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Taxes and Fiscal Year 2006 Budget Reconciliation: A Brief Summary, June 9, 2006 1 (June 9, 2006)

handle is hein.tera/crstax0508 and id is 1 raw text is: Order Code RS22322 Updated June 9, 2006 CRS Report for Congress Received through the CRS Web Taxes and Fiscal Year 2006 Budget Reconciliation: A Brief Summary David L. Brumbaugh Specialist in Public Finance Government and Finance Division Summary On April 28, 2005, Congress approved a FY2006 budget resolution (H.Con.Res. 95) with reconciliation instructions calling for tax cuts of$11 billion in FY2006 and $70 billion over five years. Congress began consideration of the tax-reduction reconciliation legislation as 2005 drew to a close. On November 15, the House Ways and Means Committee and the Senate Finance Committee approved separate tax-cut proposals as H.R. 4297 and S. 2020, respectively. The full Senate approved a slightly modified version of S. 2020 on November 18; the House passed H.R. 4297 on December 8. On February 2, 2006, the Senate approved H.R. 4297 after amending it by replacing the contents of the House-passed bill with those of S. 2020. An important part of both the House- and Senate-passed bills was the extension of numerous temporary, tax-reducing provisions that are scheduled to expire at various times over the next several years. Although most of these extenders were the same in both plans, there were some differences, including extension of the increased alternative minimum tax (AMT) exemption, contained in the Senate proposal but not the House bill; and reduced rates for capital gains and dividends, which were in the House measure but not the Senate plan. Aside from the extenders, the Senate bill contained a number of additional items not in the House plan, including tax incentives for development in areas affected by recent hurricanes; both tax benefits and reforms related to charitable contributions; and revenue-raising items in the area of tax shelters and elsewhere. In addition, on December 7 the House passed stand alone bills extending the increased AMT exemption (H.R. 4096) and providing disaster-related tax benefits (H.R. 4440). The disaster-related bill was approved by the Senate, signed by the President, and became P.L. 109-135, but the Senate did not act on H.R. 4096. On May 9, a conference committee reached agreement on reconciliation legislation, which it approved as the Tax Increase Prevention and Reconciliation Act of 2005 (H.R. 4297; enacted as P.L. 109- 222). The plan extends the dividend and capital gains reductions for two years and AMT relief for one year. Many extenders, however, were not included in the package and are expected to be addressed in forthcoming legislation. This report will be updated as legislative developments occur. Congressional Research Service oe The Library of Congress

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