Saturday, June 23, 2012

Congress Must Act on Transportation Bill and Student Loans



I don't think I got very far on the Offsets to the Jobs Act.



TITLE IV – OFFSETS


SUBTITLE A -- 28 PERCENT LIMITATION ON CERTAIN DEDUCTIONS AND EXCLUSIONS


SEC. 401. 28 PERCENT LIMITATION ON CERTAIN DEDUCTIONS AND EXCLUSIONS


This limitation applies to TAXPAYER'S adjusted gross income. Let's see...


Adjusted Gross Income is defined as gross income minus adjustments to income.

Hm.

Now, that means it is not the GROSS income is taxed, but, the NORMAL and regular place for taxing at the adjusted income tax. So, if someone has a business and he/she/they have expenses this won't effect their ability to deduct expenses. So, the ability of the business/farm to actually profit is not removed from this tax adjustment. So, the idea this change in tax percentage would effect the functioning of a business is a false accusation. This is not going to put anyone out of business. Now, is it? 


As a matter of fact the Adjusted Gross Income on IRS From 1040 doesn't show up until line 37. I don't believe folks using 1040EZ will be effected by this provision. I don't even think 1040A will find this a change to worry about.


Now on IRS Form 1040 there is a lot that happens between line 6d (exemptions) and line 37. Let's see if I can list all that mess.


Under Income there is this:



7  Wages, salaries, tips, etc. Attach Form(s) W-2 . . . . . . . . . . . . 7 
8a Taxable interest. Attach Schedule B if required . . . . . . . . . . . . 8a 
b  Tax-exempt interest. Do not include on line 8a . . . 8b 
9 a Ordinary dividends. Attach Schedule B if required . . . . . . . . . . . 9a 
b  Qualified dividends . . . . . . . . . . . 9b 
10  Taxable refunds, credits, or offsets of state and local income taxes . . . . . . 10 
11  Alimony received . . . . . . . . . . . . . . . . . . . . . 11 
12  Business income or (loss). Attach Schedule C or C-EZ . . . . . . . . . . 12 
13  Capital gain or (loss). Attach Schedule D if required. If not required, check here  ▶ 
14  Other gains or (losses). Attach Form 4797 . . . . . . . . . . . . . . 14 
15 a IRA distributions . 15a  b  Taxable amount . . . 15b 
16 a Pensions and annuities  16a  b  Taxable amount . . . 16b 
17  Rental real estate, royalties, partnerships, S corporations, trusts, etc. Attach Schedule E  17 
18  Farm income or (loss). Attach Schedule F . . . . . . . . . . . . . . 18 
19  Unemployment compensation . . . . . . . . . . . . . . . . . 19 
20 a Social security benefits  20a  b  Taxable amount . . . 20b 
21  Other income. List type and amount  21 
22  Combine the amounts in the far right column for lines 7 through 21. This is your total income 

Then there is the Adjusted Gross Income section of the IRS Form 1040:

23  Educator expenses . . . . . . . . . . 23 


24  Certain business expenses of reservists, performing artists, and 
fee-basis government officials. Attach Form 2106 or 2106-EZ  24 


25  Health savings account deduction. Attach Form 8889 . 25 


26  Moving expenses. Attach Form 3903 . . . . . . 26 


27  Deductible part of self-employment tax. Attach Schedule SE . 27 


28  Self-employed SEP, SIMPLE, and qualified plans . . 28 


29  Self-employed health insurance deduction . . . . 29

30  Penalty on early withdrawal of savings . . . . . . 30 


31 a Alimony paid  b  Recipient’s SSN  ▶ 31a 


32  IRA deduction . . . . . . . . . . . . . 32 


33  Student loan interest deduction . . . . . . . . 33

34  Tuition and fees. Attach Form 8917 . . . . . . . 34 


35  Domestic production activities deduction. Attach Form 8903  35 


36  Add lines 23 through 35 . . . . . . . . . . . . . . . . . . . 36 
37  Subtract line 36 from line 22. This is your adjusted gross income

Yep. Imagine that. All those deductions if one cares to itemize. Now, that may seem unfair at first glace because I would ask, there are all the expenses for business? Well, if one looks at the Income section there are some interesting areas.



