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Fund Times: Congressional Tax Cuts and AMT Relief Widely Expected

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Lawmakers in the House and Senate are putting the finishing touches on legislation that would have a big impact on investors in the years to come. Although the bill has not yet been passed, it would provide for a two-year extension of the 15 percent tax rate for capital gains distributions and dividends, which are set to expire in late 2008.

Additionally, it would hold the line on the Alternative Minimum Tax. The AMT was originally set up without an income-inflation adjustment, which has meant that it reaches ever-greater numbers of individuals each year. For instance, during the 2001 tax year approximately 1.4 million taxpayers were subject to the AMT, but by the 2005 tax year, this number had grown to 3.6 million individuals. The proposal being considered by Congress would limit the expansion of the AMT for the 2006 tax year but does nothing to permanently solve the longer-term problem of the tax's expanding impact.

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Lawrence Jones does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.