WASHINGTON, D.C. – U.S. Sen. Sherrod Brown (D-OH) – a member of the U.S. Senate Committee on Finance – today supported legislation that included several tax incentives and credits to support working families in Ohio. Brown’s proposal to permanently expand the Earned Income Tax Credit (EITC) and the Child Tax Credit (CTC) was the centerpiece of the final package.
“Tax credits have the power to lift families out of poverty, send young adults to college, and support business investments including R&D and capital expenditure,” said Brown. “I’m most proud of the fact that this bill permanently extends the expansions of the Earned Income Tax Credit and the Child Tax Credit. This will provide certainty for working families and put their hard-earned money back in their pockets.
“Families will also benefit from the American Opportunity Tax Credit, which helps send young Americans to college. The bill also gives important assistance to Ohio businesses so they can continue to grow, supports homeowners, and invests in renewable energy like wind and solar.”
The package includes Brown’s proposal to permanently extend expansions of the ETIC and CTC – two of the most important anti-poverty credits for working families. Without an extension of the EITC and CTC by 2017, approximately 50 million Americans would lose all or part of their EITC or CTC and 16.4 million people would be pushed into poverty or deeper into poverty. The EITC is a refundable tax credit for low-income Americans that encourages work and helps families make ends meet. In 2012, more than 24 million taxpayers received a lump-sum refundable credit through the EITC after filing their taxes. The CTC is available for taxpayers with children in the amount of up to $1,000 per child under age 17.
Mortgage Debt Relief
The tax extenders bill would permanently extend relief originally passed in the Mortgage Forgiveness Debt Relief Act of 2007. The legislation allows homeowners to exclude from annual, reportable income the discharge of mortgage debt owed on their homes. Unless the law is extended, individuals who receive assistance through the Home Affordable Modification Program (HAMP), Ohio’s Save the Dream Program, or other private agreements with financial institutions to save their home from foreclosure may now face additional tax consequences.
American Opportunity Tax Credit & Techers Supplies
The bill permanently expands the American Opportunity Tax Credit (AOTC), which is currently available to families earning less than $180,000 per year and provides a tax credit of up to $2,500 towards tuition and certain expenses required for enrollment at a higher education institution, including the cost of books, supplies, and equipment needed for a student’s studies.
It also extends and indexes for inflation the $250 deduction for teachers who spend their own money on school supplies.
Work Opportunity Tax Credit
The Working Opportunity Tax Credit (WOTC) helps employers hire individuals facing considerable barriers to gaining employment – by offering a tax credit based on the type of employee, their hours, and their wages. This credit can assist a variety of workers including veterans, Temporary Assistance for Needed Families (TANF) recipients, Supplemental Nutrition Assistance Program (SNAP) recipients, former felons, supplemental security income recipients, and other select groups. The bill authorizes a five-year extension of the credit to target the long-term unemployed who have struggled to reenter the workforce.
The bill will reinstate a deduction that encourages individuals and organizations to donate food by providing a tax deduction for donations. It will increase the deduction to 15 percent of one’s taxable income for food donations. It will also reinstate the Individual Retirement Account (IRA) charitable rollover. In 2006, as part of the Pension Protection Act, Congress established what is referred to as the “charitable rollover.” This tax provision allows individuals aged 70 and a half and older to withdraw up to $100,000 from an individual retirement account (IRA) tax-free so long as that money is donated to a qualified charitable organization. The provision not only allows individuals to support charities in their community, but also ensures that seniors who wish to give to charity can use money in their retirement accounts without affecting their benefit levels for other programs, such as Social Security or Medicare. It will also reinstate deductions for conservation easement donations. This deduction incentivizes land conservation by providing a credit to famers and other landowners to work with land trusts to voluntarily conserve land.
Renewable Energy Credits
The omnibus bill would reinstate the Production Tax Credit (PTC) and the Investment Tax Credit (ITC), which expired last year and extend them for five years. The PTC provides a tax credit for wind and other forms of renewable energy. The ITC is a credit for both commercial solar projects and for households that purchase and install solar systems.
New Markets Tax Credit
The bill includes a five-year extension of the New Markets Tax Credit (NMTC), which incentivizes community developers to invest in low-income areas. NMTC provides tax credit incentives to Community Development Entities (CDE) with a primary mission of investing in low-income communities. Under the program, CDEs apply to the U.S. Treasury Department for the authority to raise a certain amount of capital, also known as Qualified Equity Investments (QEI), from investors. Awardees are then given a tax credit that equals 39 percent of their investment output over the span of seven years: five percent in each of the first three years and six percent in the final four years. The NMTC has helped several Ohio entities attract new investment in economic development projects.
Low-Income Housing Tax Credit (LIHTC)
The bill would make permanent the minimum 9 percent rate floor for the Low-Income Housing Tax Credit (LIHTC) Program, one of America’ most successful affordable housing programs. Since its inception in 1986, the program has helped build or rehabilitate more than 2 million affordable apartment units. In Ohio, it’s helped provide funding for capital numerous projects like Lakewoods in Lucas County, a 48-home complex for low-income seniors. The program provides federal resources to state housing agencies, who allocate tax credits to housing projects that meet a local affordable housing need.
Research and Development (R&D) Credit
The Research and Development (R&D) Credit encourages innovation and allows companies to deduct the expense of research, development, and hiring of workers to conduct R&D.
Section 179 & Alternative Minimum Tax
Section 179 supports small businesses by allowing them to deduct the cost of new or used depreciable assets – like equipment and computer software. The bill will increase the amount a company can expense. It will also accelerate the depreciation schedule, so that companies expensing more than the annual allowable deduction can get their money faster. In addition, Section 179 is critical to providing Ohio farmers with the flexibility they need to replace equipment and vehicles.
The bill modifies the Alternative Minimum Tax so that companies can accelerate their AMT credits instead of including bonus depreciation or regular accelerated depreciation in their income tax liability. This is important for many of Ohio’s manufacturing companies who accumulated AMT credits during the economic downturn.