferent parties.

Please do not hesitate to contact our office at (559) 432-2346 if you have any questions regarding the above information.

IRS Required Statement: This document was not intended or written to be used, and it cannot be used by the recipient, for the purpose of avoiding penalties that may be imposed on any taxpayer.