Emergency Economic Stabilization Act of 2008
Financial Markets Rescue Plan, AMT Patch, Extenders and More
After a tumultuous week of closed-door meetings, late night press conferences and a strange coexistence of bipartisanship and coalition solidarity, Congress passed and President Bush signed on October 3, 2008, historic financial rescue legislation. The Emergency Economic Stabilization Act of 2008 provides $700 billion to the Treasury Department for the purchase of certain illiquid assets from troubled institutions. It would be misleading, however, to characterize this legislation as just a banking Act. The Emergency Economic Stabilization Act of 2008 is also one of the largest tax Acts in recent years. It makes nearly 300 changes to the Internal Revenue Code at a cost of $150 billion. In addition to the major tax provisions that directly address current financial bailout measures, the new law includes a much-anticipated alternative minimum tax (AMT) patch, an extensive package of tax extenders, energy incentives, disaster relief, and more.
Financial Rescue Plan
The centerpiece of the Emergency Economic Stabilization Act of 2008 is the $700 billion provided to the Treasury Department for the purchase of illiquid assets. The measure gives the Treasury Department $250 billion immediately, and requires the President to certify if an additional $100 billion is necessary. An additional $350 billion may be disbursed subject to Congressional approval. The Treasury Department is required to report on the use of the funds and progress made in addressing the crisis. An oversight board and a special inspector general will also be created to watch over the Treasury Department. The measure also:
The legislation requires companies that sell some of their bad assets to the government to provide warrants so that taxpayers will benefit from any future growth these companies may experience as a result of participation in this program. In addition, the President must submit legislation that would cover any losses to taxpayers resulting from this program by charging a small, broad-based fee to all financial institutions. Finally, the legislation temporarily raises the FDIC insurance cap from $100,000 to $250,000.
|Tax Extenders and Energy-Related Incentives|
In addition to the provisions related to the controversial rescue plan, the Emergency Economic Stabilization Act of 2008 contains over 100 tax and accounting provisions that make nearly 300 changes to the Internal Revenue Code. Inserted at the eleventh hour as a "sweetener" designed to entice the House of Representatives into passing the measure, the robust tax package includes:
The added tax provisions are largely taken from the Renewable Energy and Job Creation Act of 2008 (H.R. 6049), which the Senate passed on September 23, 2008, and are only partially offset. The House of Representatives initially refused to consider the standalone bill because it did not follow House "pay-as-you-go" budget rules. However, with time running out before the elections in November and pressure mounting to address the country's economic crisis, the House of Representatives acquiesced.
If you have any questions as to how these rules apply to your particular situation, please do not hesitate to call the Certified Public Accountants at Wood, Johnson, Heath, P.C. at 512-343-8075.