Senate Passes Financial Market Bailout Legislation that Includes Cost Basis Reporting
On Wednesday evening, October 1st, the Senate passed H.R. 1424, the Emergency Economic Stabilization Act of 2008 on a vote of 74 to 25 in response to the financial market crisis. The bill includes required cost basis reporting by brokers to the IRS and taxpayers. The bill now goes to the House where it is expected that it will be voted on either on this Thursday or Friday.
Essentially, the financial market bailout legislation was expanded to include other provisions that could be considered favorable for many taxpayers, thereby presumably making the expanded bill easier to pass. The most notable provision is the increase in the maximum Federal Deposit Insurance Corporation (FDIC) customer deposit insurance amount from $100,000 to $250,000. Also, the Senate’s version of energy and tax extender legislation that it passed last Tuesday, September 23rd (H.R. 6049) was added onto the bailout bill. The tax extenders and energy provisions would provide benefits to a wide range of taxpayers. As previously described, the Senate’s tax extender bill was only partially revenue offset and was subsequently rejected by the House of Representatives on Friday, September 26th when the House passed its own fully offset substitute version of the energy and tax extender legislation (H.R. 7060).
As you are probably aware, an earlier version of the financial market legislation failed to pass the House on Monday, September 29th and the U.S. and other world stock markets fell drastically in response. Given this earlier failed vote, it is uncertain whether financial market legislation will pass the House. Also, the House previously rejected the Senate’s tax extender bill because it was not fully revenue offset and certain members of the House have already expressed disapproval of its reappearance as part of H.R. 1424. However, the urgency of the financial market crisis and other provisions such as the increase in the FDIC deposit insurance maximum to $250k could result in enough votes in the House to permit H.R. 1424 to be passed by the House and sent to the President for signature into law. The President has already indicated that he approves of the expanded bill.
The details of the cost basis reporting provision are essentially the same as detailed in both last week’s Senate version in H.R. 6049 and the House’s previously passed version (H.R. 7060) of the energy and tax extender legislation–the effective date for cost basis reporting for most stock would apply to stock acquired on or after January 1, 2011; for open-end mutual fund and dividend reinvestment plan stock acquired on or after January 1, 2012 and for debt instruments, options and other covered securities acquired on or after January 1, 2013. The provision is scored to raise $6.67 billion over a ten year period.
Stevie
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