A step away from the fiscal cliff?

August 3rd, 2012 by Joe Kristan

Huge parts of the tax law either have technically expired already or will do so at year end, thanks to our congresscritters habit of enacting  tax breaks temporarily.  This looming calamity is variously called Taxmageddon or the Fiscal Cliff.   Congress has no intention of letting these breaks actually expire, but they can pretend the breaks are less expensive than they are under Congressional accounting that way.

That works out fine when they are in a mutual back-scratching mood, but this election year the critters are snarly, and they arent getting much done.  Thats why yesterdays bi-partison vote in the Senate Finance Committee to approve an extenders bill is important it may signal that at least the normal expiring provisions will see action this year.

Some of the key items included in the Finance Committee bill :

- Extension of the AMT patch to keep 20 million or so individuals from facing a tax increase of up to around $8,000 for 2012.

Extension of the charitable break for conservation easement donations through 2012

- Tax-free IRA distributions for charity through 2012.

Research tax credits, which expired at the end of 2011.

Work opportunity credits, which also expired at the end of 2011.

Extend the $500,000 Sec 179 deduction through 2013.  Current law limits the deduction to $125,000 this year and $25,000 next year.

Reduction in the built-in gain period for S corporations to five years after the S corporation election.  Former C corporations are subject to a 35% corporate tax on built-in gains for the first ten years following their S corporation election.  The bill would make this a five-year period for 2012 and 2013 sales of built-in gain property.

15-year depreciation for qualified leasehold improvements, qualified restaurant buildings and improvements, and qualified retail improvements placed in service in 2012. 

-And, of course, the key to the entire economy, seven-year depreciation for motorsports entertainment complexes, also known as racetracks.

The bill does nothing to address the scheduled increase in top marginal tax rates to 39.6% starting next year, or to mitigate the 3.8% Obamacare surtax on investment income also scheduled to take effect in January.  Even the items in this bill are no sure bet, considering how difficult it is to pass anything this year.  Still, this shows that there may actually be a serious attempt to pass an extender bill this summer.  If they do, it will probably look a lot like this.

This entry was posted on Friday, August 3rd, 2012 at 9:22 am and is filed under Uncategorized. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response. or trackback from your own site.