After months of debate, the Congress approved the most significant tax bill in nearly a decade and avoided a January 1 rate spike. The $858 billion tax package, the Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act (H.R. 4853), provides temporary extensions of a number of expiring provisions including the so called “Bush tax cuts,” cuts payroll taxes, creates business investment incentives and adjusts eligibility for unemployment benefits. The American Foundry Society and North American Die Casting Association supported the package and urged all members of Congress to vote for the bill. President Obama went on to sign the measure into law on December 17, 2010.
Here’s a summary of the key provisions of interest to the metalcasting industry:
Extension of the 2001/2003 Income-Tax Rates – The new law resolves the months-long impasse over tax rates by extending the 2001/2003 income tax rates for two years and reforming the Alternative Minimum Tax. Individual income tax rates will continue to be imposed at the lower Bush-era rates of 10, 15, 25, 28, 33 and 35 percent.
Capital Gains/Dividends - extends current capital gains and dividend rates for all taxpayers for two years through 2012. Long-term capital gains and “qualified dividends” will continue to be taxed at a maximum rate of 15 percent.
Bonus Depreciation - Under current law, businesses are allowed to recover the cost of capital ex¬penditures over time, according to a depreciation sched¬ule. Congress allowed businesses, beginning on January 1, 2008 and continuing through December 31, 2009, to take an additional depreciation deduction allowance equal to 50 percent of the cost of the depreciable property placed in service in those years. Under the Small Business Jobs Act of 2010, this temporary increase in the depreciation deduction allowance was extended through December 31, 2010. The new law extends and temporarily increases this bonus depreciation provision for investments in new business equipment. For investments placed in service after September 8, 2010 and through December 31, 2011, the bill provides for 100 percent bonus depreciation. For investments placed in service after December 31, 2011 and through December 31, 2012, the bill provides for 50 percent bonus depreciation. The provision also allows taxpayers to elect to accelerate some AMT credits in lieu of bonus depreciation for taxable years 2011 and 2012.
Extension of the R&D Tax Credit - includes a 2 year retroaction extension of the R&D tax credit from January 1, 2010, through 2011. The Alternative Simplified Credit (ASC) rate remains at 14% for 2010 and 2011.
Estate Tax - Lowers the estate tax for two years. The new allows estates of $5 million per person and $10 million per couple to pass to heirs tax free through 2012. Amounts over $5 million and $10 million would be taxed at the 35% tax rate.
Payroll Tax Break for Workers – includes a nearly 2 percent, employee-side payroll tax cut for over 155 million workers. The Internal Revenue Service has released instructions to help employers implement the 2011 cut in payroll taxes, which can be found at: http://www.irs.gov/newsroom/article/0,,id=232590,00.html.
