[Editor's Note: Frank Overton Brown, Jr., is an attorney in private practice in the Richmond, Virginia Metropolitan Area. He is a fellow of the American College of Trust and Estate Counsel, and is Immediate Past Chair of the Virginia State Bar Senior Lawyers Conference.]

This is a synopsis of H.R. 2, the "Jobs and Tax Relief Reconciliation Act of 2003." The House passed the bill, 231 to 200. The Senate vote was 50 to 50, and Vice President Cheney cast the tie-breaking vote for Senate passage, 51 to 50. President Bush signed the bill into law on May 28, 2003. Many of the provisions of the bill have what has been referred to as the "yo-yo" or "roller coaster" effect; that is, they are effective for a limited period of time, then they revert to the present law (pre-act). Some of the provisions are accelerations of the effective dates of previously enacted law. This tax act has been characterized as the third largest tax cut in United States history. The following graphic shows the effective dates for the various provisions of the act. (Each horizontal line illustrates the applicable effective dates for that particular provision of the law by reference to the dates listed at the head of the table.)

JGTRRA EFFECTIVE DATES:

The act makes the following significant changes:

A. INCREASE IN THE CHILD CREDIT.

For tax years 2003 and 2004, the child credit is increased from $600 to $1,000 per child. For tax year 2003, the $400 difference per child will automatically be paid in advance by check by the U.S. Treasury, beginning in July, 2003, based upon information from returns filed for tax year 2002. The IRS announcement about the procedure is contained in IR-2003- 68, which may be found on the IRS Web site at www.irs.gov. On January 1, 2005, the child credit will revert to $700 per child.

B. MARRIAGE PENALTY TAX RELIEF.

1. STANDARD DEDUCTION RELIEF. For tax years 2003 and 2004, the standard deduction for married taxpayers filing a joint return is increased, so that it is double the standard deduction for single individuals (standard deduction increases from $7,950 to $9,500). On January 1, 2005, the standard deduction will decrease to present law.

2. EXPANSION OF 15% RATE BRACKET. For tax years 2003 and 2004, the size of the 15% tax bracket for married individuals filing jointly is increased, so that it is double the size of the bracket for single individuals:

*Note: This bracket increased from its previous levels of $12,000- $47,450.

On January 1, 2005, the 15% bracket reverts to its present law level.

C. EXPANSION OF TAX BRACKETS.

1. TEN PERCENT INCOME TAX RATE BRACKET INCREASE. The 10% rate bracket is increased as follows for tax years 2003 and 2004:

On January 1, 2005, the ten percent bracket reverts to its present level.

2. EXPANSION OF OTHER TAX BRACKETS AND REDUCTION OF TAX RATES. This new law accelerates tax rate reductions which were established for phase-in under The Economic Growth and Tax Reconciliation Act of 2001. The 27% rate is reduced to $25%, the 30% rate is reduced to 28%, the 35% rate is reduced to 33% and the highest rate is reduced from 38.6% to 35%. For tax years 2003 and subsequent, the following tax rate brackets are established:

The new bill does not eliminate the present sunset provisions of the 2001 tax act.

D. CAPITAL GAINS AND DIVIDENDS CHANGES

1. REDUCTION OF TAX ON LONG TERM CAPITAL GAINS. For sales on or after May 6, 2003, the 20% rate on long term capital gains (assets held more than one year) is reduced to 15%. The rate for taxpayers in the 10% or 15% brackets will drop from 10% to 5%; effective January 1, 2008, the rate for low income taxpayers drops from 5% to 0%. These changes are effective through 2008. On January 1, 2009, the rates will return to 20% and 10%, respectively.

2. DIVIDENDS TAXED AT CAPITAL GAINS RATES. Retroactive to January 1, 2003, dividends received by individual shareholders from domestic and qualified foreign corporations will be taxed at capital gains rates as described above. These changes are effective through December 31, 2008. The old rates return on January 1, 2009.

E. BONUS DEPRECIATION AND EXPENSING FOR BUSINESSES

1. BONUS DEPRECIATION. For property placed in service after May 5, 2003 and before January 1, 2005, bonus depreciation is increased to 50%. There is no dollar limitation on this, as there is on expensing.

2. EXPENSING. For qualified property placed in service in tax years 2003, 2004, and 2005, the Section 179 expensing limitation is raised to $100,000, up from $25,000.

F. ALTERNATIVE MINIMUM TAX

The AMT exemption amounts for tax years 2003 and 2004 only are increased for single taxpayers to $40,250 (raised from $35,750) and for married taxpayers to $58,000 (raised from $49,000).