Casey L. Carhart
Attorney at Law
Mandelbaum, Salsburg, Lazris & Discenza
155 Prospect Ave
West Orange, NJ 07052
Phone (973) 243-7942
Casey works for a one of the largest, most experienced, and successful law firms in New Jersey. Mandelbaum Salsburg is a full service law firm with offices all over NJ, New York City , and Florida.
Casey specializes in tax law, corporate law, and estate planning.
Casey graduated from SUNY Albany with a major in Political Science and a minor in French. Plus, Casey graduated from Whitter Law School and was Editor-in-Chief of the Law Review. After law school, Casey sought out additional training with the prestigious NYU Tax Program.
Casey has worked with many of the members of our Parsippany LeTip group and all of them have been delighted with the quality of work that Casey has provided. As one LeTip member shared, ‘Casey is truly truly impressive.”
During her talk this morning, Casey educated all of us on TAXAGEDDON ==>
TAXMAGEDDON: AN OVERVIEW OF THE 2013 TAX CHANGES
Under current law, many favorable tax policies implemented over the last decade are scheduled to terminate effective as of December 31, 2012. The impact of this enormous and unprecedented tax increase has been nicknamed “Taxmageddon”. The estimated impact of Taxmageddon is a $494 billion tax increase on American taxpayers.
The following is a summary of the 7 categories of tax changes scheduled to take effect on January 1, 2013.
- The Bush Income Tax Cuts
- Payroll Taxes
- AMT Patch
- “Obama Care” Tax Increases
- 2009 Stimulus Tax Cuts
- Tax Extenders
- Estate & Gift Tax
- The Bush Income Tax Cuts. In both 2001 and 2003, President Bush enacted a series of tax cuts which gradually reduced individual and estate tax liabilities between 2002 and 2010. In 2010, Congress extended the tax cuts through 2012. Key elements of the Bush tax cuts include the following:
- Tax Rates. Individual income tax rates were reduced from 15%, 28%, 31%, 36%, and 39.6% to 10%, 15%, 25%, 28%, 33%, and 35%. (These individual tax rates also apply to taxpayers that have business income from a sole proprietorship, S corporation or partnership.)
- Capital Gain Rates. The long term capital gain tax rate was reduced from 20% to 15%.
- Dividend Rates. The top individual dividend rate was reduced from 39.6% to 15%.
- Itemized Deductions (Pease). Itemized deduction limits for higher income taxpayers were gradually reduced and eventually phased out. In 2012, there is no limit on the overall amount of itemized deductions a taxpayer can claim.
- Personal Exemptions (PEP). Personal exemption limits for higher income taxpayers were gradually reduced and eventually phased out. In 2012, there is no income restriction on the amount of personal exemptions a taxpayer can claim.
- Child Tax Credit. The child tax credit was increased from $500 to $1,000 per child.
- Married Filers. The standard deduction and tax brackets for all married filers increased.
On January 1, 2013, each of these Bush tax cuts will expire and rates, etc. will revert back to their 2001 and 2003 levels, absent congressional intervention. This will result in an increase in all income tax rates, capital gain tax rates and dividend tax rates. In addition, the limit on itemized deductions and personal exemptions will be restored. For higher income taxpayers, the total amount of itemized deductions will be reduced by 3% of the amount by which the taxpayer’s adjusted gross income (“AGI”) exceeds an applicable threshold, adjusted annually for inflation. The total amount of personal exemptions that can be claimed will be reduced by 2% for each $2,500 by which the taxpayers AGI exceeds applicable thresholds, adjusted annually for inflation.
Married filers will also take a severe hit in 2013. The 2012 standard deduction for married couples is 200% of the standard deduction for single filers, but that will drop to 167% in 2013. Similarly, in 2013 the 15% tax bracket for married filers will drop from 200% of the single filer limit to 167% of the single filer limit.
The following table sets forth the scheduled rate increases, using 2012 dollar amounts which will be adjusted for inflation in 2013.
COMPARISON OF 2012 V. 2013 INCOME TAX RATES
Over But not over
Cuts in Place)
Marginal Tax Rates for Single Individuals
|$ 0 $ 8,700||15%||10%|
|$ 8,701 $ 35,350||15%||15%|
|$ 35,351 $ 85,650||28%||25%|
|$ 85,651 $178,650||31%||28%|
Marginal Tax Rates for Married Couples Filing Jointly
|$ 0 $ 17,400||15%||10%|
|$ 17,401 $70,700*||15%||15%|
|$ 70,701* $142,700||28%||25%|
|Single:||$ 5,950||$ 5,950|
|Married Filing Jointly:||$ 9,950||$11,900|
* In 2013, this dollar amount will decrease to 167% of the amount for unmarried taxpayers in the same bracket (which is $58,900 in 2012), rather than 200% of the amount for unmarried taxpayers under current law. This change will have the effect of putting more middle-income joint filers in the 28% bracket and increasing the “marriage penalty” for many taxpayers.
