On July 31, Congress passed the Taxpayer Relief Act of 1997. It was signed by President Clinton on Aug. 5. It provides for $95.2 billion of net tax relief and sets the stage for our country to achieve a balanced budget by 2002. Moreover, this tax package will be a major stimulus for the economy. While these events should be regarded as momentous for the country’s future, the reaction throughout the country has been surprisingly low-key. Perhaps that’s because the ’97 Tax Act incorporates 285 new Internal Revenue Service Code sections and 824 Code amendments. The bill consists of $151.6 billion in tax cuts over the next five years that are partially offset by $56.4 billion of budget-balancing tax hikes. It is not a broad-based tax bill providing general tax-rate changes like prior tax bills. Rather, it is selectively targeted in its tax changes, which add new complexity to our nation’s tax laws. It also provides for multiple effective dates for the application of its changes. This law can arguably be characterized as the Accountants’ and Lawyers’ Employment Act of 1997. For the future of accountants, this law must also be viewed as a major step away from the concept that further promotes a flat tax. By adding new tiers of tax rates, new deduction strategies and projected revenue decreases after 2002, a flat tax has finally gone the same way as the beliefs of the Flat Earth Society. The bill provides for $56.4 billion of new tax revenues. These revenues derive principally from extending the 7.5 percent airline excise taxes and increasing the tobacco tax to 39 cents by 2002. For individuals, the ’97 Tax Act provides changes in five areas: capital gains, expanded individual retirement accounts, estate- and gift-tax relief, child tax credits, and educational incentives. However, because the effective dates of these provisions differ widely, most taxpayers will not realize benefits immediately. But, over the long term, incentives have been created, especially to help those taxpayers who do so much to stimulate our nation’s economy. The changes to capital gains highlight both the complexity and the multiple effective dates in the bill. At the top end, the capital-gains tax rate has been reduced from 28 percent to 20 percent for sales made after May 6, 1997. However, for assets sold after July 27, 1997, “long-term” now means assets held 18 months. In the category of gain on sale of principal residence, a big tax break has been provided in addition to the capital-gains rate reduction. Retroactive to May 7, 1997, up to $500,000 of this gain on joint returns may be excluded. In the short run, this change should stimulate much activity in the residential home market. Starting in 1998, new rules are applicable for IRA contributions. New types of IRAs are created, and other changes liberalize the rules for increased contributions to current IRAs. Estate- and gift-tax relief is provided by greater unified credit amounts. Beginning in 1998, this credit will rise to $625,000 from the present number of $600,000. By 2006, the credit will reach $1 million. Not beginning until 1998 is a new child credit. It amounts to a $400 credit in 1998 and $500 credit for 1999 and later. The credit is available for children under age 17 and is phased out at higher income levels. Education incentives are numerous beginning after 1997. Future student-loan interest payments will be deductible. Educational IRAs can be established. New educational credits will consist of Hope Scholarship and Lifetime Learning credits. Some credits are lost for taxpayers in higher income levels. The above is just a taste of the changes. See future issues of The Northern Colorado Business Report for more. Former Fort Collins mayor John Knezovich is a certified public accountant.