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2004 SPECIAL SESSION I

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HB 5018 Tax reform; changes provis. for pass-thru entities, estate, cig., income, food, record. & sales tax.

Introduced by: Harry J. Parrish | all patrons    ...    notes | add to my profiles | history

SUMMARY AS PASSED:

Omnibus Tax Bill. Makes several changes to the cigarette, recordation, income and sales taxes as follows:

Sales tax on food: Reduces the state sales tax on food by one-half cent effective July 1, 2005, an additional one-half cent effective July 1, 2006, and an additional one-half cent effective July 1, 2007.

Income tax: Increases the personal exemption amount from $800 to $900, effective January 1, 2006.

Increases the standard deduction for married individuals from $5,000 to $6,000, effective January 1, 2005.

Raises the filing threshold from $5,000 to $7,000 for individuals and from $8,000 to $14,000 for married couples, effective January 1, 2005.

Maintains the age deduction as it currently exists for taxpayers aged 65 and older as of January 1, 2004. Taxpayers who are currently 62 through 64 as of such date will continue to receive their current deduction, but once they reach 65, they will be subject to a means test. Those taxpayers who currently are younger than 62 as of January 1, 2004, will not receive the $6,000 deduction for age and will be subject to a means test once they turn 65 for their $12,000 deduction. These changes are effective January 1, 2004.

The bill allows low-income taxpayers to claim an income tax credit based upon the federal earned income tax credit in lieu of the current low-income tax credit beginning January 1, 2006.

Requires additions to federal taxable income for certain deductions for intangible and interest expense, but provides certain safe-harbors related to Delaware holding companies, effective January 1, 2004.

Pass-through entities: Requires pass-through entities' information returns to be filed with the Tax Department, effective for taxable years beginning on and after January 1, 2004.

Cigarette tax: Increases the state cigarette tax from 2.5 cents to 20 cents per pack. Beginning July 1, 2005, the rate increases to 30 cents per pack. The bill also establishes a cigarette wholesaler tax at the rate of 10% beginning March 1, 2005.

Recordation tax: Increases the state recordation tax from 15 cents to 25 cents per $100.

Sales tax: Increases the state sales and use tax one-half percent from 3.5 percent to 4 percent, which when combined with the local 1% sales tax will raise the combined rate from 4.5% to 5%, effective August 1, 2004.

Eliminates sales tax exemptions for certain public service corporations.

SUMMARY AS PASSED HOUSE:

Tax Reform Compromise Act of 2004. Makes several changes to the estate, cigarette, recordation, income and sales taxes as follows:

Estate tax: Eliminates the estate tax for the estates of persons who die on or after November 1, 2004.

Sales tax on food: Reduces the state sales tax on food by one-half cent effective September 1, 2004, and an additional one-half cent effective July 1, 2005.

Income tax: Increases the personal exemption amount from $800 to $1,000, effective January 1, 2005.

Increases the standard deduction for married individuals from $5,000 to $6,000, effective January 1, 2005.

Raises the filing threshold from $5,000 to $7,000 for individuals and from $8,000 to $14,000 for married couples, effective January 1, 2005.

Maintains the age deduction as it currently exists for taxpayers aged 65 and older. Taxpayers who are currently 62 through 64 will continue to receive their current deduction but once they reach 65 they will be subject to a means test. Those taxpayers who currently are younger than 62 will be subject to a means test once they reach that age. These changes are effective January 1, 2004.

Provides certain safe-harbors related to Delaware holding companies, effective January 1, 2004.

Pass-through entities: Requires pass-through entities' information returns to be filed with the Tax Department, effective for taxable years beginning on and after January 1, 2004.

Cigarette tax: Increases the state cigarette tax from 2.5 cents to 25 cents per pack. Beginning July 1, 2005, the rate increases to 30 cents per pack.

Recordation tax: Increases the state recordation from 15 cents to 25 cents per $100.

Sales tax: Increases the state sales and use tax one-half percent from 3.5 percent to 4 percent, which when combined with the local 1% sales tax will raise the combined rate from 4.5% to 5%, effective September 1, 2004.

Eliminates sales tax exemptions for certain public service corporations.

Eliminates the accelerated sales tax payments.

Finally, the bill will not take effect unless a general appropriation act for the 2004-2006 biennium is enacted by the General Assembly.

SUMMARY AS INTRODUCED:

Tax Reform Compromise Act of 2004. Makes several changes to the estate, cigarette, recordation, income and sales taxes as follows:

Estate tax: Eliminates the estate tax for the estates of persons who die on or after November 1, 2004.

Sales tax on food: Reduces the state sales tax on food by one-half cent effective October 1, 2004, and an additional one-half cent effective July 1, 2005.

Income tax: Increases the personal exemption amount from $800 to $1,000, effective January 1, 2005.

Increases the standard deduction for married individuals from $5,000 to $6,000, effective January 1, 2005.

Raises the filing threshold from $5,000 to $7,000 for individuals and from $8,000 to $14,000 for married couples, effective January 1, 2005.

Maintains the age deduction as it currently exists for taxpayers aged 65 and older. Taxpayers who are currently 62 through 64 will continue to receive their current deduction but once they reach 65 they will be subject to a means test. Those taxpayers who currently are younger than 62 will be subject to a means test once they reach that age. These changes are effective January 1, 2004.

Closes certain loopholes related to Delaware holding companies, effective January 1, 2004.

Pass-through entities: Requires pass-through entities' information returns to be filed with the Tax Department, effective for taxable years beginning on and after January 1, 2004.

Cigarette tax: Increases the state cigarette tax from 2.5 cents to 25 cents per pack. Beginning July 1, 2005, the rate increases to 30 cents per pack.

Recordation tax: Increases the state recordation from 15 cents to 25 cents per $100.

Sales tax: Increases the state sales and use tax one-half percent from 3.5 percent to 4 percent, effective October 1, 2004.

Eliminates sales tax exemptions for certain public service corporations.

Eliminates the accelerated sales tax payments.

Finally, the bill will not take effect unless a general appropriation act for the 2004-2006 biennium is enacted by the General Assembly.