As Congress Heads Out of Town for Its August Recess, Tax Issues Remain
As the August recess approaches, both the House and Senate remain confronted with what to do about expiring tax provisions. Although recent rumblings from the Hill indicate that Congress might extend the expiring provisions for another year, House and Senate versions of the extension legislation differ – hinging on what (if any) the income cap will be on the extension.
Last week the Senate passed the Middle Class Tax Cut Act (S. 3412), which extends the tax rate reductions and other tax benefits of the Economic Growth and Tax Relief Reconciliation Act of 2001, through the end of calendar year 2013. The Senate bill extends the AMT and applies an income cap for the tax cuts for taxpayers whose incomes are $200,000 or less, or $250,000 for married couples filing jointly.
In response to the Senate action, House Ways and Means Chairman Dave Camp introduced legislation to also extend expiring 2011 and 2012 tax provisions. The bill, H.R. 8, the Job Protection and Recession Prevention Act of 2012, would extend for an additional year, also through the end of calendar year 2013, the tax reductions originally enacted in 2001 and 2003 and provide a two-year AMT patch (covering 2012 and 2013). The House is expected to pass the measure before recessing later this week, but the Senate will likely not take up the issue until after the November elections.
Both bills, as currently drafted, include an extension of Section 127 of the Internal Revenue Code which allows employers to provide education assistance for their employees up to $5,250 tax free. SHRM has been a strong proponent of Section 127 and is advocating a permanent extension of the provision as the co-chair of the Coalition to Preserve Employer Provided Education Assistance.
In Other Tax-Related News…
DOL Withdraws Information in a Field Assistance Bulletin (FAQ 30) on Participant Disclosure
In May, the Department of Labor (DOL) issued a Field Assistance Bulletin to provide guidance on compliance with required participant-level disclosure regulations under ERISA. Included among the 38 Frequently Asked Questions (FAQs) was FAQ 30 which increased fiduciary reporting obligations for employers who sponsor retirement plans.
FAQ 30 would have, for the first time, required plan fiduciaries to monitor investments selected by a “significant” number of participants through self-directed brokerage windows and, in some cases, treat those investments as “designated investment options” requiring investment-level disclosure. SHRM and other stakeholder groups worked together to educate the agency and congressional staff about concerns with the requirements of FAQ 30 and concerns about the agency making this change without the opportunity for formal stakeholder input through notice and comment.
On July 30, DOL withdrew FAQ 30 and replaced it with language consistent with the ERISA statute and regulations.