SECTION 2. CHANGES

.01 Section 1003 of the American Recovery and Reinvestment Tax Act of 2009, Tit. I of Div. B of Pub. L. No. 111–5, 123 Stat. 155 (ARRTA), amended § 24(d)(4) of the Internal Revenue Code to provide a temporary increase in the refundable portion of the child tax credit. Under § 24(d)(1)(B)(i), a taxpayer is allowed a refundable credit equal to 15 percent of earned income in excess of $10,000, adjusted annually for inflation. Section 24(d)(4) provides that, for taxable years beginning in 2009 or 2010, the dollar amount in effect under § 24(d)(1)(B)(i) is $3,000. (See section 3.04 of this revenue procedure.)

.02 Section 1004 of ARRTA added to the Code new § 25A(i) (the American Opportunity Tax Credit) to provide temporary increases in the amount of the Hope Scholarship Credit and the threshold phaseout amounts for the credit. Section 25A(i)(1) provides that, for taxable years beginning in 2009 or 2010, the American Opportunity Tax Credit is equal to 100 percent of the amount of qualified tuition and related expenses not in excess of $2,000, plus 25 percent of those expenses that exceed $2,000 but do not exceed $4,000. Section 25A(i)(4) provides that, for taxable years beginning in 2009 or 2010, the amount of the American Opportunity Tax Credit begins to phase out for taxpayers whose modified adjusted gross income exceeds $80,000 ($160,000 for married taxpayers filing a joint return). The credit is completely phased out at $90,000 ($180,000 for married taxpayers filing a joint return). (See section 3.05 of this revenue procedure.)

.03 Section 1002 of ARRTA added § 32(b)(3) to the Code to provide a temporary increase in the earned income credit for certain taxpayers. Under § 32(b)(3)(A), for taxable years beginning

in 2009 or 2010, the maximum amount of the earned income credit for taxpayers with three or more qualifying children is 45 percent of the earned income amount for the taxable year. For taxable years beginning in 2009, under § 32(b)(3)(B)(i) the amount added to the threshold phaseout amounts and the completed phaseout amounts for married taxpayers filing joint returns is $5,000. For taxable years beginning in 2010, the $5,000 amount under § 32(b)(3)(B)(i) is adjusted for inflation. (See section 3.06 of this revenue procedure.)

.04 Section 3003 of the Housing and Economic Recovery Act of 2008, Pub. L. No. 110–289, 122 Stat. 2654 (HERA), amended § 42(e)(3) of the Code to increase the per low-income unit qualified basis amount under § 42(e)(3)(A)(ii)(II) to $6,000 for rehabilitation expenditures to qualify for treatment as a separate new building for the low-income housing credit. For calendar years beginning in 2010, the $6,000 amount under § 42(e)(3)(A)(ii)(II) is, pursuant to § 42(e)(3)(D), adjusted for inflation. (See section 3.07 of this revenue procedure.)

.05 Section 3001 of HERA added § 42(h)(3)(I) to the Code to provide for temporary increases in certain amounts used to calculate the State housing credit ceiling under § 42(h)(3)(C)(ii)(I) and (II), after any adjustments for inflation to those amounts under § 42(h)(3)(H). The temporary increases apply only to calendar years 2008 and 2009. Accordingly, for calendar years after 2009, the inflation adjusted amounts under § 42(h)(3)(C)(ii)(I) and (II) are determined without the temporary increases. (See section 3.08 of this revenue procedure.)

.06 The overall limitation on itemized deductions under § 68 does not apply to any taxable year beginning after December 31, 2009, and before January 1, 2011. Accordingly, the overall limitation on itemized deductions is not included in this revenue procedure.

