Legislative Status: October 25, 2007

Chairman Rangel Introduces the “Mother of All” Tax Reform Bills

Today, House Ways and Means Committee Chairman Charles Rangel unveiled his $1 trillion tax reform plan that, according to Chairman Rangel, would result in tax relief for approximately 91 million families.

The legislation, which is revenue neutral, aims to repeal the alternative minimum tax, expand certain tax credits and lower corporate tax rates. To accomplish this, the plan calls for between a 4 and 5% surtax on the highest-earning Americans – a proposal that will raise somewhere in the neighborhood of $830 billion over ten years. (Click here for additional details on the proposal.)

In addition, the legislation contains several provisions of interest to the charitable community, such as:

• Modification of unrelated business income tax rules for certain investment partnerships – the so-called “UBIT” blocker provision;

• Extension (for one year) of special tax treatment of certain payments to controlling exempt organizations;

• Extension (for one year) of enhanced charitable deduction for contributions of food inventory;

• Enhanced charitable deduction (extended for one year) for contributions of book inventories to public schools;

• Extension (for one year) of enhanced deduction for corporate contributions of computer equipment for educational purposes;

• Extension (for one year) of tax-free distributions from individual retirement plans for charitable purposes; and

• Extension (for one year) of above-the-line deduction for certain expenses of elementary and secondary school teachers.

While the more sweeping parts of the proposal are not expected to gain traction this year, we do expect that limited parts of this proposal (including the extensions) will be enacted this year along with a one-year “fix” for the alternative minimum tax.

As for the more sweeping parts of the proposal, including major tax increases on high-income taxpayers and full repeal of the alternative minimum tax, we fully expect these to be Chairman Rangel’s starting point for tax reform discussions beginning next year.

As always, please let us know if you have any questions, otherwise, we will plan to discuss in more detail during the regularly scheduled conference call.

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