8a Taxable interest. Attach Schedule B if required . . . . . . . . . . . . 8a 
b  Tax-exempt interest. Do not include on line 8a . . . 8b 
9 a Ordinary dividends. Attach Schedule B if required . . . . . . . . . . . 9a 
b  Qualified dividends . . . . . . . . . . . 9b 
10  Taxable refunds, credits, or offsets of state and local income taxes . . . . . . 10 
11  Alimony received . . . . . . . . . . . . . . . . . . . . . 11 
12  Business income or (loss). Attach Schedule C or C-EZ . . . . . . . . . . 12 
13  Capital gain or (loss). Attach Schedule D if required. If not required, check here  ▶ 13 
14  Other gains or (losses). Attach Form 4797 . . . . . . . . . . . . . . 14 
15 a IRA distributions . 15a  b  Taxable amount . . . 15b 
16 a Pensions and annuities  16a  b  Taxable amount . . . 16b 
17  Rental real estate, royalties, partnerships, S corporations, trusts, etc. Attach Schedule E  17 
18  Farm income or (loss). Attach Schedule F.

Now, if one cares to understand the amounts of deductions businesses are allowed to take to reduce their income tax burden examining the SCHEDULES and how they act to protect profits from expenses gets very interesting.

There are also QUALIFYING entries as noted in 9b, offsets of state and local income taxes, and gains or (losses). So, to believe the change in the law that offsets the costs of the American Jobs Act is draconian and is unfair while costing jobs is nonsense.



(1) the taxpayer’s adjusted gross income is above—


(A) $250,000 in the case of a joint return within the meaning of 
section 6013, 
(B)  $225,000 in the case of a head of household return,
(C)  $125,000 in the case of a married filing separately return. or 
(D) $200,000 in all other cases; and
(2)  the taxpayer’s adjusted taxable income for such taxable year exceeds 
the minimum marginal rate amount,...


That's a lot of money on line 37 of Adjusted Gross Income. For a joint return it is a quarter of a million dollars US. That is not small potatoes. I defy anyone to say it is.

Subtitle B – Tax Carried Interest in Investment Partnerships as Ordinary Income


Here we are at Carried Interest, otherwise known as "Found Money." Santa Clause even.


Carried interest is not interest in the sense of an interest-bearing savings account. It is a share in a fund. The person claiming that interest is the general manager of a private equity firm or hedge fund, and the carried interest is calculated as a percentage of the profits generated by the fund he manages. When the fund has a capital gain, the manager's percentage is treated as a gain to him, taxed like an ordinary capital gain on the sale of real estate or stock. Critics say this particular income source does not fit the correct definition of capital gain and should be taxed as wages. Ya think?


I am not having a lot of sympathy for folks here. I sincerely believe by the time they get finished with their legal deductions and their 'take home' is capable to be burdened during trying times to benefit job growth that might even help hedge their funds. 


Sec. 411. Partnership Interests Transferred In Connection With Performance of Services


The definition is best described by the provision of the American Jobs Act itself:



“(i) the fair market value of such interest shall be treated for purposes of this section as being equal to the amount of the distribution which the partner would receive if the partnership sold (at the time of the transfer) all of its assets at fair market value and distributed the proceeds of such sale (reduced by the liabilities of the partnership) to its partners in liquidation of the partnership

In different words, the monies would be treated as liquid assets with no special reduction of taxable percentage with a special qualifier called 'carried interest.' No special rewards for raiding the treasuries of companies like the steel plant that was leveraged then for bankruptcy.


(b) EFFECTIVE DATE.—The amendments made by this section shall apply to interests in partnerships transferred after December 31, 2012


So, long as the Republican House and Senate continue to stall with all these provisions it will be New Years Eve and they won't have to worry about it anymore.

Something tells me Mr. Romney would haven't done this. As a matter of fact Mr. Romney would most likely be interested in having Jamie Dimon in the Oval Office at first opportunity. Perhaps, confidential federal records would be evening reading in family quarters. Just me. I can image all that happening easily. Sort of like a financial Cheney meeting with young agents.



