New Tax Act Triggers Retroactive and Immediate Changes

Congress recently passed the President Bush signed the "Small Business and Work Opportunity Tax Act of 2007". A number of provisions extend the effective dates of various provisions of the Code or make some changes in Code sections. Most of the changes are directed toward small businesses with a few impacting individuals. The Act provides:

* The Work Opportunity Tax Credit and the tip credit will be allowed to offset the alternative minimum tax.
* An extension of the Work Opportunity Tax Credit for 44 months (until September 1, 2011) and expands the definition of "qualified first year wages" to $12,000 and expands the definition of certain qualified individuals.
* Increases the allowed expensing of depreciable tangible property to $125,000 (up from $112,000) for 2007 with the phase-out beginning at $500,000 (up from $450,000).
* While increasing the federal minimum wage, the Act freezes the minimum wage to calculate the FICA tip credit so that the credit will not be reduced.
* Many of the benefits affecting the Gulf Opportunity Zone (GO Zone) have been extended and expanded.
* S corporation provisions deal with the treatment of gains from the sales or exchanges of stock or securities, banks changing their method of accounting for bad debts when electing S corporation status and the elimination of pre-1983 earning and profits.
* An expansion of the "Kiddie Tax" to children under 19 years of age (up from 18) or who are full-time students under age 24.
* A number of provisions affecting penalties and interest, user fees and return preparer penalties.
* An acceleration of corporate estimated tax payments due in 2012!
* An extension of alternative deficit reduction contribution rules to plan years beginning before January 1, 2008.
* Modification of the interest rate to be used under the pension funding rules of the Pension Protection Act of 2006.