Washington, Jul 28 -  Congressman Jim Gerlach (PA-06) released the following statement after voting for The Estate Tax and Extension of Tax Relief Act of 2006, legislation that increases the federal minimum wage by more than $2 an hour, provides permanent relief from the “death tax” and provides important tax relief to families, teachers and hard-working Americans.

“This bill is by no means perfect but I voted for final passage of this legislation because it accomplishes some very important goals such as increasing the federal minimum wage for the first time since 1997,” Rep. Gerlach said. “And we’ve increased the minimum wage while providing important tax breaks to small business owners who will bear the burden of the additional costs associated with paying the higher wages. Furthermore, this legislation addresses key discrepancies in the tax code and provides important tax breaks to clean up the brownsfields and blighted areas in our communities, help teachers save money and make it easier for families to send their kids to college.”

According to the House Committee on Ways and Means, some of the key provisions of the Estate Tax and Extension of Tax Relief Act of 2006 are:

Permanent Estate and Gift Tax Relief

The Estate Tax and Extension of Tax Relief Act of 2006 provides permanent estate and gift tax relief. Under current law, the estate tax relief provided in the Economic Growth and Tax Relief Reconciliation At of 2001 (EGTRRA) will end in 2010. Unless Congress acts, in 2011 the estate tax exemption will drop to $1 million per person and the maximum estate tax rate will increase to 55 percent. This is very important to small business owners.

Increase in the Federal Minimum Wage and Tip Credit Fairness

The provision increases the current federal minimum wage rate of $5.15 per hour by $2.10 over three years in the following increments: $5.85 an hour effective on January 1, 2007, $6.55 an hour effective on June 1, 2008 and $7.25 an hour effective on June 1, 2009.

Above-the-Line Deduction for Higher Education Expenses

Taxpayers can deduct up to $4,000 (depending on their income) of higher education expenses in lieu of claiming the Hope or Lifetime Learning tax credits. The legislation extends this deduction through 2007.

Fifteen-Year Depreciation for Restaurant Improvements and New Restaurant Properties

The cost of nonresidential real property is generally depreciated over 39 years. The provision (i) extends a reduced 15-year depreciation period for restaurant improvements to existing restaurant properties through 2007, and (ii) expands the provision to include new restaurant properties placed in service after the date of enactment of the bill and before the end of 2007.

Extension and Modification of the Research and Development (R&D) Tax Credit

The provision extends the R&D tax credit for two years through 2007. In addition to the extension, effective January 1, 2007, the provision increases the value of the alternative incremental credit and adds a new alternative simplified credit.

Work Opportunity Tax Credit (WOTC)

Employers may claim the WOTC if they hire individuals from groups that are considered to face barriers to employment. The maximum credit is $2,400 and may be claimed during the individual’s first year of employment. The provision extends the current WOTC without modification through 2006. Beginning in 2007, the provision combines the WOTC with the Welfare-to-Work (WTW) credit and extends the combined provision through 2007. Key modifications of the combined credit include expanded eligibility for WOTC (raised age ceiling for food stamp recipients from 25 to 40), revised eligibility requirements for ex-felons (without regard to family income) and a modification of the filing deadline for WOTC claimants from 21 to 28 days.

Fifteen-Year Depreciation for Leasehold Improvements

The cost of leasehold improvements is generally depreciated over 39 years. The provision reduces the depreciation period for leasehold improvements from 39 years to 15 years. The provision is extended for two years through 2007.

Above-the-Line Deduction for Teacher Classroom Expenses

Teachers can deduct up to $250 of out-of-pocket costs incurred to purchase books, supplies and other classroom equipment.

Brownfields Expensing

Taxpayers may expense costs incurred in cleaning up certain contaminated sites. The deduction may be claimed against regular tax and the alternative minimum tax (AMT). The provision also expands the definition of an eligible contaminated site to include sites contaminated by petroleum products.

Whistleblower Reforms

This provision reforms the reward program for individuals who provide information to the Secretary regarding violations of the tax laws. The provision establishes a reward range for such “whistleblowers” of 15 percent to 30 percent of proceeds collected by the IRS (subject to certain exceptions) where the amount in dispute exceeds $2,000,000. The provision also provides the Secretary with regulatory authority to create a Whistleblower Office within the IRS to administer the reward program.

For more information about The Estate Tax and Extension of Tax Relief Act of 2006 visit http://waysandmeans.house.gov/

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