“(2) BUSINESSES TO WHICH THIS SECTION APPLIES.—A trade or 
business is described in this paragraph if such trade or business primarily involves 
the performance of any of the following services with respect to assets held 
(directly or indirectly) by the investment partnership referred to in paragraph (1):


“(A) Advising as to the advisability of investing in, purchasing, or selling any specified asset.
“(B) Managing, acquiring, or disposing of any specified asset.
“(C) Arranging financing with respect to acquiring specified assets.
“(D) Any activity in support of any service described in subparagraphs (A) through (C).


These are subparagraphs A through C


“(A) shall not be treated as an investment services partnership interest for any period before the first date on which it is so held in connection with such a trade or business,
“(B) shall not cease to be an investment services partnership interest merely because such person holds such interest other than in connection with such a trade or business, and
“(C) shall be treated as an investment services partnership interest if acquired from a related person in whose hands such interest was an investment services partnership interest.


Yes, indeed, eating confidential material rather than pretzels. Good roughage.


My imagination gets carried away sometimes. Actually, the material would be get served shredded to the horse. Remember how Cheney had these trucks come to the White House to haul away all this shredded material?


Subtitle C – Close Loophole for Corporate Jet Depreciation


See now the Republicans would have the electorate believe there would be absolutely no deduction from corporate jets and it would crash the industry. NOT SO. The deduction is not eliminated it is lengthened from seven years to twelve which reduces the amount per year deducted but makes the time the deduction can be taken longer. The industry wouldn't crash. The Republicans are horrible, they love to play on fears of people.



“(F)  General aviation aircraft.  In the case of any general aviation aircraft, the 
recovery period used for purposes of paragraph (2) shall be 12 years.”


Sec. 421. General Aviation Aircraft Treated As 7-Year Property


Section 421 is the only provision under Subtitle C.


Subtitle D -- Repeal Oil Subsidies


Sec. 431.  Repeal of Deduction for Intangible Drilling and Development Costs in the Case of Oil and Gas Wells



(a) In General.—Section 263(c) of the Internal Revenue Code of 1986 (relating to 
intangible drilling and development costs) is amended by adding at the end the following new sentence:  “This subsection shall not apply in the case of oil and gas wells with respect to amounts paid or incurred after December 31, 2012.”.

(b) Effective Date.—The amendment made by this section shall apply to amounts paid or incurred after December 31, 2012.

Section 431 is the only section under Subtitle D. Above is the entire section's wording. This section completely remove the oil and gas subsidies.


There is nothing more corrupt than these subsidies. There isn't anything else to say. These are corrupt subsidies of an industry well established in this country for decades making exorbitant profits. There simply no reason for the American taxpayer to continue this exploitation of their federal treasury.

Sec. 432.  Repeal of Deduction for Tertiary Injectants


The Oil and Gas Industry does all sorts of weird stuff to the land to extract oil. If one recalls the early assessments of Iraq's oil fields by Halliburton revealed low pressure of the vats. That means the pressure forcing the oil to the surface (gushers) is close to zero or below zero and while there is still oil in the vat there is no 'physics' at play to bring it to the surface. The viscosity and the depth doesn't allow suction of the oil and then there is the possibility of geologic collapse of the vat, vacuum under the ground and/or all kinds of contaminants entering the well from the surrounding rock. The petroleum industry is fairly primitive. They drill a hole in the Earth and the oil and gas come up through that hole. ie: Deepwater Horizon Disaster. There was no way of stopping that pressure and when it was finally stopped by a cast metal bulkhead there was the danger and still is of fracturing the sea bottom nearby and having the seepage or worse a gusher all over again. 


When a vat is low in pressure but still containing oil, the industry injects water and in the case of hydraulic fracturing all kinds of chemicals to destroy the rock. Those elements of the industry have a fancy name called "Tertiary Injectants" (third party participants).



