On Dec. 20, the President signed the Tax Relief and Health Care Act of 2006 into law. The President's signature sets the effective date for various Act provisions with an effective date geared to the Dec. 20, 2006 date of enactment. 

(The House on Dec. 8 approved H.R.6111 (the Tax Relief and Health Care Act of 2006) by a vote of 367-45.  The Senate approved the measure at 4:30 a.m. the following morning by a vote of 79-9.) 

The Tax Relief and Health Care Act of 2006 extends and/or modifies many important tax provisions, including key tax breaks that expired at the end of 2005. These extensions include:

• Research credit—two years (in 2007, an additional Alternative Simplified Credit that does not use gross sales as a factor in the regular credit would be available).
• Work Opportunity Tax Credit/Welfare-to-Work Tax Credit—two year extension for both credits, but for 2007 the two credits would be combined and modifications would apply.
• Above the line deduction for tuition expenses—two years.
• New markets tax credit—one year.
• State and local sales tax deduction—two years.
• Earned Income Tax Credit (EITC) for combat pay—through 2007.
• Qualified Zone Academy Bonds—through 2007.
• Above-the-line deduction for teacher classroom expenses— two years.
• Indian employment tax credit— two years through 2007.
• Accelerated depreciation for business property on Indian reservation— two years through 2007.

In addition, the Tax Relief and Health Care Act of 2006 also would extend for one year a host of energy related tax provisions scheduled to expire at the end of 2007 under current law, such as the credits for residential energy efficient property and new energy efficient homes, and the deduction for energy efficient commercial buildings.

The bill also carries a number of non-extender provisions, such as:

• Many changes for health savings accounts (HSAs). These include: allowing rollovers from health flexible spending accounts (FSAs) and health reimbursement arrangements (HRAs) into HSAs; repeal of the annual plan deductible limit on HSA contributions; expanded contribution limit for part year coverage; and allowing one-time rollovers from IRAs into HSAs.
• Allowing individuals to take advantage of a refundable credit with respect to certain long-term unused alternative minimum tax (AMT) credits existing before Jan. 1, 2013. This provision would help taxpayers who wound up with AMT problems because of their exercise of incentive stock options.
• Allowing the Code Sec. 199 deduction to be claimed for domestic production activities in Puerto Rico.
• Allowing partial expensing of advanced mine safety equipment and a tax credit for mine rescue team training.
• Toughening the rules for frivolous submissions.
  

 

Click on Book to download a pdf file containing the RIA Summary of the Act's Key Provisions