Fiscal Cliff Legislation Summary
TO: Transportation Transformation Group Executive Committee
FROM: Billy Moore
SUBJECT: Fiscal Cliff Legislation Summary
DATE: January 1, 2013
The Senate approved HR 8, the American Taxpayer Relief Act of 2012 (ATRA), 89-8 on January 1. The House will vote later today.
Major provisions include:
• Tax rates would permanently rise to Clinton-era levels for families with income above $450,000 and individuals above $400,000. All income below the threshold would permanently be taxed at lower Bush-era rates.
• The tax on capital gains and dividends would be permanently set at 20 percent for those with income above the $450,000/$400,000 threshold. It would remain at 15 percent for everyone else.
• The estate tax would be set at 40 percent for those at the $450,000/ $400,000 threshold, with a $5 million exemption. The threshold would be indexed to inflation.
• The sequester would be delayed for two months. Half of the delay would be offset by discretionary cuts, split between defense and non-defense. The other half would be offset by revenue raised by the voluntary transfer of traditional IRAs to Roth IRAs, which would tax retirement savings when transferred.
• Pay for Members of Congress would be frozen.
• The stimulus tax provision would be extended for five years
o The Earned Income Tax Credit
o The Child Tax Credit, and
o The American Opportunity Tax Credit.
• Other provisions would be extended one or two years:
o Deduction for certain expenses of elementary and secondary schoolteachers.
o Exclusion from gross income of discharge of qualified principal residence indebtedness.
o Parity for exclusion from income for employer-provided mass transit and parking benefits.
o Mortgage insurance premiums treated as qualified residence interest.
o Deduction of State and local general sales taxes.
o Special rule for contributions of capital gain real property made for conservation purposes.
o Above-the-line deduction for qualified tuition and related expenses.
o Tax-free distributions from individual retirement plans for charitable purposes.
o Research credit.
o Temporary minimum low-income tax credit rate for non-federally subsidized new buildings.
o Housing allowance exclusion for determining area median gross income for qualified residential rental project exempt facility bonds.
o Indian employment tax credit.
o New markets tax credit.
o Railroad track maintenance credit.
o Mine rescue team training credit.
o Employer wage credit for employees who are active duty members of the uniformed services.
o Work opportunity tax credit.
o Qualified zone academy bonds.
o 15-year straight-line cost recovery for qualified leasehold improvements, qualified restaurant buildings and improvements, and qualified retail improvements.
o 7-year recovery period for motorsports entertainment complexes.
o Accelerated depreciation for business property on an Indian reservation.
o Enhanced charitable deduction for contributions of food inventory.
o Increased expensing limitations and treatment of certain real property as section 179 property.
o Election to expense mine safety equipment.
o Special expensing rules for certain film and television productions.
o Deduction with respect to income attributable to domestic production activities in Puerto Rico.
o Tax treatment of certain payments to controlling exempt organizations.
o Certain dividends of regulated investment companies.
o RIC qualified investment entity treatment under FIRPTA.
o Subpart F exception for active financing income.
o Look-thru treatment of payments between related controlled foreign corporations under foreign personal holding company rules.
o Exclusion of 100 percent of gain on certain small business stock.
o Basis adjustment to stock of S corporations making charitable contributions of property.
o Reduction in S-corporation recognition period for built-in gains tax.
o Empowerment zone tax incentives.
o Tax-exempt financing for New York Liberty Zone.
o Increase in limit on cover over of rum excise taxes to Puerto Rico and the Virgin Islands.
o American Samoa economic development credit.
o Bonus depreciation.
o Credit for energy-efficient existing homes.
o Credit for alternative fuel vehicle refueling property.
o Credit for 2- or 3-wheeled plug-in electric vehicles.
o Cellulosic biofuel producer credit.
o Incentives for biodiesel and renewable diesel.
o Production credit for Indian coal facilities placed in service before 2009.
o Credits with respect to facilities producing energy from certain renewable resources.
o Credit for energy-efficient new homes.
o Credit for energy-efficient appliances.
o Special allowance for cellulosic biofuel plant property.
o Special rule for sales or dispositions to implement FERC or State electric restructuring policy for qualified electric utilities.
o Alternative fuels excise tax credits.
• The Alternative Minimum Tax would be permanently patched to avoid raising taxes on the middle-class.
• The payroll tax holiday would be allowed to expire.
• Limits on tax exemptions and deductions for higher-income Americans would be re-imposed: Personal Exemption Phase-out would be set at $250,000 and the itemized deduction limitation kicks in at $300,000.
• Scheduled cuts to doctors under Medicare would be avoided for a year through Medicare spending cuts.
• Federal unemployment insurance would be extended for another year.
• Agriculture policies would be extended nine months.
William K Moore
633 Pennsylvania Avenue, NW
Washington, DC 20004