- Payroll Taxes. In 2013, the employees’ portion of the social security payroll tax will increase from 4.2% to 6.2%.
- AMT Patch. The Alternative Minimum Tax (“AMT”) was created to ensure that higher-income taxpayers who owed little or no income taxes because they could claim certain tax preferences (i.e., certain credits and deductions), would still pay some tax. The individual AMT is calculated as follows:
- First, add back the tax preference items to the taxpayer’s taxable income to create a higher “AMT tax base”
- Second, subtract a basic exemption amount from the adjusted AMT tax base;
- Third, apply the AMT tax rates (26% on the first $175,000 and 28% on any amount over $175,000) to the adjusted AMT tax base.
The taxpayer is then required to pay the higher of the AMT liability or the standard income tax liability. It is important to note that the AMT amounts are not indexed for inflation, so in theory, each year more and more taxpayers become victims of the AMT.
The Bush tax cuts temporarily increased the exemption amount under which the AMT applied, thereby reducing the impact of the AMT on middle-income taxpayers. Between 2001 and 2011 only about 5% of individual taxpayers paid the AMT. In 2011, the AMT exemption amounts were $74,450 for married individuals and $48,450 for unmarried individuals.
Under current law, effective as of January 1, 2012, these exemption levels reverted back to $45,000 for married individuals and $33,750 for unmarried individuals. In addition, most nonrefundable personal tax credits (i.e., dependent care credit, elderly and disabled care credit, credit for residential energy efficient property, credit for alternative motor vehicles, etc.), will no longer be allowed against the AMT.
There is speculation that the AMT patch may be extended retroactively for 2012. However, if the Bush tax cuts are not extended beyond 2012, it is estimated that the percentage of taxpayers owing AMT will rise from just 5% in 2011 to over 20% in 2013. In addition, if the Bush tax cuts are extended but the AMT patch is not, it is estimated that 36% of taxpayers will owe AMT in 2013.
- “Obama Care” Tax Increases. The 2010 Affordable Care Act (generally referred to as “Obama Care”), created many new taxes. In 2013, a few of these new taxes will be effective.
- Medicare Tax.
- There will be an additional 0.9% Medicare surtax on wages of an employee or earnings of self-employed individuals. For single filers, this additional tax applies to wages or self-employment income received during the year in excess of $200,000. If an employee or self-employed individual files a joint return, then the tax applies to all wages and earnings in excess of $250,000.
- Ways to Reduce the 0.9% Medicare Surtax:
- First, it should be noted that the 0.9% surtax applies to all income subject to Medicare tax, including 401(k) contributions. Therefore, increasing contributions to retirement plans will not reduce the impact of the 0.9% surtax. However, contributions to health reimbursement arrangements (i.e., flexible spending accounts) are not subject to Medicare tax and as such can be used to reduce the impact of the 0.9% surtax.
- Taking advantage of other employee fringe benefit plans can also reduce the impact of the 0.9% surtax, such as education reimbursement programs, child care programs and employer provided auto use.
- Employers should reimburse employee business expenses directly. This will allow employers to reduce wages paid to employees who incur a lot of business related expenses. The reimbursement is deducted on the business return directly and it not taxable to the employee. Employers also receive cost savings from reduced payroll taxes and workers’ compensation costs and employees save on income, payroll and the 0.9% surtax.
- Many tax practitioners are suggesting that LLCs and partnerships convert to S corporations because income distributions (dividends) from S corporation are not considered earned income (i.e., are not subject to Medicare tax) and as such are not subject to the 0.9% surtax. By contrast, all undistributed income of an LLC or partnership is treated as self-employment income, and therefore is subject to Medicare tax and the 0.9% surtax. By converting to an S corporation and combining lower salary payments (subject to 0.9% surtax) with distributions of remaining profits as dividends (not subject to 0.9% surtax), small business owners may be able to significantly reduce the 0.9% surtax. This conversion should not be implemented without adequate consideration. Converting to an S corporation can have serious tax consequences that may outweigh the benefit of reducing the 0.9% tax. First, in order to qualify as an S corporation, the entity may not have more than 100 shareholders, all of the shareholders must be individuals and U.S. citizens, and the entity may only issue one class of stock. Failure to comply with these will restrictions during the life of the corporation, will result in the business being taxed as a C corporation. In addition, many states assess a minimum tax on all corporate entities, even S corporations. In New Jersey, the minimum tax is calculated as follows:
|New Jersey Gross Receipts||Minimum Tax|
|Less than $100,000||$500|
|Equal to or greater than $100,000, but less than $250,000||$750|
|Equal to or greater than $250,000, but less than $500,000||$1,000|
|Equal to or greater than $500,000, but less than $1,000,000||$1,500|
|Equal to or greater than $1,000,000||$2,000|
- Surtax on Investment Income.