.07 Section 1151 of ARRTA amended § 132(f)(2) of the Code to provide a temporary increase in the amount exclud

2009–45 I.R.B. 619 November 9, 2009

TABLE 1 - Section 1(a) - Married Individuals Filing Joint Returns and Surviving Spouses

If Taxable Income Is : The Tax Is :

Not over $16,750 10% of the taxable income

Over $16,750 but not over $68,000

Over $68,000 but not over $137,300

Over $137,300 but not over $209,250

Over $209,250 but not over $373,650

$1,675 plus 15% of the excess over $16,750

$9,362.50 plus 25% of the excess over $68,000

$26,687.50 plus 28% of the excess over $137,300

$46,833.50 plus 33% of the excess over $209,250

Over $373,650 $101,085.50 plus 35% of the excess over $373,650

TABLE 2 - Section 1(b) - Heads of Households

If Taxable Income Is : The Tax Is :

Not over $11,950 10% of the taxable income

Over $11,950 but not over $45,550

Over $45,550 but not over $117,650

Over $117,650 but not over $190,550

Over $190,550 but not over $373,650

$1,195 plus 15% of the excess over $11,950

$6,235 plus 25% of the excess over $45,550

$24,260 plus 28% of the excess over $117,650

$44,672 plus 33% of the excess over $190,550

Over $373,650 $105,095 plus 35% of the excess over $373,650

TABLE 3 — Section 1(c) — Unmarried Individuals (other than Surviving Spouses and Heads of Households)

If Taxable Income Is : The Tax Is :

Not over $8,375 10% of the taxable income

Over $8,375 but not over $34,000

Over $34,000 but not over $82,400

Over $82,400 but not over $171,850

Over $171,850 but not over $373,650

$837.50 plus 15% of the excess over $8,375

$4,681.25 plus 25% of the excess over $34,000

$16,781.25 plus 28% of the excess over $82,400

$41,827.25 plus 33% of the excess over $171,850

Over $373,650 $108,421.25 plus 35% of the excess over $373,650

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TABLE 4 - Section 1(d) - Married Individuals Filing Separate Returns

If Taxable Income Is : The Tax Is :

Not over $8,375 10% of the taxable income

Over $8,375 but not over $34,000

Over $34,000 but not over $68,650

Over $68,650 but not over $104,625

Over $104,625 but not over $186,825

$837.50 plus 15% of the excess over $8,375

$4,681.25 plus 25% of the excess over $34,000

$13,343.75 plus 28% of the excess over $68,650

$23,416.75 plus 33% of the excess over $104,625

Over $186,825 $50,542.75 plus 35% of the excess over $186,825

TABLE 5 - Section 1(e) - Estates and Trusts

If Taxable Income Is : The Tax Is :

Not over $2,300 15% of the taxable income

Over $2,300 but not over $5,350

Over $5,350 but not over $8,200

Over $8,200 but not over $11,200

$345 plus 25% of the excess over $2,300

$1,107.50 plus 28% of the excess over $5,350

$1,905.50 plus 33% of the excess over $8,200

Over $11,200 $2,895.50 plus 35% of the excess over $11,200

§ 25A(b)(1), as increased under § 25A(i) (the American Opportunity Tax Credit), is an amount equal to 100 percent of qualified tuition and related expenses not in excess of $2,000, plus 25 percent of those expenses that exceed $2,000 but do not exceed $4,000. Accordingly, the maximum Hope Scholarship Credit allowable under § 25A(b)(1) for taxable years beginning in 2010 is $2,500. (2) For taxable years beginning in 2010, a taxpayer’s modified adjusted gross income in excess of $80,000 ($160,000 for a joint return) is used to determine the reduction under § 25A(d)(2) in the amount of the Hope Scholarship Credit otherwise allowable under § 25A(a)(1). For taxable years beginning in 2010, a taxpayer’s modified adjusted gross income in excess of $50,000 ($100,000 for a joint return) is used to determine the reduction under § 25A(d)(2) in the amount of the Lifetime Learning Credit otherwise allowable under § 25A(a)(2).

.06 Earned Income Credit .

