Grassley Praises Signing of Bill to Shield Taxpayers from AMT, Offer Tax Relief for Iowa Disaster Recovery, Continue Tax Incentives for Wind Energy, Tax Relief for College Tuition
Sen. Chuck Grassley of Iowa today praised final passage and the signing into law of legislation he co-authored to shield millions of taxpayers from the Alternative Minimum Tax this year, provide tax relief for Midwestern disaster recovery, extend tax incentives for wind energy and other renewable sources, and extend tax relief for families and teachers.
"This legislation was a no-brainer," Grassley said. "The AMT relief prevents 24 million families from facing an average tax increase of at least $2,000 each. We're extending tax benefits for middle-income taxpayers, including deductions for out-of-pocket expenses for teachers, sales tax, and college tuition. Millions of taxpaying families would have faced an unexpected tax increase without our action. Businesses need continued job-creating incentives, like the research and development tax credit. Congress is sending a clear signal in support of alternative energy and conservation. And the Midwest needs help with disaster recovery, the sooner, the better."
The House of Representatives today gave final approval to a bipartisan tax package that Grassley helped to write as ranking member of the Committee on Finance, which writes tax policy in the Senate. Passed as part of the financial rescue package, the legislation was signed into law by the President this afternoon. Highlights include:
AMT relief. The AMT provision ensures that 24 million families do not see a tax increase because of the AMT in 2008. The tax was intended to prevent the wealthy from using deductions to slash their tax bill. But because it is not indexed for inflation, it has threatened a larger number of taxpayers each year. In Iowa, 131,000 filers - mostly families with children - would pay the AMT if the AMT patch were not done for this year, a tax hit on average of more than $2,000 per family. The legislation also includes relief for taxpayers hit unfairly under the AMT for exercising incentive stock options.
Individual tax relief. The legislation also renews for two years popular individual tax relief such as a deduction for teachers who pay for classroom supplies out of their own pockets and a deduction for the cost of college tuition. In Iowa, 35,238 teachers get the out-of-pocket expenses deduction (this is filers, so two teacher-family joint filers count as one); 48,895 Iowa families and students get the college tuition deduction. The tuition deduction was created in 2001 tax legislation Grassley sponsored as chairman of the tax-writing committee.
Renewable energy. The legislation extends tax incentives for wind energy, biodiesel and other clean energy sources that are critical to helping consumers and building the nation's energy independence. The legislation also includes a tax incentive for oil refineries to encourage more refining and lead to lower gas prices. Grassley authored the Wind Energy Incentives Act of 1993, which established the first-ever wind energy production tax credit, and has worked ever since to continue the tax credit without interruption to foster the ever-growing wind energy industry.
The legislation as enacted is a special victory for the wind energy production tax credit. The House of Representatives twice passed an extension of this tax credit but watered down the credit in doing so. Grassley refused to let that happen in the Senate legislation. As a result, the wind energy production tax credit has been extended at its full level, which makes sense for Iowa. The federal tax credit has helped the state better withstand the downturn in the economy by helping to create hundreds of good-paying manufacturing jobs across Iowa, in small-towns such as Newton, Ft. Madison, Keokuk and West Branch. Iowa leads the nation in wind energy potential, and is fourth in the country in installed wind capacity. More than five percent of Iowa's electricity comes from wind energy.
Disaster relief. The legislation includes a $4.6 billion disaster tax relief package exclusively to help Iowa and nine other Midwestern states recover and rebuild from the spring 2008 floods and tornadoes. The bill includes another $3.5 billion for general disaster tax relief for other disasters nationwide, including those in Iowa. The tax relief is in addition to and separate from disaster recovery funds provided through the appropriations process.
The tax provisions for the Midwest are modeled on what Congress passed for Hurricane Katrina victims three years ago. Grassley kept the pressure on congressional leaders all summer to take similar action for natural disaster victims in Iowa and throughout the Midwest. In 2005, while Grassley was chairman of the tax-writing committee in the Senate, a major individual tax relief package was signed into law within three weeks of the Katrina disaster. A few months later, Congress followed up with an infrastructure and business relief tax package.
Among other provisions, the legislation lets disaster victims with damage to their primary residence tap their assets and access cash by withdrawing money from retirement plans without tax penalties; suspends limits on tax incentives for charitable contributions, strengthening local and other fundraising drives collecting money to help small businesses and families recover; creates tax-credit bond authority to help local governments rebuild infrastructure; increases the amount of tax-exempt bond authority to help businesses receive below-market interest rate financing; removes limitations on deducting casualty losses due to natural disaster; and reduces the 2008 tax burden for small and mid-sized businesses by substantially increasing the 2008 deductions for the depreciation and expensing of business property.