- Obama Care creates a 3.8% surtax on “investment income”, including dividends, interest, capital gains, annuities, royalties, rents and income from “passive activity” companies, including brokerage companies. “Passive activity”, with respect to a taxpayer, is defined as an activity in which the taxpayer has “no material participation”, including rental activities, but excluding oil and gas.
- This surtax applies to the lesser of either (i) the taxpayer’s net investment income or (ii) the excess of the taxpayer’s modified AGI over the threshold amount ($250,000 for joint filers and $200,000 for single filers).
- Ways to reduce the 3.8% Surtax:
- The surtax can be avoided or significantly reduced in two ways: (i) reducing AGI to less than the threshold amount; and (ii) reducing or replacing investment income with income that is not subject to the surtax.
- Increasing contributions to 401(k) and other retirement plans, as well as flex spending accounts and other employee fringe benefits plans will effectively reduce AGI and thus the impact of the surtax.
- Taxpayers considering large sales (i.e., a business or investment asset) should consider using the installment sale method. This strategy could reduce total AGI and keep the taxpayer under the threshold level. However, the future receipts may be taxed under the installment method at higher rates expected in future years, so a careful analysis of the net tax effect needs to be undertaken.
- Taxpayers should consider reallocating their investment portfolios to put more money in municipal bonds. Municipal bond income is not subject to income tax or the surtax.
- Again, many practitioners are suggesting that LLCs and partnerships convert to S corporations because income distributions (dividends) from S corporation are not considered investment income and as such are not subject to the surtax. An S corporation can make reasonable salary payments to the shareholders (not subject to the surtax) and then distribute the remaining profits as dividends (not subject to the surtax), and effectively eliminate the surtax liability entirely. Taxpayers must proceed with great caution when implementing this strategy, for several reasons. First, S corporation are subject to certain limitations that may make a conversion impossible, as noted above. Second, the surtax only applies to investment income; thus, an LLC or partnership engaging in an active business does not need to undergo a conversion because the allocated income will not be subject to the surtax. Finally, in the case of an S corporation, any shareholder that is not actively engaged in the operation or management of the business should not be paid a salary, as this technique creates a risk of termination of the S election, based on the second class of stock limitations. In addition, and conversely, if salaries paid to active managers are too low, based on benchmarks, taxing authorities can re-allocate the payments to shareholders to increase the salary component and reduce the dividend component, thus obviating the tax savings benefits.
- Medical Expense Deduction. The 7.5% AGI floor on medical expense deductions will be increased to 10%.
- 2009 Stimulus Tax Cuts. The 2009 American Recovery and Reinvestment Act created a number of tax benefits intended to help the economy. Many of these benefits will also expire in 2012, including the following:
- American Opportunity Tax Credit: This is a refundable tax credit for higher education expenses, including required course materials, for individuals with income less than $80,000 or married couples with income less than $160,000.
- Expand Child Tax Credit: This is a partially refundable tax credit of up to $1,000 per child (under age 17) to help offset the costs of raising a child. This bill expanded the credit by lowering the eligibility level to make the credit available to tax filers with at least $3,000 of earnings. Under prior law, the credit was available only to those individuals earning more than $12,550.
- Expand Earned Income Tax Credit (“EITC”): The EITC is a benefit for certain people who work and have low to moderate wages. The American Recovery and Reinvestment Act increased the number of individuals eligible to receive the credit as well as the size of the credit.
- Tax Extenders. “Tax Extenders” refer to a variety of temporary tax provisions which affect individuals, businesses, charitable giving, energy, community development and disaster relief. Most of the Tax Extenders expired in 2011 and the rest expire in 2012. Table 1 sets forth a complete list of the Tax Extenders that expired in 2011 or are scheduled to expire in 2012. (Source: CRS Report R42485). One of the most relevant of the Tax Extenders expiring in 2012 is the increased dollar limitation for expensing. Prior to 2003, under Internal Revenue Code section 179, businesses were permitted to expense (or immediately deduct) the first $25,000 of investments in machinery and equipment. The amount of qualifying investments eligible for the deduction decreased dollar for dollar for amounts in excess of $200,000, so that businesses investing more than $225,000 received no immediate deduction. In 2003, the expensing limit and the phase-out level were significantly increased and those increases were later extended by the American Jobs Creation Act of 2004 and the American Recovery and Reinvestment Act of 2009. In 2012, the expensing limit was $125,000 and the phase-out began at $500,000. In 2013, these limitations will revert back to the 2003 levels.
