In what has become almost a routine action, the U.S. House of Representatives voted Wednesday to renew for one year 45 tax breaks due to expire December 31, including a sales tax deduction for people in states without income taxes, a property tax deduction for people who do not itemize, and the research and development credit. 

 

Most Democrats voted to approve the measure, which includes tax increases on fund managers' income and a 30 percent withholding tax on foreign banks that fail to report information on American clients to tax authorities. Most Republicans who voted against the measure argued that tax increases would have a negative impact on new investment during the economic downturn. 

 

If the Extenders Act of 2009 does not make it to the Senate floor for a vote before the end of the year, and the extensions expire, the tax breaks can be made retroactive, as has happened in previous years.

 

The Senate is not expected to approve the tax increases on fund managers. House Democrats have twice before voted to change the tax treatment of income paid on "carried interest" to compensation, which could be taxed at 35 percent, from capital gains income, which could be taxed at 15 percent, arguing that the income paid to fund managers is fee income and not just income on their 2 percent investment in their funds. 

 

Representative Tom Price, Republican of Georgia, speaking on behalf of the House Republican Study Committee, noted that the extensions in the bill are long-standing policy and should not be offset by revenue increases, CCH reports.

 

The 30 percent withholding tax on foreign banks that fail to report information on American clients to tax authorities comes as the Internal Revenue Service seeks to identify tax shelters for income earned abroad and pursue noncompliance. "There is a big push right now for transparency to avoid the UBS-type situation," Joseph Calianno, a partner at the accounting firm Grant Thornton, told Reuters.

 

Some of the key tax breaks extended in the House bill (HR 4213):

 

For individuals:

 

 

 

 

Existing tax breaks for specific industries have also been extended.