general_business_credit_notes - General Business Credit...

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General Business Credit updated: October 19, 2009 I. Tax credits as a tax policy tool. Over the years, Congress has used tax credits extensively to encourage desirable activities including the conservation of energy (e.g., the energy tax credit), the rehabilitation of industrial and commercial buildings and certified historic structures (e.g., the tax credit for rehabilitation expenditures), and the provision of equity for selected taxpayer groups (e.g., the foreign tax credit, the earned income credit). A. For many years, Congress has used the tax credit provisions of the Code liberally in implementing tax policy. B. The use of tax credits as a tax policy tool continues to evolve as economic and political circumstances change. This is evidenced by the continuing importance of several old credits (e.g., earned income credit) and by the recent enactment of several other credits (e.g., energy research credit). C. Many who are interested in tax policy believe that credits should be used more extensively because they provide equal benefits to taxpayers in all tax brackets. On the other hand, deductions provide greater benefits to higher bracket taxpayers. II. General business credit – The general business credit was enacted for the following reasons: A. Congress felt that the credit rules were complex and, at times, not rationally structured and that the computation procedure could be simplified. B. Taxpayers generally should not be able to eliminate their entire tax liability by the use of credits which provide business incentives. C. Definition – the general business credit is the sum of several credits (e.g., tax credit for rehabilitation expenditures, work opportunity tax credit, research activities credit, low-income housing credit, disabled access credit, credit for small employer pension plan startup costs, and credit for employer-provided child care). 1. If the taxpayer has only one of these credits for the current year, then
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general_business_credit_notes - General Business Credit...

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