According to a statement on the website of House Speaker Nancy Pelosi, the Act will -
“*Make tax relief for families of soldiers in combat under the EITC permanent. The bill makes permanent current law to include combat pay as earned income for purposes of the Earned Income Tax Credit (EITC). At the end of the year, soldiers’ families working to get into the middle class will be denied needed tax relief if combat pay is not counted for purposes of receiving the Earned Income Tax Credit.
* Make sure that reservists called up for active duty do not suffer a pay cut. Provides a tax credit of up to $4,000 for small businesses who continue to pay their National Guard and Reserve employees when they are called up to serve. According to a DOD survey, 55 percent of married Guard members and reservists suffer a loss of income when being called to active duty.
* Recovery rebates for military families. The bill clarifies that a military service member on active duty who files a joint return is eligible for a recovery rebate, even if their spouse does not have a Social Security number.
* Make it easier for veterans to become homeowners. The bill would make thousands of veterans eligible for low-interest loans by making changes to the qualified mortgage bond programs used to help veterans achieve homeownership.
* Make permanent other tax provisions to relieve economic hardships for military families. For example, the bill makes permanent IRS provisions to:
· permit active duty reservists to make penalty-free withdrawals from retirement plans;
· permit an employer to make contributions to a qualified retirement plan on behalf of an employee killed or disabled in combat;
· count extra pay for active duty military personnel from their previous civilian employer for retirement purposes; and
· permit recipients of military death benefit gratuities to roll over the amounts received, tax-free, to a Roth IRA or an Education Savings Account, among others.”
A Social Security Administration bulletin reports that the bill also “amends the Internal Revenue Code and the Social Security Act to exclude from FICA taxable wages any property tax rebate or other qualified benefit provided to volunteer firefighters and emergency medical responders in return for labor services. The IRS has previously ruled that such payments constitute compensation for services performed.”
The bill is awaiting signature by George W.
In other legislative news, the House voted 263 to 160 to pass the Renewable Energy and Job Creation Bill of 2008 (HR 6049), known as the “extenders bill” because it includes extension of many currently expired popular individual and business tax breaks.
George W may veto the bill in its current form. According to a CCH Tax Headlines article, “the administration supports several of the tax-cut proposals in the measure, but objects to the proposed tax offsets to pay for them”.