2010 will be the last year for the advance earned income credit. This program, first enacted in 1978, enables lower-income taxpayers to receive a portion of their expected earned income credit in advance as an additional amount in their normal paycheck. The program will remain in effect through December 31, 2010. After that, taxpayers will no longer be able to receive advances of their earned income credit.
In 2008 (the last year for which data is presently available) 140,253 taxpayers reported receiving advanced earned income credit payments totalling $78,248,000. (IRS Statistics of Income, 2008 Individual Complete Report, section 1, table A, page 5, PDF.)
Elimination of the advanced earned income credit is part of HR 1586. This legislation provides funding to states to assist in hiring school teachers and to fund state Medicaid programs. To pay for those programs, Congress eliminated the advanced Earned Income Credit and tightened the rules regarding foreign tax credits.
The foreign tax credit is designed to help people and businesses avoid paying US tax on the same items of income that are also taxed in a foreign country. Some taxpayers, however, utilized a splitting strategy to defer reporting foreign income while at the same time taking a foreign tax credit in the US against this deferred income. HR 1586 tightens rules relating to the accounting of foreign income, foreign subsidiaries and the use of tax treaties to prevent the misuse of the foreign tax credit.
Additional resources: HR 1586 (at the Library of Congress), President Signs Foreign Tax Reforms to Fund Education / Medicaid (from publisher CCH)