.02 Unearned Income of Minor Children Taxed as if Parent’s Income (the “Kiddie Tax”) . For taxable years beginning in 2010, the amount in § 1(g)(4)(A)(ii)(I), which is used to reduce the net unearned income reported on the child’s return that is subject to the “kiddie tax,” is $950. This amount is the same as the $950 standard deduction amount provided in section 3.11(2) of this revenue procedure. The same $950 amount is used for purposes of § 1(g)(7) (that is, to determine whether a parent may elect to include a child’s gross income in the parent’s gross income and to calculate the “kiddie tax”). For example, one of the requirements for the parental election is that a child’s gross income is more than the amount referenced in § 1(g)(4)(A)(ii)(I) but less than 10 times that amount; thus, a child’s gross income for 2010 must be more than $950 but less than $9,500.

.03 Adoption Credit . For taxable years beginning in 2010, under § 23(a)(3) the

credit allowed for an adoption of a child with special needs is $12,170. For taxable years beginning in 2010, under § 23(b)(1) the maximum credit allowed for other adoptions is the amount of qualified adoption expenses up to $12,170. The available adoption credit begins to phase out under § 23(b)(2)(A) for taxpayers with modified adjusted gross income in excess of $182,520 and is completely phased out for taxpayers with modified adjusted gross income of $222,520 or more. (See section 3.14 of this revenue procedure for the adjusted items relating to adoption assistance programs.)

.04 Child Tax Credit . For taxable years beginning in 2010, the value used in § 24(d)(1)(B)(i) to determine the amount of credit under § 24 that may be refundable is $3,000.

.05 Hope Scholarship, American Op- portunity, and Lifetime Learning Credits .

(1) For taxable years beginning in 2010, the Hope Scholarship Credit under

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or above which no credit is allowed. The threshold phaseout amounts and the completed phaseout amounts shown in the table below for married taxpayers filing a joint return include the increase provided in § 32(b)(3)(B)(i), as adjusted for inflation for taxable years beginning in 2010.

(1) In general . For taxable years beginning in 2010, the following amounts are used to determine the earned income credit under § 32(b). The “earned income amount” is the amount of earned income at or above which the maximum amount of the earned income credit is al

lowed. The “threshold phaseout amount” is the amount of adjusted gross income (or, if greater, earned income) above which the maximum amount of the credit begins to phase out. The “completed phaseout amount” is the amount of adjusted gross income (or, if greater, earned income) at

Number of Qualifying Children

Item One Two Three or More None

Earned Income Amount $ 8,970 $12,590 $12,590 $ 5,980

Maximum Amount of Credit $ 3,050 $ 5,036 $ 5,666 $ 457

Threshold Phaseout Amount

(Single, Surviving Spouse, or Head of Household)

Completed Phaseout Amount

(Single, Surviving Spouse, or Head of Household)

Threshold Phaseout Amount

(Married Filing Jointly)

Completed Phaseout Amount

(Married Filing Jointly)

The instructions for the Form 1040 series provide tables showing the amount of the earned income credit for each type of taxpayer.

(2) Excessive investment income . For taxable years beginning in 2010, the earned income tax credit is not allowed under § 32(i) if the aggregate amount of certain investment income exceeds $3,100.

.07 Rehabilitation Expenditures Treated as Separate New Property . For calendar year 2010, the per low-income unit qualified basis amount under § 42(e)(3)(A)(ii)(II) is $6,000.

.08 Low-Income Housing Credit . For calendar year 2010, the amount used un

$16,450 $16,450 $16,450 $ 7,480

$35,535 $40,363 $43,352 $13,460

$21,460 $21,460 $21,460 $12,490

$40,545 $45,373 $48,362 $18,470

der § 42(h)(3)(C)(ii) to calculate the State housing credit ceiling for the low-income housing credit is the greater of (1) $2.10 multiplied by the State population, or (2) $2,430,000.