- Estate & Gift Tax. Under the Bush Tax Cuts, the top estate tax exemption amount gradually increased and the top estate tax rate gradually decreased between 2002 and 2009. The estate tax was repealed completely in 2010. Presently, in 2012, the federal tax exemption for estate, gift and generation skipping transfers (“GST”) tax is an unprecedented $5.12 million and the top estate, gift and GST tax rate is 35%, it’s lowest in many decades. In addition, for 2012, the estate tax provisions incorporate the advantage of “portability”, a concept that was never before included in the federal estate tax law. The concept of portability allows a surviving spouse to add any unused portion of the estate tax exemption of the first spouse to die to the surviving spouse’s estate tax exemption. What this means is that a married couple can pass along up to $10.24M to heirs free from federal estate taxes, whether or not the assets are owned by one both or apportioned between both spouses.
In 2013, the current laws expire and the estate, gift and GST tax provisions and rates that were in effect in 2001 are restored. Below is a chart outlining the unfavorable changes to take effect in 2013.
|Top Estate Tax Rate||35%||55%|
|Estate Tax Exemption||$5.12M||$1M|
|Portability of Estate Tax Exemption||Yes||No|
|Top Gift Tax Rate||35%||55%|
|Gift Tax Exemption||$5.12M||$1M|
|Gift Tax Annual Exclusion||$13,000||$13,000, subject to inflation adjustment|
|GST Tax Rate||35%||55%|
|GST Tax Exemption||$5.12M||$1.4M|
Proposed Changes to Tax Laws
Income Tax Proposals
President Obama has recently proposed extending the Bush tax cuts for single taxpayers with less than $200,000 in income and married taxpayers with less than $250,000 in income. Under this proposal, the top two individual tax rates of 36% and 39.6% would be restored for higher income filers only, along with the limitation on itemized deductions and personal exemptions. The capital gain and dividend tax rates would revert back to the pre-Bush tax cut level for these filers as well.
Republicans would generally like the Bush tax cuts extended for all taxpayers. Any action by Congress, however, is expected to be delayed until after the November elections. Once the elections are over, there will likely be some compromise regarding the $250,000 threshold level. Although they have since backed off of their comments, both Senator Charles Schumer (D-NY) and House Minority Leader Nancy Pelosi (D-CA) have recently called for a temporary extension of the Bush tax cuts to families earning up to $1 million a year.
Estate Tax Proposals
President Obama’s proposed budget supports a $3.5M estate, gift and GST tax exemption and a tax rate of 45%. Republican candidate Mitt Romney is in favor of repealing the estate tax altogether. A number of Congressional representatives are in favor of the 2012 laws and therefore are advocating extensions of the current laws.
Planning for 2013
The following is a list of planning strategies to be considered in light of the 2013 tax law changes:
- Convert traditional IRAs to Roth IRAs. While this decision is based on each individual’s situation, those that are considering converting may want to pull the trigger this year. Conversions result in the recognition of ordinary income to the extent of the funds converted to the Roth structure and as such funds will be taxed at the taxpayer’s applicable income tax rate, which of course is expected to be lower in 2012. For the wealthy, it would be better to be taxed at 35% instead of 39.6%. Also, most of the models that have been developed to compare the long term effect of a Roth conversion show that the cost of paying a current income tax (from other funds) to achieve a Roth conversion is outweighed by the benefit of being able to grow the Roth IRA funds completely tax free and with no future tax liabilities expected.
- Take income earlier. If the taxpayer is able to control when income is received, recognizing income in 2012 could result in it being taxed at a lower rate, by locking in the pre-increase tax rates and avoiding the risk that the recognition of the income in 2013 or a later year may potentially push AGI over the income thresholds applicable in 2013 and later years. This includes exercising stock options, realizing/receiving bonuses and deferred bonuses or compensation and other income in 2012.
- Defer deductions. If the taxpayer is able to make a deductible expenditure in a later year, to the taxpayer should make the expenditure then, rather than in 2012. This decision may depend on the size of the expenditure and whether and when it is deductible, based on dollar limitations on expensing.
- Sell investments.
- If the capital gains tax is headed to 20% in 2013, some individuals may want to consider cashing in gains at 15% this year. If the individual wants to retain a specific mutual fund or stock, it can be sold in 2012 (maximum 15% capital gain) and repurchased after 30 days to establish a higher basis.
- In addition, if the individual is planning on selling a business, closing in 2012 is preferable to 2013. If closing in 2012 is not an option, individuals should consider using “installment sales” after 2012 so as to spread out the income, if doing so keeps the taxpayer under the income threshold or otherwise minimizes the impact of the 20% capital gains tax and the Medicare surtax.
- Delay selling assets with built in losses. Taxpayers should consider postponing any sales if they have a large capital loss carryover on investments. Using loss carryovers after 2012 will give a taxpayer a bigger “bang for your buck” at the higher 2013 tax rates.
- Reduce dividends. If dividends become taxed at the taxpayer’s normal tax rate in 2013, as expected, instead of the current 15% rate, some individuals may want to rebalance their portfolios so that the proportion of overall invested assets that pay no or lower dividends are housed in their taxable accounts and higher dividend-yielding investments are held in tax-deferred accounts such as 401(k)s and IRAs. On top of this, in 2013, investment income will be subject to an additional 3.8% surtax for those with income over $200,000 (or $250,000 for married taxpayers filing jointly).
