Tax Cuts
For the moment, concerns have been alleviated about potential unintended negative consequences on the Low Income Housing Tax Credit (LIHTC) which could result from repealing the taxes on corporate dividends. Tax cut legislation approved by the Senate Thursday night (by a vote of 51-49) would reduce and temporarily repeal the taxes on shareholders’ dividends. However, the Senate bill does not include the President’s proposed “excludable dividend amount” calculation on the corporate side, which many industry partners feared would lessen the incentive for corporations to buy the credits.
The legislation initially approved by the Senate Finance Committee (S 1054) exempted shareholders’ first $500 in dividend income from taxes. Shareholders could have excluded an additional 10 percent of dividend income above $500, which would have risen 20 percent after 2007. S 1054 effectively set the top dividend tax rate at 28 percent.
During floor consideration of the bill, Senator Don Nickles (R-OK) successfully offered an amendment to increase the dividend exclusion. The Nickles amendment allows individuals to exempt 50 percent of their dividend income from taxes in 2003. There would be no tax on dividends for individual taxpayers in 2004, 2005, and 2006. The exclusion would have to be renewed in 2007. Vice President Dick Cheney cast the tie-breaking vote on the amendment.
Industry experts do not expect the Nickles amendment to adversely affect the LIHTC. Like the original Finance Committee proposal, the amendment applies to the way shareholders pay their taxes. It does not affect the way corporations compute taxes paid, as the President’s proposal called for.
Prior to final passage of the tax bill, the Senate substituted its language (S 1054 as amended) into HR 2. The Senate then passed its version of the Jobs and Growth Reconciliation Tax Act (HR 2) by a vote of 51-49. Differences related to the cost and substance of these bills will be resolved by a conference committee.
Committee Hearings
The Senate Banking, Housing and Urban Affairs Committee held confirmation hearings on several Executive branch nominations. Included was Mr. Steven B. Nesmith, the nominee for HUD Assistant Secretary of Congressional and Intergovernmental Affairs.
The House Government Reform Subcommittee on Government Efficiency and Financial Management held an oversight hearing on improper federal payments. Linda Springer, a Controller at OMB, testified. HUD’s $2 billion in erroneous payments was discussed. To read Springer’s testimony, please see
https://www.whitehouse.gov/omb/legislative/testimony/springer051303.html.
