On February 23, 2010, The Bipartisan Tax Fairness and Simplification Act (BTFS) of 2010 was referred to the U.S. Senate Committee of Finance for consideration. The bill proposes numerous changes to the Internal Revenue Code as well as the continuation of cuts, some set to expire this year, such as the Earned Income Tax Credit. The bill establishes a new Retirement Savings Account and a new Lifetime Savings Account to consolidate the three existing types of IRAs, allowing couples to set aside as much as $14,000 in tax-free savings.
Also among the bill's objectives is a change to how capital gains and dividends are taxed. Under BTFS, 35% of capital gains from investments held for 6-12 months, not exceeding $500,000, would be tax free. To the extent of 35%, any gains from investments held longer than a year and income from qualified dividends would be tax free. Qualified dividends are generally dividends from any share of stock in a domestic corporation or a foreign share of stock that is readily tradable on an established security market. Further progress on the bill will not be made until it is scheduled for consideration on the calendar of the Senate Committee on Finance; as of June 9, 2010, we have no information on when that will be.
Michael A. Gilmore
UDM School of Law
Class of 2012