Heads up on EGTRRA!(Economic Growth and Tax Relief Reconciliation Act of 2001)

On June 7, 2001, President Bush signed into law The Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA). The EGTRRA has a number of changes retroactive to Jan. 1, 2001; some with an effective date of June 7, 2001; and a few (exclusively related to changes in payroll taxes) with an effective date of Aug. 6, 2001. ERISA changes may take place in 2001 after the Department of Labor has adopted final regulations implementing the provisions (they have up to three years). This item covers only those changes included in the EGTRRA.

Effective Jan. 1, 2001 Sec. EGTRRA Section Comments 1(i)(1) 101(a) A new 10% tax bracket was created for individual taxpayers. Various 101(a) Reduces the individual 28%, 31%, 36% and 39.6% tax rates by 0.5% each. Revised withholding tax tables became effective Aug. 6, 2001. Various 101(c) The inclusion rate for the kiddie tax drops from 15% to 10%. Various 101(c) A corporation's accumulated earnings tax rate drops to 39.1%. Various 101(c) A personal holding company's (PHC's) undistributed PHC tax rate drops to 39.1%. 24(a) 201(a) The child tax credit is increased to $600. 24(d)(1) 201(b) The child tax credit becomes refundable for all taxpayers, to the extent of 10% of the taxpayer's earned income in excess of $10,000. 2031(c) 551 An estate's executor may elect to exclude the value of "land subject to a qualified conservation easement" from the gross value of the estate. None 581 Under certain circumstances, a refund of any recapture tax paid as a result of a lineal descendant's lease of special-use value property (e.g., a farm) may be claimed through June 7, 2002. 2632 561 There is now an automatic generation-skipping transfer (GST) exemption allocated to...