Tech Firms, Couples to Benefit Under Tax Bill
Married couples earning up to $150,000, technology companies and other businesses are among the big beneficiaries in a late burst of legislation from the 105th Congress.
The income ceiling for couples to convert to advantageous Roth IRAs would be raised over five years and taxes on prize winnings would change under a House-Senate deal reached Friday providing $1.7 billion to improve Medicare home health care.
The agreement awaited only a final go-ahead from the White House, but Republican aides were optimistic that compromise had been achieved. The concept has had broad Democratic support in Congress and would be added to the huge catchall bill expected to pass Tuesday.
The congressional session has turned into a triumph for businesses large and small, as Republicans pushed through bills championed by companies and rejected measures opposed by the business community.
Computer equipment makers and the software industry did particularly well, including Microsoft Corp., Cisco Systems Inc. and Oracle Corp. as well as Intel Corp.
Among the winners:
* Intel Corp. In the last 10 days, Congress agreed to double visas for high-tech workers, raise the bar for plaintiffs in shareholder lawsuits, extend a tax credit for research and development and extend copyright protections to the Internet--all measures Intel lobbied for.
* Cisco, Oracle and other technology companies lobbied heavily and won passage of legislation forcing shareholders to file class-action suits in federal court, where it’s tougher for plaintiffs to win.
* American Online, Yahoo Inc., Amazon.com Inc., Microsoft and other firms that operate on the Internet won a three-year ban on new taxes on Net business.
* Genentech Inc. and other biotechnology firms as well as a range of other companies, such as MCI WorldCom Inc., secured the renewal of a credit that rewards corporate research.
* BMC Software Inc., Electronic Data Systems Corp. and other computer and software companies won new rules that restrict IRS use of corporate software.
“We really didn’t think it was going to be much of a year, but things really turned around,” said Michael Maibach, vice president of government affairs for Intel. “This Republican leadership really paid attention to our agenda, more than ever before.”
A broad tax-break package, worth $9.2 billion over 10 years, would renew a tax credit that rewards corporate research, would expand a statute that allows U.S. financial firms to defer paying taxes on certain overseas income and would allow the self-employed to deduct more of their health-care insurance premiums.
The tax changes included in Friday’s Medicare compromise are designed to pump more money into the program’s home health-care system, which under a 1997 interim plan is providing low payments that have hindered care for some high-cost patients, caused layoffs and forced some agencies to close.
Two tax changes would occur:
* The $100,000 income cap that prevents higher-income married couples from investing in Roth IRAs would gradually rise to $150,000 over five years. Because Roth IRAs have better long-term tax benefits than regular IRAs, many couples are expected to switch even though they would have to pay some money in taxes upfront.
* Winners of all prizes such as casino jackpots and lotteries--including past winners--could choose to receive the money in a lump sum instead of over time. Tax analysts believe more people would choose the lump sum, providing an influx of cash for the Medicare program.
The gambling provision was strongly supported by lawmakers from Nevada and New Jersey, in part because companies that handle big prizes for casinos suffer tax consequences when the money is paid out over time, according to House aides.
Some lawmakers say the tax changes would temporarily raise revenue as people switch to Roth IRAs and lump-sum gambling payments, but would wind up a loser as people begin to withdraw their IRA money tax-free.
A legislator from California, Rep. Fortney Stark (D-Hayward), called it an “outrageous tax giveaway,” but sponsors say the trade-off is worthwhile because people would have larger retirement savings and the Medicare home health system would be strengthened.
On Medicare, the compromise calls for a one-year delay in a planned 15% reduction in payments and ensures that no home health agencies lose money. More than 65% of all agencies would see an increase in their Medicare payments.
