As we go to press, 2009 has not produced a significant number of tax law changes beyond the American Recovery and Reinvestment Act of 2009, which was signed into law by President Obama in February. The provisions of this act were designed to stimulate the economy and included certain tax breaks along with cash payments. Recent legislation extended and expanded the homebuyer credit and the five-year carryback period for net operating losses (NOL). Before year-end, several additional one-year patches are anticipated, including an extension of the 2009 estate exemption amount and tax rates, an alternative minimum tax (AMT) patch and extension of the research credit.

Tax-related legislative efforts in the coming months are expected to focus on raising revenue to address chronic federal deficits and provide funding for health care reform. Many proposals are on the table. Recurring themes include:

• Making 2009 estate tax levels permanent
• Extending the 10% tax bracket
• Increasing top individual rates from 33% and 35% to 36% and 39.6%, respectively
• Increasing the tax rate on long-term capital gains from 15% to 20%
• Capping tax deductions for high-income taxpayers
• Reforming the international tax deferral regime
• Repealing last-in, first-out (LIFO) inventory valuation method
• Taxing service partnership carried interests as ordinary income
• Codifying the economic substance doctrine
• Making the research and development tax credit permanent
• Repealing certain tax preferences for oil and natural gas companies, including the domestic production activities deduction, percentage of completion and expensing of intangible drilling costs
• Enhancing information reporting for payments to corporations

As these provisions evolve, your BKD advisor can help you navigate the changes that will likely impact your bottom line.