Congress Tries Last Minute Push to Expand Child Tax Credit

The Senate is offering a compromise, and Democrats promise negative publicity, but House Republicans appear to be holding out for an expanded Child Tax Credit that seems unlikely to make it into law this summer.

The U.S. House and Senate have been at odds over efforts to further expand the recently expanded Child Tax Credit so that it includes low-income families who would receive the credit as a tax refund whether or not they paid tax to offset the credit.

Last month the Senate voted to expand the Child Tax Credit, recently changed from $600 per child under age 17 to $1,000 per child, so that families with income between $10,500 and $26,625 would also qualify for the credit. The Senate's bill would make the credit refundable, meaning families that qualify for the credit would receive the credit as a refund even if they didn't pay enough income tax to offset the credit.

It was the Senate's wish that this expanded version of the Child Tax Credit would be implemented in time to be a part of this summer's rebate program, scheduled to launch on Friday of this week.

The House, however, passed a bill vastly different from the Senate bill, and the two chambers have been unable to reach a compromise. The House bill would make the $1,000 credit permanent, at least until year 2010 instead of 2005 when it is now scheduled to return to $600 per child. In addition, the House bill would expand the income ceiling on the credit so that taxpayers with incomes up to $150,000 would be able to claim the credit. The current income phase-out level is $110,000.

This week the Senate agreed to extend the $1,000 credit from 2005 to 2007, hoping to win favor in the House and arrive at a compromise bill that both chambers could approve. Senate Republicans are hopeful that an agreement can be reached by the end of the week, before the House is scheduled to begin its recess. Meanwhile, House Democrats have promised organized protests this week to show their displeasure with the compromise effort and the expanded cost the credit would bring to the government. The original Senate bill was to be paid for by an increase in Custom fees, whereas the House bill provides no specific means for reimbursement.

You may like these other stories...

Many senior US tax professionals believe that a streamlined audit process will be the top benefit resulting from the IRS Transfer Pricing Audit Roadmap, a new toolkit organized around a notional 24-month audit timeline,...
Tax accounting to be simplified for money-market fundsThe US Securities and Exchange Commission (SEC) voted 3-2 on Wednesday for sweeping changes to institutional money-market funds, Emily Chasan, senior editor of...
By Cathy Stopyra and Todd SimmensUnderpayment interest, refund interest, and penalties charged to businesses are just a few of the considerations the IRS calculates when determining taxation for a given company. Though...

Upcoming CPE Webinars

Jul 31
In this session Excel expert David Ringstrom helps beginners get up to speed in Microsoft Excel. However, even experienced Excel users will learn some new tricks, particularly when David discusses under-utilized aspects of Excel.
Aug 5
This webcast will focus on accounting and disclosure policies for various types of consolidations and business combinations.
Aug 20
In this session we'll review best practices for how to generate interest in your firm’s services.