CCH TAX BRIEFINGS – TAX HELP SALT LAKE CITY

SOME TAXES GOING UP?

TAX HELP SALT LAKE CITY

During his campaign, President Obama noted that it would be impossible for the
government to reduce its deficit without bringing in additional revenue and
that additional taxes are necessary:

“We’ve identified tax rates going up to the Clinton [pre-2001] rates for
income above $250,000; making some adjustments in terms of the corporate tax
side that could actually bring down the corporate tax overall, but broaden the
base and close some loopholes. That would be good for our economy, and it would
be good for reducing our deficit.” That is why you might need tax help Salt Lake City

Individual Extenders

The individual tax extenders can be divided into two categories: Extenders that
are good candidates for renewal and extenders that are on the fence. This
assessment is based upon both the support, or lack thereof, that the Obama
Administration has given to each and how receptive members of the Congressional
tax writing committees have been to each.

Likely to be renewed

Individual extenders with a strong likelihood of renewal are:

• ▪ Higher education tuition deduction

• ▪ State and local sales tax deduction

• ▪ Teachers’ classroom expense deduction

• ▪ Qualified charitable distributions from IRAs

IMPACT.

No one can predict what Congress will ultimately do but the higher education
tuition deduction, the state and local sales tax deduction, the teachers’
classroom expense deduction, and charitable distributions from IRAs appear to
enjoy strong support for extension. These incentives could be extended for one
year (through 2012) or for two years (through 2013).

Comment

In September, a bipartisan group of about 60 House members from states without
an income tax called for extension of the state and local sales tax deduction.

Selected individual extenders on the fence include:

• ▪ Deduction for qualified mortgage insurance premiums

• ▪ Code Sec. 25C residential energy property credit

Comment

The Code Sec. 25D residential energy efficient property credit is available for
qualified property placed in service before January 1, 2017. Qualified property
includes certain geothermal energy property and small wind energy property.

Business Extenders

Like the individual extenders, the business extenders can be divided into two
groups: good candidates for renewal and extenders on the fence.

Likely to be renewed – Tax Help Salt Lake City

Business extenders likely to be renewed include:

• ▪ Code Sec. 41 research tax credit

• ▪ Code Sec. 179 small business expensing

• ▪ Work Opportunity Tax Credit (WOTC)

• ▪ 15-year recovery for qualified leasehold improvements, restaurant property
and retail improvements

• ▪ New Markets Tax Credit

Comment

The research tax credit, which expired after 2011, enjoys strong bipartisan
support in Congress, with many lawmakers and the White House calling for a
permanent credit. The research tax credit is likely to be extended for one year
(through 2012) or two years (through 2013).

Comment

Under current law, employers can take advantage of an enhanced WOTC for hiring
qualified military veterans. The enhanced WOTC for veterans is scheduled to
expire after 2012 but is a good candidate for renewal. However, it is unclear
at this time if the WOTC for other target groups, which expired after 2011,
will be extended.

Selected business extenders on the fence include:

• ▪ Production tax credit for wind energy projects

• ▪ Employer credit for activated military reservists

• ▪ Seven-year recovery period for motorsports complexes

• ▪ Railroad track maintenance credit

• ▪ Brownfields remediation

• ▪ Credit for energy efficient homes

Comment

During the campaign, President Obama called for extension of the production tax
credit for wind energy projects, which is scheduled to expire af ter 2012 (and
after subsequent years for other projects). However, extension of the
production tax credit faces significant hurdles in the GOP-controlled House.

Comment

Brownfields remediation expensing and the credit for energy efficient homes
were two incentives not included in the SFC’s Middle Class Tax Cut Relief Act
of 2012.


Areas of Service: Tax Help Salt Lake City

 

CCH 2012 TAX BRIEFINGS – TAX EXTENDERS

TAX EXTENDERS

Linked to the Bush-era tax cuts are a package of so-called tax extenders. These
are popular but temporary tax incentives. Many of the tax extenders were
effective only through 2011 but may be retroactively extended for the entire
2012 tax year by the lame-duck Congress. Others were extended through 2012.

IMPACT.

Before his re-election President Obama called for extension of the higher
education tuition deduction, AMT relief (the AMT “patch”), the
enhanced Work Opportunity Tax Credit (WOTC) for veterans, and the production
tax credit for wind energy projects, among other extenders. Now that he has
been re-elected, there is nothing to indicate that the President will withdraw
his support for extending these provisions. The question is: will lawmakers go
along with the President’s proposals and when will they act?

IMPACT.

Democrats and Republicans generally agree that the longer they wait to extend
some or all of the extenders, the greater the likelihood of a delayed 2013
filing season. The IRS is preparing to process 2012 returns under the tax law
as it now reads. The IRS will need time to adjust its processing systems for
late legislation.

Comment

In past years, the tax extenders were routinely approved by Congress, either at
year-end or early in the subsequent year and made retroactive. This year may be
different. Some lawmakers have balked at the estimated $200 billion cost over
10 years of extending all of these tax benefits. However, it is unclear which
extenders, if any, would be allowed to expire. In August, the Senate Finance
Committee (SFC) approved the Middle Class Tax Relief Act of 2012, which did not
renew some of the tax extenders (such as brownfields remediation expensing and
the first-time homebuyer credit for the District of Columbia); but these
extenders could be added back before the passage of a final bill.

Comment

The tax extenders may also be held up by legislation unrelated to taxes. Some
lawmakers are upset that Congress recessed before the November elections
without passing a farm bill and drought disaster relief. They have promised not
to move on the extenders or other legislation until Congress acts on a farm
bill.