Tue, Sep 2, 2014
A A A
Welcome Guest
Free Trial RSS
Get FREE trial access to our award winning publications
Industry Updates

The American Taxpayer Relief Act of 2012 fiscal cliff disaster averted

Thursday, January 03, 2013
Opalesque Industry Update: After furious round-the-clock year end negotiations, lawmakers determined to act before the U.S. stock markets opened after the New Year’s holiday, passed the American Taxpayer Relief Act of 2012 (the Act). This legislation, which President Obama promised to sign, averts the dire consequences from the so-called “fiscal cliff” of expiring Bush-era tax cuts and the imposition of spending cuts enacted within other legislation.

The uncertainty of the tax law impeded the long-term tax and cash flow planning for businesses and prevented taxpayers from making informed decisions. With some modifications, the Act extends the Bush-era tax cuts for individuals earning under $400,000 annually and $450,000 for couples, sets the estate tax rate at 40 percent, with an exemption for estates valued under $5 million, provides a permanent patch for the alternative minimum tax (AMT), and taxes dividends and capital gains at 20 percent for individuals earning over $400,000 and couples with income over $450,000.

In addition, the Act extends the Research and Experimentation credit through 2013 and makes permanent certain personal tax credits, such as the child care and college tuition credit and also The Earned Income Tax Credit is extended for five years. The legislation also extends long-term unemployment insurance benefits through 2013, providing a much needed lifeline to about 2 million unemployed Americans.

While many tax provisions were addressed, the Act does not fully resolve the nontax portion of the fiscal cliff regarding automatic spending cuts (“sequestration”) which are now deferred for the next two months. Discussions regarding the growth of the national debt are expected to begin again when the new Congress is sworn in during January. Taxes are likely to continue to be part of the negotiations concerning the national debt over the next few months. While this Act is projected to raise $620 billion over the next ten years, lawmakers are looking for cuts to entitlements to generate $1 trillion in new revenue.

Highlights of the major provisions of the Act include:

  • Make the 2001 and 2003 tax cuts permanent for income under $400,000 (single) and $450,000 (joint),
  • Return the top rates to 39.6% for ordinary income and 20% for capital gains and dividends (not including the new 3.8% Medicare tax),
  • Reinstate the phaseouts for personal exemptions and itemized deductions at income levels of $250,000 (single) and $300,000 (joint),
  • Make the $5 million estate and gift tax exemption permanent (indexed for inflation) but raise the rate from 35% to 40%,
  • Permanently index the alternative minimum tax (AMT) for inflation,
  • Retroactively extend tax provisions such as the research credit,
  • Provides 50% bonus depreciation for qualified property placed in service,
  • The Act does not extend the 2% point cut in payroll and self employment taxes and,
  • It does not repeal any newly effective Medicare taxes.

Marcum

Press Release

BM

What do you think?

   Use "anonymous" as my name    |   Alert me via email on new comments   |   
Today's Exclusives Today's Other Voices More Exclusives
Previous Opalesque Exclusives                                  
More Other Voices
Previous Other Voices                                               
Access Alternative Market Briefing
  • Top Forwarded
  • Top Tracked
  • Top Searched
  1. Study shows what resonates with investors: 'Unwavering', 'passionate' beats 'committed', 'dedicated' and more surprises[more]

    Komfie Manalo, Opalesque Asia: A new study by Pershing, a unit of BNY Mellon company, showed that an effective value proposition strengthens audience connections and fosters growth, yet many advisors have had little objective guidance in formulating such statements until now. In the study

  2. Legal – GE Capital and Petters-related hedge fund in legal battle, SEC sanctions Donald Brownstein's hedge fund over conflicts of interest[more]

    GE Capital and Petters-related hedge fund in legal battle From Startribune.com: A billion-dollar legal battle is brewing in Florida over who knew what and when about the decade-long Ponzi scheme operated by former Wayzata businessman Tom Petters. The bankruptcy trustee for two failed Flo

  3. Managed futures' global diversification is important in next phase of economic recovery[more]

    Komfie Manalo, Opalesque Asia: The global diversification provided by managed futures may prove to be extremely valuable as the markets enter the next phase of the economic recovery, said Campbell & Company, a pioneer in absolute return invest

  4. Comment – Why you should avoid the hottest hedge fund hands, Swedroe attacks Hussman over risk management, relative value strategy[more]

    Why you should avoid the hottest hedge fund hands FromCNBC/Yahoo.com: Investors who don't have money with Pershing Square Capital Management are likely salivating at the hedge fund's industry-leading 26 percent return from January through July. But investing with Bill Ackman and other to

  5. Ex-UBS prop trader's hedge fund Manikay Partners eyes UK launch[more]

    From eFinancialnews.com: Manikay Partners, a $1.7 billion US multi-strategy hedge fund set up in 2008 by a proprietary trader from UBS with backing from Goldman Sachs, is planning to open in the UK. New York-based Manikay's move into Europe comes after Financial News revealed on Monday that Aurelius