Salt Lake City BUSINESSES TAX
BUSINESSES TAX
On the campaign trail, President Obama called for a reduction in the corporate
tax rate. Such a reduction has broad bipartisan support, although there remains
disagreement over the proper tax rate and the specific revenue offsets that
would be used to broaden the tax base. However, because there is consensus that
a reduction in corporate income tax rates would be good for business and good
for the country, Congress is expected to enact corporate tax reform, although
it may take until late 2013 or 2014 to do so.
Corporate Tax Rate
President Obama has said that any cut in the corporate tax rate must be revenue
neutral. That means certain business tax preferences are likely to be
eliminated in exchange for the reduction. President Obama has repeatedly urged
elimination of tax preferences for oil and gas producers, which could be used
to partly offset the cost of a corporate tax cut.
Comment
In early 2012, President Obama unveiled a Framework for Business Tax Reform in
which he proposed reducing the maximum corporate tax rate from 35 percent to 28
percent, with a reduced effective rate of 25 percent for qualified
manufacturers.
Comment
Any discussions for a grand bargain could include moving the U.S. from a
worldwide system of taxation to a territorial system of taxation, but this is
unlikely to be a priority. On the other hand, proposals made by the President
in early 2012 to reward employers that move operations from overseas plants to
the U.S.
with a tax credit could be revived. President Obama also proposed to give
employers that increase payrolls a tax credit. This proposal also could be
revived in year-end negotiations.
Small Business Expensing
Enhanced Code Sec. 179 expensing is scheduled to expire after 2012. Unless
extended, the current expensing amount of $139,000 (as indexed for inflation)
is scheduled to fall to $25,000 and the current $560,000 investment limit (as
indexed for inflation) is scheduled to fall to $125,000.
Comment
Some compromise over extending expensing at a higher level into 2013 appears
possible. Earlier this year, the Senate approved legislation to provide for a
Code Sec. 179 maximum dollar amount of $250,000 and an $800,000 investment
limitation for tax years beginning after December 31, 2012. The House approved
legislation to extend the Code Sec. 179 small business expensing parameters
originally put in place in 2003 ($100,000 and $400,000, respectively) through
2013. These amounts would be indexed for inflation for 2013, which the House
GOP estimated at $127,000 and $510,000, respectively. Disincentives to passing
an expensing extension include its cost and what offsets may be used.
Bonus Depreciation
Bonus depreciation at its current 50 percent rate is scheduled to expire after
2012 (after 2013 for certain transportation property and longer-lived
property). It is unclear if President Obama will support an extension of 50
percent bonus depreciation. (Salt Lake City BUSINESSES TAX)