.09 Alternative Minimum Tax Exemp- tion for a Child Subject to the “Kiddie Tax .” For taxable years beginning in 2010, for a child to whom the § 1(g) “kiddie tax” applies, the exemption amount under §§ 55 and 59(j) for purposes of the alternative minimum tax under § 55 may not exceed the sum of (1) the child’s earned income for the taxable year, plus (2) $6,700.

.10 Transportation Mainline Pipeline Construction Industry Optional Expense Substantiation Rules for Payments to Em-

ployees under Accountable Plans . For calendar year 2010, an eligible employer may pay certain welders and heavy equipment mechanics an amount of up to $16 per hour for rig-related expenses that is deemed substantiated under an accountable plan if paid in accordance with Rev. Proc. 2002–41, 2002–1 C.B. 1098. If the employer provides fuel or otherwise reimburses fuel expenses, up to $10 per hour is deemed substantiated if paid under Rev. Proc. 2002–41.

.11 Standard Deduction . (1) In general . For taxable years beginning in 2010, the standard deduction amounts under § 63(c)(2) are as follows:

Filing Status Standard Deduction

Married Individuals Filing Joint Returns and Surviving Spouses (§ 1(a)) $11,400

Heads of Households (§ 1(b)) $ 8,400

Unmarried Individuals (other than Surviving Spouses and Heads of Households) (§ 1(c)) $ 5,700

Married Individuals Filing Separate Returns (§ 1(d)) $ 5,700

(3) Aged or blind . For taxable years beginning in 2010, the additional standard deduction amount under § 63(f) for the aged or the blind is $1,100. These amounts

(2) Dependent . For taxable years beginning in 2010, the standard deduction amount under § 63(c)(5) for an individual who may be claimed as a dependent by an

other taxpayer cannot exceed the greater of (1) $950, or (2) the sum of $300 and the individual’s earned income.

November 9, 2009 622 2009–45 I.R.B.

of a guaranteed investment contract or investments purchased for a yield restricted defeasance escrow is reasonable if (1) the amount of the fee that the issuer treats as a qualified administrative cost does not exceed the lesser of (A) $35,000, and (B) 0.2 percent of the computational base (as defined in § 1.148–5(e)(2)(iii)(B)(2)) or, if more, $4,000; and (2) the issuer does not treat more than $100,000 in brokers’ commissions or similar fees as qualified administrative costs for all guaranteed investment contracts and investments for yield restricted defeasance escrows purchased with gross proceeds of the issue.

.19 Personal Exemption . For taxable years beginning in 2010, the personal exemption amount under § 151(d) is $3,650.

.20 Election to Expense Certain Depre- ciable Assets . For taxable years beginning in 2010, under § 179(b)(1) the aggregate cost of any § 179 property a taxpayer may elect to treat as an expense cannot exceed $134,000. Under § 179(b)(2), the $134,000 limitation is reduced (but not below zero) by the amount by which the cost of § 179 property placed in service during the 2010 taxable year exceeds $530,000.

.21 Eligible Long-Term Care Premi- ums . For taxable years beginning in 2010, the limitations under § 213(d)(10), regarding eligible long-term care premiums includible in the term “medical care,” are as follows:

are increased to $1,400 if the individual is also unmarried and not a surviving spouse.

.12 Qualified Transportation Fringe . For taxable years beginning in 2010, the monthly limitation under § 132(f)(2)(A), regarding the aggregate fringe benefit exclusion amount for transportation in a commuter highway vehicle and any transit pass, and under § 132(f)(2)(B), regarding the fringe benefit exclusion amount for qualified parking, is $230.

.13 Income from United States Savings Bonds for Taxpayers Who Pay Qualified Higher Education Expenses . For taxable years beginning in 2010, the exclusion under § 135, regarding income from United States savings bonds for taxpayers who pay qualified higher education expenses, begins to phase out for modified adjusted gross income above $105,100 for joint returns and $70,100 for other returns. The exclusion is completely phased out for modified adjusted gross income of $135,100 or more for joint returns and $85,100 or more for other returns.

