No Tax Changes Expected This Year from Legislature
Marsh, Kimberly, THE JOURNAL RECORD
Ochsenschlager was the guest speaker Thursday for the Oklahoma City Estate Planning Council's meeting.
Congress is expected to continue tinkering with tax legislation in order to generate some additional revenue, but another major action is still far away.
"It is quite conceivable nothing will happen this year, and everything will fall into a tinkering bill in 1989," Ochsenschlager said. "In 1990 or 1991, they will finally realize they've run out of tinkering cuts and will probably do something major."
The main question still stands as to how changes will be imposed, and what they will involve, he said.
Congress is expected to consider the catastrophic health bill and the trade bill before adjourning for Easter recess, Ochsenschlager said.
If there is time to address a tax bill during this session, the issues will most likely include:
- Research and development credits. While they are considered to be revenue losers, Ochsenschlager said, the credits will most likely be extended because they go hand in hand with the trade bill.
- The repeal of the windfall profits tax.
- Mutual fund expenses deductions. As a result of the 1986 tax reform act, mutual funds are required to report administrative costs to shareholders, who in turn must report their share as income to the Internal Revenue Service. The problem is that the expenses must be deducted as part of miscellaneous items, which can only be deducted to the extent they exceed 2 percent of the gross annual income.
If miscellaneous items exceed 2 percent of the income, the shareholder is not able to claim a deduction for the income (coined "phantom income" because shareholders never see it) and therefore pay taxes on more income than they actually received during the year in cash, Ochsenschlager said.
"What we hope to happen, is it will be changed that so mutual funds would not have to report administrative costs to the shareholders," he said.
- Capital gains rate decreases. Hearings on this issue are deadlocked, with some Representatives divided on whether the capital gains tax is actually a good revenue raiser, Ochsenschlager said.
In the tinkering process, Ochsenschlager said several of the following items will probably going to be considered in a tax bill in the next two years. …