House Republicans' Bill Extends Payroll Tax Break and 100% Bonus Depreciation for One Year
On December 9, House Republicans introduced their “Middle Class Tax Relief & Job Creation Act of 2011.” The bill would extend through 2012 the 2% reduction in workers' payroll tax and self-employment tax that's scheduled to expire at the end of 2011. It also would make a number of other tax changes, including the following:
- The 100% bonus first-year depreciation allowance under Code Sec. 168(k), which under current law won't apply to assets placed in service after 2011 (with the exception of some specialized assets), would be extended to apply for property placed in service in 2012.
RIA observation: Under current law, 50% bonus first-year depreciation is available for property placed in service in 2012. The bill doesn't appear to extend this rule to property placed in service in 2013.
- For 2012, the election to claim AMT credits in lieu of bonus depreciation would be expanded.
- For 2012, taxpayers that use the percentage of completion method under Code Sec. 460, could treat the cost of qualified property allocated to the contract as if bonus depreciation had not been enacted (a one-year extension of the rule).
- Effective for tax years beginning after the enactment date, taxpayers that claim a refundable tax credit would be required to include their social security numbers on their returns.
- After 2011, a 100% tax would apply to unemployment compensation claimed by very high income taxpayers.
- The amount of “excess advance payments” of the premium assistance credit (enacted as part of the 2010 health care reform legislation to help lower-income individuals acquire affordable health insurance coverage) that a taxpayer must repay under Code Sec. 36B(f)(2) would effectively be increased for some taxpayers, effective for tax years ending after Dec. 31, 2013.
- Previous tax laws have raised revenue by shifting (i.e, accelerating) estimated tax payments in future years for large corporations (assets of at least $1 billion). Sec. 6001 of the bill would repeal five of these shifts.
The House Republicans' bill also includes a large assortment of non-tax-related revenue raisers, as well as a number of unrelated provisions, such as a permit for the Keystone XL oil pipeline from Canada to the U.S. Senate Democrats have predicted the House Republicans' bill won't pass the Senate in its current form, and the President has said he would veto any bill that linked quick approval of the Keystone XL pipeline to extending the payroll tax cut.
Source: Federal Tax Updates on Checkpoint News tab 12/1/2011