.14 Adoption Assistance Programs . For taxable years beginning in 2010, under § 137(a)(2) the amount that can be excluded from an employee’s gross income for the adoption of a child with special needs is $12,170. For taxable years beginning in 2010, under § 137(b)(1) the maximum amount that can be excluded from an employee’s gross income for the amounts paid or expenses incurred by an employer for qualified adoption expenses

furnished pursuant to an adoption assistance program for other adoptions by the employee is $12,170. The amount excludable from an employee’s gross income begins to phase out under § 137(b)(2)(A) for taxpayers with modified adjusted gross income in excess of $182,520 and is completely phased out for taxpayers with modified adjusted gross income of $222,520 or more. (See section 3.03 of this revenue procedure for the adjusted items relating to the adoption credit.)

.15 Private Activity Bonds Volume Cap . For calendar year 2010, the amounts used under § 146(d)(1) to calculate the State ceiling for the volume cap for private activity bonds is the greater of (1) $90 multiplied by the State population, or (2) $273,775,000.

.16 Loan Limits for Agricultural Bonds . For calendar year 2010, the loan limit amount on agricultural bonds under § 147(c)(2)(A) for first-time farmers is $470,100.

.17 General Arbitrage Rebate Rules . For bond years ending in 2010, the amount of the computation credit determined under § 1.148–3(d)(4) of the proposed Income Tax Regulations is $1,500.

.18 Safe Harbor Rules for Broker Commissions on Guaranteed Invest- ment Contracts or Investments Purchased for a Yield Restricted Defeasance Es- crow . For calendar year 2010, under § 1.148–5(e)(2)(iii)(B)( 1 ), a broker’s commission or similar fee for the acquisition

Attained Age Before the Close of the Taxable Year Limitation on Premiums

40 or less $ 330

More than 40 but not more than 50 $ 620

More than 50 but not more than 60 $1,230

More than 60 but not more than 70 $3,290

More than 70 $4,110

$2,500 maximum deduction for interest paid on qualified education loans under § 221 begins to phase out under § 221(b)(2)(B) for taxpayers with modified adjusted gross income in excess of $60,000 ($120,000 for joint returns), and is completely phased out for taxpayers with modified adjusted gross income of $75,000 or more ($150,000 or more for joint returns).

.22 Medical Savings Accounts . (1) Self-only coverage . For taxable years beginning in 2010, the term “high deductible health plan” as defined in § 220(c)(2)(A) means, for self-only coverage, a health plan that has an annual deductible that is not less than $2,000 and not more than $3,000, and under which the annual out-of-pocket expenses required to be paid (other than for premiums) for covered benefits do not exceed $4,050.

(2) Family coverage . For taxable years beginning in 2010, the term “high deductible health plan” means, for family coverage, a health plan that has an annual deductible that is not less than $4,050 and not more than $6,050, and under which the annual out-of-pocket expenses required to be paid (other than for premiums) for covered benefits do not exceed $7,400.

.23 Interest on Education Loans . For taxable years beginning in 2010, the

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2010, the dollar amount used to determine the “2-percent portion” (for purposes of calculating interest under § 6601(j)) of the estate tax extended as provided in § 6166 is $1,340,000.

.37 Attorney Fee Awards . For fees incurred in calendar year 2010, the attorney fee award limitation under § 7430(c)(1)(B)(iii) is $180 per hour.

.38 Periodic Payments Received un- der Qualified Long-Term Care Insurance Contracts or under Certain Life Insur- ance Contracts . For calendar year 2010, the stated dollar amount of the per diem limitation under § 7702B(d)(4), regarding periodic payments received under a qualified long-term care insurance contract or periodic payments received under a life insurance contract that are treated as paid by reason of the death of a chronically ill individual, is $290.