- Funding of tax advantaged accounts. Higher future taxes increase the attractiveness of funding tax advantaged accounts whether they are IRA’s, employer provided retirement plans, health savings accounts, college funding vehicles or tax deferred annuities. However, taxpayers must be sure to retain adequate funds for emergencies and future spending needs, so that the taxpayer does not need to make withdrawals from retirement accounts, thereby creating a tax penalty. And of course, such funding opportunities are limited under ERISA and the Code.
|2012 Dollar Limits|
|Annual employee contribution limit for 401(k), 403(b), or 457 savings plans||$17,000|
|Annual catch-up contribution limit for 401(k), 403(b) or 457 savings plans if employee is age 50 or over||$5,500|
|Maximum annual benefit payable by a defined benefit pension plan||$200,000|
|Annual limit for combined employer – employee contributions to a defined contribution plan||$50,000|
|Annual contribution limit to an IRA for individuals||$5,000|
|Annual catch-up contribution limit for IRA for individuals age 50 or over||$1,000|
|Annual employee contribution for SIMPLE plans||$11,500|
|Annual catch-up employee contribution for SIMPLE plans if employee is age 50 and over||$2,500|
- Elect to have medical procedures. For taxpayers considering medical procedures (i.e., dental work) in 2012 or 2013, this year is a better choice if the taxpayer itemizes deductions and the unreimbursed medical expenses will exceed 7.5% of AGI.
- Use insurance trusts. The various tax advantages of using life insurance as part of an estate plan are not new. However, the larger exemptions have exponentially increased the advantages of using life insurance policies as part of the estate planning process. Many clients are using the increased exemptions to fund a new irrevocable life insurance trust which can benefit the client’s family for generations without ever incurring a gift or estate tax.
- Gifting. Making gifts to family members in 2012 will allow individuals to take advantage of the $5.12M lifetime gifting limit, which may be drastically reduced in 2013.
Table 1. Temporary Tax Provisions and “Tax Extenders” Expiring in 2011 and 2012
|Above-the-Line Deduction for Certain Expenses of Elementary and Secondary School Teachers||2011||Sec. 62(a)(2)(D)||P.L. 111-312||$0.23|
|Deduction for State and Local Sales Taxes||2011||Sec. 164(b)(5)||P.L. 111-312||$2.79|
|Above-the-Line Deduction for Qualified Tuition and Related Expenses||2011||Sec. 222(e)||P.L. 111-312||$0.78|
|Estate Tax Look-Through for Certain Regulated Investment Company (RIC) Stock Held by Nonresidents||2011||Sec. 2105(d)||P.L. 111-312||$0.01|
|Premiums for Mortgage Insurance Deductible as Qualified Interest||2011||Sec. 163(h)(3)||P.L. 111-312||$0.74|
|Parity for Exclusion for Employer-Provided Mass Transit and Parking Benefits||2011||Sec. 132(f)||P.L. 111-312||$0.16|
|Disclosure of Prisoner Return Information to Certain Prison Officials||2011||Sec. 6103(k)(10)||P.L. 1 10-428a||b|
|Treatment of Military Basic Housing Allowance under Low-Income Housing Credit||2011||Sec. 142(d)||P.L. 1 10-289a||c|
|Expansion of Adoption Credit and Adoption Assistance Programs||2011||Secs. 36C and 137; Sec. 10909(c) of P.L. 111-148||P.L. 111-148||d|
|Refunds Disregarded in the Administration of Federal Programs and Federally Assisted Programs||2012||Sec. 6409||P.L. 111-31 2a||e|
|Credit for Prior Year Minimum Tax Liability Made Refundable After Period of Years||2012||Sec. 53(e)||P.L. 1 09-432a||$0.93f|
|Tax Credit for Research and Experimentation Expenses||2011||Sec. 41 (h)( 1 )(B)||P.L. 111-312||$7.65|
|Temporary Increase in Limit on Cover-Over of Rum Excise Tax Revenues to Puerto Rico and the Virgin Islands||2011||Sec. 7625(f)||P.L. 111-312||$0.13|
|Expensing of “Brownfield” Environmental Remediation Costs||2011||Sec. 198(h)||P.L. 111-312||$0.18|
|Work Opportunity Tax Credit||2011||Sec. 51 (c)(4)||P.L. 111-312||$0.97|
