Effects of Tax Relief and Health Care Act of 2006 on MeF |
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The Tax Relief and Health Care Act was signed by the President on December 20, 2006. As a result of the late enactment, the implementation of many of the changes in the Modernized e-File (MeF) schemas cannot occur until processing year 2008. The following form-specific procedures should be followed by taxpayers e-filing returns on the MeF system.
Form 5735 - American Samoa Economic Development Credit
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The Act provides that a domestic corporation that is an existing credit claimant with respect to American Samoa and that elected the application of IRC § 936 for its last taxable year beginning before January 1, 2006 is allowed, for two taxable years, a credit based on the economic activity-based limitation rules. The credit is computed based on the rules of §§ 30A and 936.
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The amount of the credit allowed to a qualifying domestic corporation under the provision is equal to the sum of the amounts used in computing the corporation’s economic activity-based limitation with respect to American Samoa, except that no credit is allowed for the amount of any American Samoa income taxes.
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Thus, for any qualifying corporation, the amount of the credit equals the sum of (1) 60% of the corporation’s qualified American Samoa wages and allocable employee fringe benefit expenses and (2) 15% of the corporation’s depreciation allowances with respect to short-life qualified American Samoa tangible property, plus 40% of the corporation’s depreciation allowances with respect to medium-life qualified American Samoa tangible property, plus 65% of the corporation’s depreciation allowances with respect to long-life qualified American Samoa tangible property.
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The current § 936(c) rule denying a credit or deduction for any possessions or foreign tax paid with respect to taxable income taken into account in computing the credit under § 936 does not apply with respect to the credit allowed by the provision.
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This provision is effective for the first two taxable years of a corporation, which begin after December 31, 2005, and before January 1, 2008.
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Form 5735 will be accepted in PDF for 2006 tax year claimants.
Other Forms Affected by Form 5735:
The American Samoa Economic Development Credit is used to determine the allowable amount for several other credits. For these forms, the American Samoa Economic Development Credit amount will be included on the same line as the Qualified Electric Vehicle Credit. It will be identified on paper returns with a write-in explanation.
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For e-filed returns, the American Samoa Economic Development Credit amount will be included as part of the total on the applicable form on the same line (identified below).
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The “write-in” will be identified on MeF returns by using the General Dependency Schema. The “write-in” explanation on this schema must be described as Form 8835 Credit Amount and should be referenced from the form’s line where it was included. Write-in explanation should say - : “American Samoa Economic Development Credit amount included of $XX”
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Form 1120 – U. S. Corporation Income Tax Return – Sch J, Line 5b
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Form 8835 – Renewable Electricity, Refined Coal, and Indian Coal Production Credit – Part II, Line 36c
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Form 8844 – Empowerment Zone Employment Credit – Part II, Line 16c
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Form 8860 – Qualified Zone Academy Bond Credit – Part II, Line 7c
Form 8907 - Nonconventional Source Fuel Credit
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No schema change for 2006
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2006 – Part I, Line 4a and 4c MUST BE ZERO. Software Developers should either embed zeros in these lines or not enable them in the software.
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2005 Form is accepted in PDF but Part 1, Line 4b MUST BE ZERO.
Form 8923 – Mine Rescue Team Training Tax Credit (New form)
This form will be accepted in PDF for 2006 tax returns.
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PDF must be named and described – Form 8923 Mine Rescue Team Training Credit.
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Form must be attached to the top level tax return; if the return is a consolidated return, it must be attached at the consolidated level.
Exclusion of 25% of Capital Gain for Certain Sales of Mineral and Oil Leases for Conservation Purposes
The Act provides a 25% exclusion from gross income of long-term capital gain from the conservation sale of a qualifying mineral or geothermal interest. The amount of this exclusion should be identified on the Schedule D as TRHC - 403(c).
Schemas Revised or Being Revised for 2006
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Form 3800 – Line 1Y has been changed to Mine Rescue Team Training Credit (Form 8923). Part II, Line 12c is where the write-in amount for the Form 5735 credit will be included.
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Form 4136 - Credit for Federal Tax Paid on Fuels – Lines 9a and 9b have been added to include the nontaxable use of kerosene used in noncommercial aviation.
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Form 6765 – Credit for Increasing Research Activities – Major modifications including the addition of 21 lines.
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Form 8834 – Qualified Electric Vehicle Credit – Line 16c has been changed to American Samoa Economic Development Credit (Form 5735) and. Line 16d now says Add lines 16 through 16c.
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Form 8912 - Credit for Clean Renewable Energy and Gulf Tax Credit Bonds – Part II, Line 16c has been renamed American Samoa Economic Development Credit.
Return to: e-file for Large and Mid-Size Corporations
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Page Last Reviewed or Updated: December 03, 2008