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The alternative minimum tax (AMT) exemption amounts were “temporarily” increased for four years by EGTRRA, and then “temporarily” increased again by a succession of tax laws. The ability of individuals to use most nonrefundable personal credits to offset AMT also is “temporary,” and has been extended over the years by a series of new laws. Under pre-Act law, after 2010, the AMT exemption amounts were to have plummeted to their pre-EGTRRA level, and individuals would not have been able to use most nonrefundable personal credits to offset AMT.

Finally, the American Recovery and Reinvestment Act of 2009 temporarily boosted the credit incentives for higher education (i.e., created the American Opportunity Tax Credit, or AOTC), and liberalized the rules for the refundable child tax credit and the earned income tax credit (EITC). Under pre-Act law, these ARRA incentives would have ended on December 31, 2010.

New law. Under 2010 Tax Relief Act Secs. 101 through 103, the Sec. 901 EGTRRA sunset, the Sec. 303 JGTRRA sunset, and the ARRA sunsets relating to the AOTC, child tax credit, and EITC are extended for two years (one year in case of the adoption rules).

Caution:  Unless Congress acts, all of the favorable rules will revert after 2012 to their pre-EGTRRA, pre-EGTRRA, and pre-ARRA rules. For example, the tax rates for individuals in 2013 will be 15%, 28%, 31%, 36%, and 39.6%.

Stay tuned for more posts about this new tax law.

• Retroactively reimpose the estate tax and GST tax;
• Adopt an applicable exclusion amount and GST exemption of $3.5 million per person;
• Adopt a progressive rate structure, under which a 45% rate would apply on the taxable estate up to $10 million, 50% on the taxable estate above $10 million and below $50 million, and 55% on taxable estates above $50 million, and a 10% surtax on estates above $500 million;
• Enact two loophole closures included in President Obama’s Fiscal Year 2011 budget, requiring consistent valuation for transfer and income tax purposes, and requiring a 10-year minimum term for GRATs;
• Eliminate the use of valuation discounts for entities that do not operate an active trade or business;
• Allow reduction in the gross estate under Code Sec. 2032A , special use valuation for family farms and certain closely held business real estate, by up to $3 million; and
• Expand the rules for conservation easements through increasing the maximum exclusion amount to $2 million and increasing the base percentage to 60%.

As more states struggle with budgetary and other fiscal constraints, expect to see more efforts to audit and collect taxes under the current system.  Our attorneys at McLaughlin & Quinn, LLC have already felt this renewed effort in both Massachusetts and Rhode Island.  The numbers of new cases is at an all-time high.  These state efforts are focused not just on personal and corporate income taxes, but sales and use taxes, payroll taxes, and excise taxes, such as the cigarette tax, fuels taxes and others.

Ms. Van Der Pool’s article correctly points out that everyone should pay their taxes according to the law.  But, as a tax attorney I can attest that there can certainly be differing opinions as to the proper interpretation of the law.  However, merely not paying any taxes, or not filing tax returns, is not the appropriate method to challenge an interpretation of the tax law.

If you have been selected for audit, if you know you owe taxes, or if you have not filed all required tax returns, and if you want to get these matters settled and behind you, you need to seek competant tax advice immediately.

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