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After months of political back and forth, the U.S. House of Representatives and U.S. Senate managed to pass a final version of an economic stimulus plan in mid-February. The plan is expected to push rebate checks out to taxpayers as early as May 2008.

President Bush favored the House version of the bill, which was passed Jan. 29. This is not surprising since the House version of the bill, hashed out with Speaker Nancy Pelosi, was largely the same as the version that Bush proposed earlier.

Under the House plan, taxpayers with income of at least $3,000 in 2007 but who did not make enough to pay federal income taxes would have received a $300 check; checks in the amount of $600 would be paid out for a married couple filing jointly. Those taxpayers who would pay at least $600 in income taxes for 2007 would have received a check for $600; checks of $1,200 would be issued for a married couple filing jointly. Rebate checks would have been increased by $300 for each dependent child, without limitation. Additionally, payments would have been phased out for individuals who earned more than $75,000 and joint filers who earned more than $150,000 in 2007.

The House plan would also have allowed businesses to immediately write off 50 percent of purchases of plants and other capital equipment. Small businesses would have been permitted to write off additional purchases of equipment.

The House package would also have raised the limits on Federal Housing Administration loans and home mortgages that Fannie Mae and Freddie Mac can purchase to as high as $725,000 in high-cost areas, more than twice the current limit for Fannie Mae.

Food stamp and unemployment extensions, endorsed by the Democrats, and a provision that would allow “struggling businesses” to recoup taxes already paid, touted by the Republicans, did not make the final version of the House bill.

While the House was quick to reach an accord on the plan hailed by the White House, the Senate took more time, prompting Bush advisers like Treasury Secretary Henry Paulson to push for a quick version of the bill that could be modified later. The Senate did not bite, choosing instead to mull several pieces of the plan. Particularly worrisome in an election year was the pushback from the AARP, which encouraged its members to contact their respective Senators to protest the omission from the plan of nearly 20 million seniors who rely primarily on Social Security for income.

After a lengthy debate, the Senate voted 58-41 to end debate on the measure. With that, the Democrats could push the measure to a vote.

Democrats in the Senate were hopeful that the Republicans recognized they would take some political heat for not including senior citizens in the rebate. The Democrats took that opportunity to load the bill with extensions for unemployment benefits and help for homeowners involved in the subprime mortgage fiasco. They anticipated that the Republicans would pass the measure in an effort to have a plan on the table to offer to the House.

The Republicans, however, wouldn’t bite. Like the Democrats, the Republicans wanted to add their own special interest measures — including language by Sen. Mitch McConnell of Kentucky to specifically bar illegal immigrants from getting rebate checks. The latter is particularly interesting from a tax policy argument — generally, those opposed to providing funding for illegal immigrants argue that the immigrants are “getting something for nothing” and that illegal immigrants don’t file or pay taxes. However, to be included in the rebate, you’d have to file or pay taxes for 2007 — so that argument is mostly moot.

After much back and forth, the Senate sent their version of the bill to the House, where it was passed largely without modification. The vote was overwhelming: 380-34.

So, with so much political muscle behind it, what does the final version of the bill look like?

The bill most resembles the Senate version of the plan. Rebates will be based on income and filing status as reported on income tax returns due April 15, 2008. Those who file for extensions will have their checks delayed until the income tax returns are filed.

Taxpayers who file individually will receive checks of up to $600. Couples who file jointly will receive checks of up to $1,200. There is an additional credit of $300 per child with no limitation. Seniors and disabled veterans, who were previously excluded from the plan, are included in the final bill and will receive checks of $300.

Individuals making up to $75,000 a year and couples earning up to $150,000 will receive the full rebate, with those making more than that or too little to owe taxes getting smaller checks.

Taxpayers who owe for prior taxes or have other federal liabilities, including overdue child support or past due federal student loans, will not receive a full check. The IRS will apply at least a portion of their rebate toward those liabilities.

The bill will also temporarily raise the limit on FHA loans and the cap on loans that Fannie Mae and Freddie Mac can buy to $729,750 — a few dollars more than originally contemplated.

Additionally, McConnell got his way — included is language designed to specifically prevent illegal immigrants from receiving checks.

The bill does not include extension of unemployment benefits, which the Democrats had initially signaled was a primary issue. Also omitted in the final bill are checks for persons on food stamp programs and low-income home energy assistance.

The total cost of the package is estimated to be $168 billion, with just $100 billion going toward the cost of the rebate checks. That $100 billion is to be distributed among 130 million American taxpayers. It’s anticipated that the package will add nearly $152 billion –– about 1 percent of the GDP — to the economy in 2008 and more than $16 billion in 2009.

President Bush signed the bill into law on Feb. 13.

Kelly Phillips Erb is a founding shareholder of The Erb Law Firm. She is a member of the bars of New Jersey and Pennsylvania and the Tax Supper Club, and she presents regularly on a wide range of topics before local and national organizations. Phillips Erb authors the blog “Taxgirl.” An interview with Phillips Erb related to estate planning will appear in Forbes magazine this year.

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