(a) In General.—Part VI of subchapter B of chapter 1 of the Internal Revenue Code of 
1986 (relating to itemized deductions for individuals and corporations) is amended by striking section 193 (relating to tertiary injectants).
(b) Clerical Amendment.-- The table of sections for part VI of subchapter B of chapter 1 
of the Internal Revenue Code of 1986 is amended by striking the item relating to section 193.
(c) Effective Date.—The amendments made by this section shall apply to amounts paid 
or incurred after December 31, 2012

This clawback by President Obama would eliminate that deduction because it is easy to abuse. Petroleum Industries can stockpile all this and take deductions today for products they may never use in future or products that won't be used for years. That was the issue with the subsea dispersants of the Deepwater Horizon. BP had huge stockpiles of the lousy  stuff and contended it was their best option of dissipating the oil at the surface. So, today the oil is still at the bottom of the Gulf contaminating sealife and causing birth defects and stresses to limited populations of marine mammals as well as corals and all kinds of stuff.


So, if President Obama wants to fund a jobs program for the USA economy putting firefighters, teachers, police, construction workers back to work, he would have to be sure there were no loopholes the petroleum industry could create after they lost the subsides. That is what this is. For the time period to New Years Eve 2012 the oil industry could not cheat the American taxpayer in providing offsets for the funding of these jobs.


Is there any wonder why the Republicans obstructed any of the bills intended to correct the course of the American economy. How dare President Obama step on the toes of their cronies after all?

Sec. 433.  Repeal of Percentage Depletion for Oil And Gas Wells


There is a provision in the IRS Code allowing the petroleum industry a depreciation of the wells. Imagine that? This is the industry these folks are in and they get to depreciate the holes they drill where they hit paydirt. Amazing isn't it? And they get subsidies, too. So, while taking profits from the oil and gas and anything else, like rare earth elements coming up from below the surface of Earth is depreciable. The equipment used to carry out this mess is depreciable and the wells themselves are depreciable. Amazing.


No, President Obama doesn't take the depreciation away. This is the provision in the American Jobs Act. This has to be the only industry where their deductions provide for nearly a cost free production, receive subsidies and rake in huge profits. Where is the morality in that? 



(a) In General.—Section 613A of the Internal Revenue Code of 1986 (relating to 
limitation on percentage depletion in the case of oil and gas wells) is amended to read as follows:




“SECTION 613A.  PERCENTAGE DEPLETION NOT ALLOWED IN CASE 
OF OIL AND GAS WELLS.  The allowance for depletion under section 611 with respect 
to any oil and gas well shall be computed without regard to section 613.”.
(b) Effective Date.—The amendment made by this section shall apply to taxable years 
beginning after December 31, 2012.


This is not a strange thing, there is extensive explanation of this provision in the Tax Code here:


TITLE 26 - INTERNAL REVENUE CODE (click here)
      Subtitle A - Income Taxes
       CHAPTER 1 - NORMAL TAXES AND SURTAXES
        Subchapter I - Natural Resources
         PART I - DEDUCTIONS


(a) General rule
      Except as otherwise provided in this section, the allowance for
    depletion under section 611 with respect to any oil or gas well
    shall be computed without regard to section 613



What President Obama did here was to continue the law as stated in the Tax Code without allowing the industry to fall back into the provisions of section 611 of the code.


I'll continue tomorrow.

The system in the Gulf is having a little difficult time becoming organized.

June 23, 2012
2003 GMT
Gulf of Mexico Satellite


I don't doubt there is some significant weather affiliated with this event. There is a circulation center due west of the Florida Keys.


The size is significant all by itself and when the eye is more organized it has the capacity to be strong storm and more condensed.


The sun is coming back down the face of Earth from its highest point, so the accumulation of heat is resulting in water vapor concentration.


June 23, 2012
1116 AM EDT
Atlantic Ocean Satellite


There is interesting activity off near shore Africa, too.


But, the Gulf needs to be on alert for what might end up being a storm to contend with.


It is a strange season already, there was Cat 1 storm in the Northern Atlantic; Hurricane Chris. I don't recall a hurricane season beginning in the Northern Atlantic.


Season of 2007 did spawn Hurricane Chantal with a central pressure of 994, but, that didn't occur until the end of July of that year. Chantal wasn't as far north as Chris or as far in east in the Atlantic. 


The Season of 2005, the Katrina season, saw three north Atlantic storms, but, they were all  very late in the season. They didn't originate as far north as Chris. 


