Economic Stabilization Act extends expired provisions and repeals MLTN standard.

• Author: Nevius, Alistair M.
• Position: More likely than not standard for tax preparers

On October 3, 2008, President Bush signed into law the Emergency Economic Stabilization Act, P.L. 110-343. Included in this act were the Energy Improvement and Extension Act of 2008 (Energy Act) and the Tax Extenders and AMT Relief Act of 2008 (Tax Extenders Act), which extends various tax benefits that expired at the end of 2007. Following are the highlights of the legislation (a full analysis of the many tax provisions in the act is beyond the scope of this column).

In addition to the tax items discussed below, the act also repealed the "more likely than not" standard for return preparers, which had been the subject of much controversy since its enactment in May 2007. Return preparers will now generally be subject to a "substantial authority" standard for undisclosed positions. The "reasonable basis" standard for disclosed positions remains. For discussion of this topic, see Tax Trends on p. 847.

Tax Benefits for Individuals

The Mortgage Forgiveness Debt Relief Act of 2007, P.L. 110-142, allowed individuals to exclude discharge of indebtedness from income when their home mortgage debt was forgiven by the lender (Sec. 108(a)(1)(E)). This relief originally applied only to discharges in 2007-2009. The Economic Stabilization Act extends this relief for three years, through the end of 2012.

The Tax Extenders Act increases the refundable amount of the Sec. 24 child tax credit for 2008 only. The threshold income amount for calculating the credit is reduced from $12,050 to $8,500. This means that for 2008, eligible taxpayers will receive a credit in the amount of 15% of their income over $8,500. The phase-out of the credit is unaffected.

The Sec. 165(h)(1) per-casualty floor for taxpayers who are eligible to deduct casualty or theft losses is increased from $100 to $500 for 2009.

The Pension Protection Act of 2006, P.L. 109-280, allowed taxpayers over age 70 1/2 to instruct their IRA trustee to make direct gifts of up to $100,000 to qualified charities without having to report the IRA distributions as income on their federal tax returns (Sec. 408(d)(8)). This provision originally expired at the end of 2007, but the Tax Extenders Act extends this rule to distributions made in 2008 and 2009.

The Tax Extenders Act extends through 2009 the election under Sec. 164(b)(5) to claim an itemized deduction for state and local sales taxes.

The Housing Assistance Tax Act, P.L. 110-289, which was enacted at the end of July, allowed nonitemizing homeowners to...