The Tax Relief and Health Care Act of 2006, includes a package of tax extenders, provisions affecting health savings accounts and other provisions in the United States.
Tax provisions
Extenders
The Act retroactively extended for two years certain provisions that had expired at the end of 2005, including:
Elective itemized deduction for state and local general sales taxes
Research credit
For tax years ending after December 31, 2006, the Act also modifies the rules for calculating the research credit: it increases the rates of the alternative incremental credit and creates a new alternative simplified credit
Work opportunity tax credit, welfare-to-work tax credit
In addition, the Act extended certain provisions that would otherwise expire at the end of 2006, including:
Election to treat combat pay as earned income for purposes of calculating the earned income credit
Provisions affecting IRS disclosure of certain tax return information
The Act extended the new markets tax credit through the end of 2008 and requires that future regulations ensure that non-metropolitan counties receive a proportional allocation of qualified entity investments. The Act extended through December 31, 2008, numerous energy provisions that would otherwise have expired at the end of 2007, including:
Tax credit for electricity produced from certain renewable resources
Authority to issue clean renewable energy bonds
Deduction for energy-efficient commercial buildings
Tax credit for new energy-efficient homes
Tax credit for residential energy-efficient property
Several provisions affect health savings accounts, including provisions dealing with limitations on HSA contributions and tax-free rollovers to HSAs from health reimbursement accounts, flexible spending accounts and individual retirement accounts.
A refundable credit of 20 percent of the long-term unused alternative minimum tax credits per year for the next five years, subject to certain limitations and phaseouts
Enhancing reporting requirements for the exercise of incentive stock options and employee stock purchase plans
Reform and expansion of whistleblower awards to certain individuals who provide information regarding violations of the tax laws
An increase of the penalty for frivolous tax submissions from $500 to $5,000 and an extension of the scope of the penalty
A temporary itemized deduction for qualified mortgage insurance premiums accrued during 2007, subject to limitations and phase-out
Ordering the completion without delay of the All-American Canal Lining Project and identifying a 1944 treaty between the US and Mexico as the exclusive authority concerning the impacts of projects constructed within US territory on foreign territories
The Act makes permanent certain provisions that were included as temporary provisions in the Tax Increase Prevention and Reconciliation Act of 2005 and were otherwise scheduled to expire after 2010, including:
Federal income tax exemption of certain qualified settlement funds established to resolve CERCLA claims
"Separate affiliated group" rule for satisfaction of active trade or business requirement under Section 355
Election to treat self-created musical works as capital assets
Exemption from imputed interest rules for certain loans to qualified continuing care facilities