It's a strange year. 


The Western Pacific has not had a major storm yet. The year similar to this year in the Atlantic is 2009 which matches with a less turbulent in the western Pacific, too. But, the 2009 season in the Atlantic was also far later than this, too. I take that back, 2009 had three strong storms in the beginning of the season in the Western Pacific.


I am trying to get a picture of the level of heat in the troposphere in relation to available water vapor on the surface of Earth. That is a global commodity. Heat. Water vapor is definately regional, although once it is dispersed into the troposphere as with Irene last year the storms afterward are easily spawned.  The western Pacific has more water vapor in the troposphere than the eastern Pacific or Atlantic. All are northern hemisphere. I think this year is unique. 


2005 was a tremendous year for heat driven storm in the Atlantic. Vince spawned in October off shore Europe. It was a Cat One for the short duration it existed. It only lasted for 45 hours.


Both the east and west Pacific had a large number of storms, so the heat dissipation from the troposphere into the oceans was considerable. 


The east and west Pacific this year is experiencing less storms, however, they are higher in velocity. In the western Pacific each storm was stronger than the one before as if the heat was waiting for the water vapor to be distributed and continued to build on the increased droplets in the troposphere.


The eastern Pacific is a little different and unique. There are land masses to interfere with velocity as the storms move from east to west. Not that they don't make land fall, but, they have the opportunity to build to higher velocity in open ocean before landfall. The really interesting aspect of the eastern Pacific these years is their origins and paths tend to be nearer shore and then traveling east far earlier and in longer duration then their initial western departure from land. I believe the thirst for water vapor of the storms near North America cause near shore storms and has shifted east in the eastern Pacific\


I doubt that interests anyone besides me. Basically, the eastern Pacific storms starts east and tends to move east quicker than in the past.


Sun Ray Simulator (click here).


The direct rays of the sun on June 19th, the day Hurricane Chris was spawned, was at 23 degrees north latitude, Chris spawned at 39.30 north latitude. Scary. This was before the sun reached its highest peak of travel this year and it was Cat One storm. Enough to make me worry about the season. 

The power structure was the enabler.

Jerry Sandusky is a sexual predator. He got away with pedophilia for a long time. His earliest victims are now adults. 


Jerry Sandusky should never have had the job he did, he should have not had the standing in the community as he did, but, he did. 


There is also a death unresolved of someone with enough information and fortitude to seek an end to the charade surrounding Sandusky. That man is a hero. 


Jerry Sandusky is facing prison. If his prison sentence is long enough he will die there. That is not anyone's fault but his own. Jerry Sandusky was enough of a nightmare to bring his own step son to resolve to uphold the justice needed in these circumstances. Sandusky was a monster. A monster. He not only got away with it because of the power within the infrastructure of Penn State's Sports Complex, he grew his own 'child organization' to satisfy his needs.


The corruption existed because of money, the need for it and the capacity the sports complex brought to the financial needs of Penn State. This is a state university vital to the young adults of Pennsylvania, the country and beyond. This can't happen again. The policy below is only words unless it is followed up by action and deeds.


This type of policy needs to be a part of every student and staff orientation. It needs to include bullying and enforcement with definitions as to what these words mean. A freshman exposed to cruelty, either by sexual orientation or sexual exploitation, for the first time cannot over react in fear of dire consequences. The institutions in this country, especially public institutions, are important and they have to enforce the fact every life has the right to dignity and protection.


There is a great deal that went wrong with Sandusky and his predatory nature. It was caused by 'the importance of money within 'image' of the institution. None of the victims, including the football program should have been under that level of pressure or should have felt that helpless to act to protect young minds and hearts. This cannot happen again in this country and the power structure of any university cannot be connected to sexual misconduct in such a way it impacts the outcomes of the laws of this country or any state of this nation. This has to be the end of it or from now on it should be more than Jerry Sandusky on trial.

"New Whistleblower Policy in Effect
Penn States Policy AD67 (Disclosure of Wrongful Conduct and Protection from Retaliation) protects members of the Penn State community who report potential violations of University standards and policies against retaliation (click here)