On December 26, 2007, the president signed into law the Senate-passed version of H.R. 3996 (the “Tax Increase Prevention Act of 2007” ).   [ Click here for a recap of the act's provisions ]

The new law extends for one year AMT relief for nonrefundable personal credits and increases the AMT exemption amount to $66,250 for joint filers and $44,350 for individuals. This proposal is estimated to cost $50.59 billion over 10 years. 

A few weeks ago, the IRS indicated that it might be mid-February before they can begin processing refunds if Congress did not pass the extender legislation in early December. Nevertheless, analysts are hopeful that because the only software changes will be the AMT exemption amounts and because those amounts are the same as promised by congressional tax-writers back in October, such a delay may be avoided.

The delay in passage was due to a disagreement between the Democrats and the Republicans over whether the cost of the AMT patch should be offset by adding provisions that would pay the cost of the patch  (Democrats) or whether an AMT patch bill should containing such revenue-increasing provisions would in reality be a "tax increase" (Republicans.) because last year no AMT tax was paid by the 20 million people who, without the patch, would now be paying AMT.

The House leadership decided to accept the Senate-amended bill only after receiving intense pressure from constituents who were upset that Congressional politics would delay their tax refunds. House Ways and Means Committee Chairman Charles Rangel (D-N.Y.) said yesterday that he would rather pass an AMT patch without offsets than see 21 million new taxpayers get hit with the tax.  “I don't think the voters would understand the problem and so at the present time … I would rather see the people not hit by the AMT and then come back and fight again for pay-go and to close the loopholes and to pay for the AMT, probably with the extenders.”

OBSERVATION: Over thirty popular tax provisions are set to expire 12/31/07.  As was the case in 2006 when the 2005 extenders bill didn't pass until May 2006, taxpayers who make 2008 estimated tax payments are likely to be impacted by the delay in passing the extenders legislation.