Key tax pieces of Senate bailout bill

Wed Oct 1, 2008 3:56pm EDT

(Reuters) – To improve chances of passing a $700 billion financial industry bailout package, Senate leaders have agreed to combine it with a package of tax breaks for renewable energy, businesses and middle class workers.

The roughly $150 billion cost of the tax package is partially offset by some revenue raising measures including one that would change the tax treatment of deferred compensation paid through offshore tax haven accounts.

Major tax provisions in the bill include the following:

* Extends Alternative Minimum Tax relief for some 24 million middle class taxpayers through 2008. Includes some additional AMT relief for people who exercised company incentive stock options.

* Extends provision allowing homeowners who do not itemize their taxes to take a deduction up to $1,000 for state and local property taxes.

* Extends through 2009 a provision allowing some taxpayers to take a deduction for state and local sales taxes.

* Extends a tax break for certain higher education expenses for taxpayers who do not itemize their deductions.

* Includes a provision that would require insurance plans that offer mental health benefits to offer those benefits at the same level as medical-surgical benefits.

* Provides tax exempt private activity bonds for Texas, Louisiana and Midwestern states hit by natural disasters. Also provides other tax benefits to those areas to help develop low income housing and help businesses.

* Extends the research and development tax credit through 2009.

* Provides $18 billion in tax breaks for clean energy by continuing production tax credits for wind and refined coal and allowing facilities that generate electricity from waves and tides to qualify. Also extends tax breaks for solar energy.

* Provides new tax credits for carbon capture and sequestration demonstration projects for advanced coal electricity generation.

* Creates a new category of tax credit bonds to finance state and local government initiatives to cut greenhouse gas emissions.

* Creates new tax credit of up to $7,500 for plug-in electric drive vehicles.

* Extends tax credit for biodiesel production through 2009.

* Extends tax credits for homeowners who update with energy efficient products. Energy efficient biomass fuel stoves for the first time would qualify for a $300 credit.

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