|Indian Employment Tax Credit||2011||Sec. 45A(f)||P.L. 111-312||$0.06|
|Accelerated Depreciation for Business Property on Indian Reservations||2011||Sec. 168(j)(8)||P.L. 111-312||$0.09|
|Exceptions under Subpart F for Active Financing Income||2011||Sec. 953(e)( 1) and Sec. 954(h)(9)||P.L. 111-312||$5.21|
|Look-Through Treatment of Payments Between Controlled Foreign Corporations under the Foreign Personal Holding Company Rules||2011||Sec. 954(c)(6)||P.L. 111-312||$0.78|
|Credit for Railroad Track Maintenance||2011||Sec. 45G(f)||P.L. 111-312||$0.17|
|15-Year Straight-Line Cost Recovery for Qualified Leasehold, Restaurant, and Retail Improvements||2011||Secs. 168(e)(3)(E)(iv), (v), (ix);
Secs. 1 68(e)(7)(A)(i) and 168 (e)(8)
|7-Year Recovery for Motorsport Racing Facilities||2011||Sec. 168(i)( 15) and Sec. 1 68(e)(3)(C)(ii)||P.L. 111-312||$0.03|
|Deduction Allowable with Respect to Income Attributable to Domestic Production Activities in Puerto Rico||2011||Sec. 199(d)(8)||P.L. 111-312||$0.20|
|Modification of Tax Treatment of Certain Payments to Controlling Exempt Organizations||2011||Sec. 51 2(b)( 1 3)(E)||P.L. 111-312||$0.02|
|Treatment of Certain Dividends of Regulated Investment Companies (“RICs”)||2011||Secs. 871 (k)( 1 )(C) and (2)(C);
Secs. 881(e)(1)(A) and (2)
|Employer Wage Credit for Activated Military Reservists||2011||Sec. 45P||P.L. 111-312||g|
|Special Expensing Rules for Film and Television Production||2011||Sec. 181 (f)||P.L. 111-312||$0.12|
|RIC Qualified Investment Entity Treatment under FIRPTA||2011||Sec. 897(h)(4)||P.L. 111-312||$0.06|
|Special Rules for Qualified Small Business Stock||2011||Sec. 1202(a)(4)||P.L. 111-312||$1.21|
|Additional First-Year Depreciation for 100% of Basis of Qualified Property||2011||Sec. 168(k)(5)||P.L. 111-312||$5.97|
|Increase in Expensing to $500,000/$2,000,000 and Expansion of Definition of Section 179 Property||2011||Sec. 179(b)(1) and (2) and Sec. 179(f)||P.L. 111-240||h|
|Reduction in S Corporation Recognition for Built-In Gains Tax||2011||Sec. 1374(d)(7)||P.L. 111-240||$0.07 i|
|Work Opportunity Tax Credit Targeted to Hiring Qualified Veterans||2012||Sec. 51 (c)(4)(B)||P.L. 112-56||na|
|Additional First-Year Depreciation for 50 Percent of Basis of Qualified Property||2012||Sec. 168(k)( 1) and Sec. 1 68(k)(2)||P.L. 111-312||j|
|Election to Accelerate AMT Credits in Lieu of Additional First-Year Depreciation||2012||Sec. 168(k)(4)||P.L. 111-312||k|
|Increase in dollar limitation for expensing to $125,000/$500,000 (indexed)||2012||Sec. 179(b)(1), Sec. 179(b)(2), Sec. 179(c)(2),
Sec. 179(d)( 1 )(A)(ii)
|Enhanced Charitable Deduction for Corporate Contributions of Computer Equipment for Educational Purposes||2011||Sec. 170(e)(6)||P.L. 111-312||$0.24|
|Enhanced Charitable Deduction for Contributions of Food Inventory||2011||Sec. 170(e)(3)(C)||P.L. 111-312||$0.14|
|Enhanced Charitable Deduction for Contributions of Book Inventory to Public Schools||2011||Sec. 170(e)(3)(D)||P.L. 111-312||$0.06|
|Tax-Free Distributions from Individual Retirement Accounts for Charitable Purposes||2011||Sec. 408(d)(8)||P.L. 111-312||$0.56|
|Basis Adjustment to Stock of S Corporations Making Charitable Contributions of Property||2011||Sec. 1367(a)||P.L. 111-312||$0.08|
|Special Rules for Contributions of Capital Gain Real Property for Conservation Purposes||2011||Sec. 170(b)( 1 )(E) and Sec. 1 70(b)(2)(B)||P.L. 111-312||$0.12|
|Suspensions of 100%-of-Net-Income Limitation on Percentage Depletion for Oil and Gas from Marginal Wells||2011||Sec. 61 3A(c)(6)(H)(ii)||P.L. 111-312||$0.13|
|Special Rule to Implement Electric Transmission Restructuring||2011||Sec. 451(i)||P.L. 111-312||—|
|Credit for Construction of Energy Efficient New Homes||2011||Sec. 45L(g)||P.L. 111-312||$0.07|
|Placed-in-Service Date for Refined Coal Production Facilities||2011||Sec.45(d)(8)||P.L. 111-312||$0.11|
|Mine Rescue Team Training Credit||2011||Sec. 45N||P.L. 111-312||m|
