We May See A Tax Cut Bill After All, Community Renewal Has A Constituency.
l. Tax Cuts, Tax Cuts where art thou."...At a December 7 White House meeting that appears to have resparked budget talks, the Clinton administration told House Speaker J. Dennis Hastert, R-Ill., House Majority Leader Richard K. Armey, R-Texas, and Senate Majority Leader Trent Lott, R-Miss., that Republicans should not have abandoned their tax cut effort. Senate Republicans decided not to move a $240 billion 10-year package pending before the Senate because of White House and Democratic opposition to many of the bill's components. Instead, Senate Republicans are hoping to use the provisions palatable to Democrats as leverage for support for a bigger tax cut next year [They had not checked in with the Florida Supreme Court (our spin--the lobbyists want a sure thing now not What Ifs Next Year)].
House GOP leaders meanwhile have urged their Senate counterparts to take up the bill, which features pension and individual retirement account expansion provisions, tax breaks for revitalizing low-income areas, and small business tax cuts tied to a hike in the minimum wage."See full story.
It is clear that a big time poker game is being played out on the Fiscal 2001 Budget with Tax Cuts a major part thereof. However, the $240B, over ten years, Tax Cut will not be truly effective until January 2001, or later in most cases. One provision that should be watched is the increase to Section 179 Deductions from $20,000 for deductions this year and $35,000, if adopted, for next year. Thus $55,000 in deductions can be taken this month and next for your Home-based Business. Incorporate this month and elect a January 31st year-end and fix up the business premises.
2. A Constituency of One.
It has been said that the Vice President has only one constituency, that being the President, and we suggest that this is the same for tax incentives. It is clear that President Clinton does not want to leave office without signing H.R. 4923 "Community Renewal and New Markets Act of 2000," which passed the House on July 25, 2000, and became part [Title VI] of the bigger tax cut bill H.R. 5542 "Taxpayers Relief Act of 2000" that passed the House on October 27, 2000. Buried within those bills [Section 616 of H.R. 5542] in the creation of IRC Section 1379B, effective for cash investments made in Empowerment Zones after date of enactment.
As we know, there are 31 Empowerment Zones including three in California, those being Los Angeles, Santa Ana, and Desert Communities. There are also 95 Enterprise Communities, including Los Angeles, San Francisco, Oakland, San Diego, Watsonville, Imperial County, and Central Valley in California, several in the states of New York, Mississippi, Illinois, Washington, Oregon including 6 in Texas [hello to the Waco TX Enterprise Community], and three in Tennessee, if anyone cares.
Apparently some of the Mayors in the leading cities are finally getting the word, and letters to Speaker Hastert, Senate Majority Leader Trent Lott, and President Clinton, on behalf of these 95 Enterprise Communities are been sent as this goes to press, better late then never. Maybe the new mayor of San Diego might get the word that the stalled Ballpark/Entertainment District is within the San Diego Enterprise Community.
What will IRC Section 1397B mean to these 126 Distressed Communities? Lots of billable time by high paid tax advisors, real estate brokers, investment bankers, and writers of tax articles, all of which will conclude that you better hire 35% or more of your full or part-time employees from neighborhood. Housing in the qualified neighborhood will become the key factor, much of which could fall under IRC Section 119 if properly structured.
Jim Schneider, LL.M.
The Taxman86 Speaks... is copyright 1998-2010 by James E. Schneider, LL.M. Inc.