Quick Look: President Bush's FY 2009 Budget: Tax Provisions -- Feb. 4 2008

The California Institute prepares a quick analysis of the President's budget request on the day it is released.  For the FY 2009 Budget, the budget was released the morning of February 4, 2008.  The following represents an examination of this portion of the budget from a California perspective.  For analysis of other components visit our 2009 Budget page.

BUDGET CROSSCUT: TAX PROVISIONS

The budget includes a breakout of various proposed changes to federal tax laws and other revenue provisions.  Among the tax provisions of interest to California are:

Research and Experimentation (R&D) Tax Credit

The Administration proposes to extend permanently the tax credits for research and experimentation expenditures, which expired with respect to expenditures incurred after December 31, 2007.

Alternative Minimum Tax

A temporary provision of current law increased the alternative minimum tax (AMT) exemption amounts to $44,350 for single taxpayers, $66,250 for married taxpayers filing a joint return and surviving spouses, and $33,125 for married taxpayers filing a separate return and estates and trusts. Effective for taxable years beginning after December 31, 2007, the AMT exemption amounts decline to $33,750 for single taxpayers, $45,000 for married taxpayers filing a joint return and surviving spouses, and $22,500 for married taxpayers filing a separate return and estates and trusts. A temporary provision of current law permits nonrefundable personal tax credits to offset both the regular tax and the AMT for taxable years beginning before January 1, 2008. The Administration proposes to increase the AMT exemption amounts to $46,250 for single taxpayers, $70,050 for married taxpayers filing a joint return, and $35,025 for married taxpayers filing a separate return and estates and trusts through taxable year 2008 to prevent the number of AMT taxpayers from increasing. Non-refundable personal tax credits also would be allowed to offset both the regular tax and the AMT through taxable year 2008. With incomes slightly above the national average and high home and property values and costs, Californians are becoming increasingly more likely to be subject to the provisions of the AMT. A larger than average percentage of the state’s taxpayers fall under its provisions, and California shouldered approximately 22 percent of the nation's AMT bill in 2006.

Orphan Drug Credit

The proposal would expand the credit by treating expenses incurred before FDA designation as an orphan drug as eligible for the credit if designation occurs before the due date (including extensions) for filing the tax return for the year in which the FDA application was filed. The proposal would be effective for qualified expenses incurred after December 31, 2007.

Classroom Expenses

The Budget would permanently extend the above-the-line deduction for qualified out-of-pocket classroom expenses for teachers.

Mortgage Bond Program

The Administration proposes expanding the tax-exempt qualified mortgage bond program to assist subprime borrowers.

Brownfields

The Budget proposes permanently extending the expensing of brownfields remediation costs,.making it available for expenditures paid or incurred after December 31, 2007, and facilitating its use by businesses to undertake projects that may be uncertain in overall duration.

 

 

 

The California Institute prepares a quick analysis of the President's budget request on the day it is released.  The FY 2009 Budget was released the morning of February 4, 2008.  The following represents an examination of this portion of the budget from a California perspective.  For analysis of other components visit our 2009 Budget page.

Official Source Material for FY 2009 Budget -- For your reference, the following are links to mirrored copies of OMB 2009 Budget materials (which are also available from the U.S. Office of Management and Budget via direct download)

 

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