|Election to Expense Mine-Safety Equipment||2011||Sec. 179E(a)||P.L. 111-312||—|
|Credit for Energy Efficient Appliance||2011||Sec. 45M(b)||P.L. 111-312||$0.24|
|Credit for Nonbusiness Energy Property||2011||Sec. 25C(g)||P.L. 111-312||$0.61|
|Alternative Fuel Vehicle Refueling Property||2011||Sec. 30C(g)(2)||P.L. 111-312||$0.02|
|Incentives for Alternative Fuel and Alternative Fuel Mixtures||2011||Sec.6426(d)(5). Sec.6427(e)(6)(C), Sec. 6426(e)(3)||P.L. 111-312||$0.16|
|Incentives for Biodiesel and Renewable Diesel||2011||Sec. 40A; Sec,
6426(c)(6); and Sec. 6427(e)(6)(B)
|Incentives for Alcohol Fuels||2011||Sec. 40(e)( 1 )(A); Secs.40(h)(1) and (h)(2); Sec.6426(b)(6); Sec. 6427(e)(6)(A)||P.L. 111-312||$5.42|
|Grants for Specified Energy Property in Lieu of Tax Credits||2011||Sec. 48(d) and Sec. 1603 of P.L.1 11-5||P.L. 111-312||$1.31|
|Credit for Electric Drive Motorcycles, Thee-Wheeled, and Low- Speed Vehicles||2011||Sec. 30(f)||P.L. 111-5a||na|
|Conversion Credit for Plug-In Electric Vehicles||2011||Sec. 30B(i)(4)||P.L. 111-5a||n|
|Qualified Green Building and Sustainable Design Project Bonds||2012o||Sec. 142(1)(9)||P.L. 110-343||p|
|Cellulosic Biofuel Producer Credit||2012||Sec, 40(b)(6)(H)||P.L.1 10-246a||$0.02f|
|Placed-in-Service Date for Wind Facilities Eligible to Claim the Electricity Production Credit||2012||Sec. 45(d)||P.L. 111-5||q|
|Credit for Production of Indian Coal||2012||Sec. 45(e)( 1 0)(A)(i)||P.L. 1 09-58a||na|
|Election to Claim the Energy Credit in Lieu of the Electricity Production Credit for Wind Facilities||2012||Sec.48(a)(5)||P.L. 111-5||r|
|Special Depreciation Allowance for Cellulosic Biofuel Plant Property||2012||Sec. 168(l)||P.L. 1 09-432a||s|
|Community Assistance Provisions|
|Qualified Zone Academy Bonds – Allocation of Bond Limitation||2011||Sec. 54E(c)( 1)||P.L. 111-312||$0.13|
|New Markets Tax Credit||2011||Sec. 45D(f)( 1)||P.L. 111-312||$0.86|
|American Samoa Economic Development Credit||2011||Sec. 119 of P.L. 109-432 as amended by Sec.756 of P.L.1 11-312||P.L. 111-312||$0.02|
|Tax Incentives for Investment in the District of Columbia (“DC”)||2011||Sec. 1 400(f)( 1), Sec. 1 400A(b), Sec.
1 400B(b)(2)(A)(i), Sec. 1 400B(b)(3)(A), Sec. 1 400B(b)(4)(A)(i),
Sec. 1 400B(b)(4)(B)(i)(I), Sec. 1 400B(e)(2) and Sec. 1 400B(g)(2)
|Empowerment Zone Tax Incentives||2011||Sec. 1391 (d)( 1 )(A)(i),
Sec. 1391 (h)(2), Sec. 1 202(a)(2), Sec. 1394, Sec. 1396, Sec. 1 397A, Sec. 1397B
|Disaster Relief Provisions|
|New York Liberty Zone – Tax Exempt Bond Financing||2011||Sec. 1 400L(d)(2)(D)||P.L. 111-312||$0.06|
|Tax-Exempt Bond Financing for the Gulf Opportunity (GO) Zone||2011||Sec. 1 400N(a)||P.L. 111-312||$0.14|
|Low-Income Housing Credit Additional Credit for the GO Zone||2011||Sec. 1400N(c)||P.L. 111-312||$0.19|
|Placed-in-Service Date for Additional Depreciation for specified GO Zone Extension Property||2011||Sec, 1400N(d)(6)||P.L. 111-312||$0.21|
|Increase in Rehabilitation Credit for Structures Located in the GO Zone||2011||Sec. 1400N(h)||P.L. 111-312||$0.02|
|Increase in Rehabilitation Credit for Areas Damaged by the 2008 Midwestern Storms||2011||Sec. 702 of Division C of P.L. 110-343||P.L. 11 0-343a||t|
|Tax-Exempt Bond Financing for Areas Damaged by the 2008 Midwestern Storms||2012||Sec. 702 of Division C of P.L. 110-343||P.L. 11 0-343a||na|
|Tax-Exempt Bond Financing for Areas Damaged by Hurricane Ike in 2008||2012||Sec. 704 of Division C of P.L. 110-343||P.L. 11 0-343a||u|
Source: Joint Committee on Taxation, List of Expiring Federal Tax Provisions, January 13, 2012, JCX- 1-12, Joint Committee on Taxation, Estimated Revenue Effects of an Extensions of Certain Expiring Provisions Through December 3!, 20!2, December 7, 2011, Table 11 – 1-167, Department of the Treasury, General Explanation of the Administration’s Fiscal Year 20!3 Revenue Proposals (“The Greenbook”), February 2012, Table 4, and CRS Report R42 105, Tax Provisions Expiring in 20!! and “Tax Extenders”, by Molly F. Sherlock, Table 1.
