Congress focuses on economy; Senate readies jobs bill

Having returned from its Presidents' Day recess, Congress shifted its main focus from passing healthcare reform to the economy and readying a jobs bill to jumpstart hiring. The bill is expected to be in the neighborhood of $100 billion. On February 11, the Senate Finance Committee (SFC) released a draft version of an $85 billion jobs and tax incentives package. However, the SFC's bill was subsequently scaled back by Senate Majority Leader Harry Reid, D-Nev., who has instead offered a pared-down version of the measure. Reid's bill would include four initiatives originally proposed in the SFC's jobs package. Reid's bill would provide an employer payroll tax exemption for new hires, Code Sec. 179 expensing, extension of the Highway Trust Fund, and an expansion of the Build America Bond program.

Hiring incentives

The centerpiece of Reid's proposed bill is a $13 billion incentive for businesses to hire unemployed individuals. Private sector businesses that hire qualified workers after the date of enactment and before January 1, 2011 would be exempt from the 6.2 percent Social Security payroll tax (up to the maximum Social Security wage of $106, 800) for qualified new hires. A qualified new hire is an individual who has not been employed for more than 40 hours during the 60-day period prior to employment. The incentive would not apply to new hires related to the employer or public sector employees.

Code Sec. 179 expensing

The Reid bill would also extend enhanced Code Sec. 179 expensing for qualified property placed in service in tax years beginning in 2010. As in 2008 and 2009, taxpayers would be able to expense up to $250, 000 of qualified Code Sec. 179 property. This amount would be reduced if the property placed in service during the tax year exceeds $800, 000.

Bonus depreciation/Extenders up in the air

Noticeably absent from Reid's proposed bill is an extension of bonus deprecation as well as the extension of a host of popular individual, business, charitable, and energy tax incentives that expired after December 31, 2009. These include the state and local sales tax deduction, additional standard deduction for real property taxes, New Markets Tax Credit, and the research tax credit. However, it is anticipated that Congress may deal with these and other tax incentives in subsequent legislation.

Estate tax

In December, the House voted to extend the 2009 estate tax regime through December 31, 2010. However, the Senate has not acted on the House's bill, nor has it unveiled a version of its own estate tax bill. Congress, it is anticipated, will deal with the estate tax after it passes jobs legislation.

COBRA

Eligibility for COBRA premium assistance will expire after February 28, 2010. Although the SFC's jobs bill would extend eligibility for COBRA premium assistance through May 31, 2010, Reid's bill would not.

Our office will keep you posted on these significant legislative developments.