New Tax Law: Just In Time
There is no question that many of the provisions contained in the tax bill signed by President Obama last week are a victory for the manufacturers of specialized farm equipment.
While we believe a repeal of the estate tax and making the Bush-era tax rates permanent would have been more beneficial, this two year relief for small, family owned manufacturers is far better than the 55 percent tax that would have destroyed many family businesses.
The Farm Equipment Manufacturers Association was in part created by multi-generational family manufacturing businesses. The estate tax provisions in this bill will help many of our members, who want to pass down the family businesses to the next generation, without having to sell their assets just to be able to afford this tax. If the estate tax had been allowed to revert back to the pre-2001 level of 55 percent, on property valued at $1 million, there would have been little, if any chance of family run businesses surviving for the next generation.
The Farm Equipment Manufacturers Association is not alone in praise of the legislation which extended many of the Bush-era tax rates and incentives for renewable fuels. "Securing meaningful estate tax reform for farm and ranch families has been a top priority for the American Farm Bureau Federation," Bob Stallman, the group’s president, said. "It offers considerable relief that will help farmers, ranchers and rural communities in these difficult economic times."
The bill raises the threshold for the estate tax to $5 million from $3.5 million in 2009 and reduces the estate tax rate to 35 percent from 45 percent. Couples will be allowed to pass up to $10 million from an estate to their heirs tax free, with assets above $10 million to be taxed at 35 percent.
We are pleased to see many of the provisions in the law that will effect our members and the thousands of workers they employ.
- A two year estate tax with a $5 million per person ($10 million per couple) exemption (indexed for inflation) and a 35 percent rate beyond that.
- Allows businesses to expense 100 percent of the cost of qualified property placed in service after Sept. 8, 2010, and before Jan. 1, 2012. It provides for a 50 percent first year additional depreciation deduction for qualified property placed in service in 2012.
- A two year "patch" to prevent the alternative minimum tax from affecting 25 million
taxpayers. For 2010, the measure sets the exemption amounts (i.e., the income not subject to taxes under the AMT) at $47,450 for individuals, and $72,450 for couples filing jointly. It increases the exemption amounts for 2011 to $48,450 and $74,450, respectively. It allows various nonrefundable personal credits to be claimed against the AMT in both years. - A two year extension of the expiring 2001 and 2003 tax cuts for taxpayers at all income levels. An extension for two years of the reduced 15 percent maximum tax rate for capital gains and dividends, as well as the 0 percent rate for those in the lowest two tax brackets.
- Extends through 2012 the maximum child tax credit of $1,000 as well as provisions that expand eligibility for the refundable credit.
- Extends for two years the size of the 15 percent tax bracket and the standard deduction for married couples filing a joint tax return intended to prevent the "marriage penalty" that led some joint filers to pay more than they would as unmarried individuals filing separately.
- Extends through 2012 the rules that simplified and expanded eligibility for the Earned Income Tax Credit, and increases the income range at which the credit phases out for married couples.
- A one year extension of the ethanol blender credit at 45 cents (at a cost of $4.9 billion), and the 54 cents import tariff. In addition, the bill extends for one year the 10 cent a gallon, small producer ethanol credit.
- The biodiesel tax credit would be made retroactive to Jan. 1, 2010, and extended through the end of 2011, at a cost of $2 billion over 10 years. The bill extends the $1.00 per gallon production tax credit for biodiesel, as well as the small agri-biodiesel producer credit of 10 cents per gallon. The bill also extends through 2011 the $1.00 per gallon production tax credit for diesel fuel created from biomass.