Notes: Accept as otherwise noted, the revenue loss estimates measure 10-year cost over the 2012-2021 budgetary window of extending expiring provisions for approximately one year (from December 15, 2011 to December 31,2012). Except as otherwise noted, the “expiration year” implies the last day of the given year (i.e., 2012 means the provisions expires on December 31, 2012). Generally, these provisions have been enacted and extended more than once. However, this table also includes tax provisions that are expiring that have not previously been extended. For provisions for which a cost estimate of a 1-year extension is not available, recent revenue loss estimates are included in the footnotes, along with the Joint Committee on Taxation (JCT) source. ”na” means a revenue loss estimate is not available.
For more information on individual provisions, see U.S. Congress, Senate Committee on the Budget, Tax Expenditures: Compendium of Background Material on Individual Provisions, committee print, prepared by the Congressional Research Service, 1 1 1th Cong., 2nd sess., December 2010.
- This law was the first law to enact this provision.
- At enactment, this provision was estimated to result in a revenue gain of less than $1 million over the 2009-2018 budgetary window (JCX-80-08).
- At enactment, this provision was estimated to result in $33 million in revenue losses over the 2008-2018 budgetary window (JCX-64-08).
- A proposed extension of this provision is estimated to result in $430 million in revenue losses over the 2013-2022 budgetary window (FY20 13 Greenbook).
- At enactment, this provision was estimated to result in $8 million in revenue losses over the 2011-2020 budgetary window (JCX-54-10).
- This cost estimate reflects the cost over the 2013-2022 budgetary window of extending this provision through the end of 2013. These revenue loss estimates are from Table 4 of the FY20 13 Treasury Greenbook.
- A proposed extension of this provision is estimated to result in $4 million in revenue losses over the 2013-2022 budgetary window (FY20 13 Greenbook).
- A previous extension of this provision resulted in an estimated $2.18 billion in revenue losses over the 2011-2020 budgetary window (JCX-48- 10).
- One-year extension for 2011, with budgetary cost over the 2011-2020 budgetary window (JCX-48- 10).
- A previous extension of the combined costs of the increase in first-year depreciation to 100% and extending the 50% additional first-year depreciation for property placed in service after 13/31/2011 of this provision resulted in an estimated $20.88 billion in revenue losses over the 2011-2020 budgetary window (JCX-54- 10).
- A previous extension of this provision resulted in an estimates $639 million in revenue losses over the 2011-2020 budgetary window (JCX-54- 10).
- One-year extension for 2012, with budgetary cost over the 2011-2020 budgetary window (JCX-54- 10).
- A proposed extension of this provision is estimated to result in $2 million in revenue losses over the 2013-2022 budgetary window (FY20 13 Greenbook).
- At enactment, the modification of the alternative motor vehicle credit, the credit for qualified plug-in electric drive motor vehicles and the credit for plug-in electric conversion was estimated to result in $2 billion in revenue losses over the 2009-2019 budgetary window (JCX- 19-09).
- This provision was scheduled to expire September 30, 2012.
- A previous extension of this provision resulted in an estimated $45 million in revenue losses over the 2009-2018 budgetary window (JCX-78-08).
- A previous extension of this provision for a variety of renewable technologies (i.e., not exclusively wind) resulted in $13.14 billion in revenue losses over the 2009- 2019 budgetary window (JCX- 19-09).
- A previous extension of this provision for a variety of renewable technologies (i.e., not exclusively wind) resulted in $285 million in revenue losses over the 2009-2019 budgetary window (JCX- 19-09).
- At enactment, this provision was estimated to result in $9 million in revenue losses over the 2007-2016 budgetary window (JCX-5 1-06).
- At enactment, this provision was estimated to result in $3 million in revenue losses over the 2009-2018 budgetary window (JCX-78-08).
u. At enactment, tax exempt bond financing for areas damaged by the 2008 Midwestern storms and low-income housing tax relief for areas damaged by Hurricane Ike was estimated to result in $638 million in revenue losses over the 2009-2019 budgetary window (JCX-78-08).