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There are many benefits for your clients in the Jobs and Growth Tax Relief Reconciliation Act of 2003. This article will help you respond to their questions.
THE LAST FEW YEARS have been busy for tax lawyers. The pace of change in tax law has been rapid, and one of the most significant developments is the arrival of the Jobs and Growth Tax Relief Reconciliation Act of 2003, Pub. L. No. 108-27, 117 Stat. 752 (May 28, 2003) ("JGTRRA"). Like most major tax legislation, JGTRRA creates a host of questions that will be answered over time and through regulations. This article will highlight the major portions of JGTRRA.
ACCELERATION OF REDUCTION IN INDIVIDUAL INCOME TAX RATES (ACT SECTION 105) * JGTRRA significantly accelerates previously enacted tax reductions. The accelerations are discussed below.
Acceleration of Previously Enacted Tax Reductions
The Economic Growth and Tax Relief Reconciliation Act of 2001 ("EGTRRA") reduced the 28, 31, 36 and 39.6 percent brackets under prior law by one percent starting July 1, 2001 and provided for additional rate reductions in 2004 and 2006. JGTRRA accelerates the EGTRRA rate reduction to the beginning of this year resulting in the following rate structure:
* Effective date: Tax years beginning after December 31, 2002.
* Sunset: Tax years beginning after December 31, 2010.
* Internal Revenue Code ("Code") sections affected: Section 1(i)(2).
Increase in Income Subject to 10 Percent Bracket (Act Section 104)
EGTRRA provided for rate reductions for taxpayers in every single tax bracket except the very lowest (15 percent). It did, however, create a new 10 percent bracket for the first $6,000 of taxable income for unmarried individuals and $12,000 for married individuals filing jointly. (This was the basis for the $300 and $600 refund checks of 2001.) EGTRRA also provided for an increase in the 10 percent bracket from $6,000 to $7,000 for single individuals and $12,000 to $14,000 for married individuals filing jointly to occur in 2008. The 2003 Act accelerates this increase, but only for two years (2003 and 2004). For taxable years beginning after December 31, 2004, the taxable income levels for the 10 percent rate will revert to the levels allowed under present law ($6,000 for single persons; $12,000 for married individuals). JGTRRA provides...