US passes bonus tax bill

The House of Representatives has passed a legislation for levying a tax on bonuses granted to employees of companies, which have received at least $5 billion from the US Federal government's financial bailout packages.

The legislation would impose a new 90 per cent tax on bonuses received by employees of companies which received funds from the Troubled Asset Relief Program (TARP), according to the details of the Bill available on the website of the House of Representatives.

The tax would also apply to any bonus given after December 31, 2008. It would apply to people who earned more than $2,50,000 ($1,25,000 for married couples filing individually) from companies that have received over $5 billion through TARP.

Eight banks, including Citigroup Inc, JP Morgan Chase & Co, Wells Fargo & Co, Bank of America Corp, Morgan Stanley, Goldman Sachs Group Inc, PNC Financial Services Group Inc and US Bancorp, have each received over $5 billion from TARP.

However, employees with adjusted gross incomes of below $2,50,000 (including bonuses) would not be impacted by the proposed tax.

Therefore, the tax would apply to any retention payment, incentive payment, or any other payment made to an employee above their regular pay for their service.