The Tax Relief and Health Care Act of 2006 (Pub.L. 109–432, 120 Stat. 292), includes a package of tax extenders, provisions affecting health savings accounts and other provisions in the United States.
The Act retroactively extended for two years (through December 31, 2007) certain provisions that had expired at the end of 2005, including:
Above the line deduction for qualified tuition and higher education expensesElective itemized deduction for state and local general sales taxes (in lieu of a deduction for state and local income taxes)Research creditFor 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 creditWork opportunity tax credit, welfare-to-work tax creditTax credit for qualified zone academy bondsUp to $250 above-the-line deduction for certain expenses of elementary and secondary school teachersExpensing of brownfields remediation costsTax incentives for investment in Washington, DCIndian employment tax creditAccelerated depreciation for business property on Indian reservationsFifteen-year depreciation for qualified leasehold improvements and qualified restaurant propertyEnhanced charitable deductions -- for corporate donations of scientific property used for research, and of computer technology and equipmentArcher medical savings accountsSuspension of the taxable income limit on percentage depletion for oil and natural gas produced from marginal propertiesIn addition, the Act extended (through December 31, 2007) 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 creditProvisions affecting IRS disclosure of certain tax return informationThe 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 resourcesAuthority to issue clean renewable energy bondsDeduction for energy-efficient commercial buildingsTax credit for new energy-efficient homesTax credit for residential energy-efficient propertySeveral provisions affect health savings accounts (HSAs), 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.
Other provisions include:
Expansion of the Section 199 domestic production activity deduction to income from Puerto Rico, if all Puerto Rican receipts are subject to federal income taxA 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 phaseoutsEnhancing reporting requirements for the exercise of incentive stock options and employee stock purchase plansReform and expansion of whistleblower awards to certain individuals who provide information regarding violations of the tax lawsAn increase of the penalty for frivolous tax submissions from $500 to $5,000 and an extension of the scope of the penaltyA temporary itemized deduction for qualified mortgage insurance premiums accrued during 2007, subject to limitations and phase-outIncreased information sharing between the IRS and certain regional governmental organizationsCharitable remainder trusts having unrelated business taxable income are subjected to an excise tax equal to 100% of unrelated business taxable incomeA technical correction to the Subpart F look-through rule under the Tax Increase Prevention and Reconciliation Act of 2005Clarifying that the Tax Court has jurisdiction to review requests for equitable innocent spouse reliefExpanding the Medicare Recovery Audit Contractor program to all 50 states and making it permanentOrdering 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 territoriesThe 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 355Election to treat self-created musical works as capital assetsExemption from imputed interest rules for certain loans to qualified continuing care facilities
