Proposed Tax Deal Has Benefits For Agriculture

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According to reports, the White House has given up on its push for a tax increase on higher income earners and has reached a deal with key tax legislators in the House and Senate that addresses a number of tax provisions in addition to keeping 2011 individual income tax rates at the 2010 level. While there isn’t any bill that has been written as of yet, here’s a collection of what has been apparently agreed to. Remember, it all could fall apart once a formal bill gets to the House and/or the Senate. Iowa State University's Center for Ag Law and Taxation has a rundown of the proposed details:

Income Tax Provisions

Rates. The EGTRRA rate structure put in place in 2001 would continue through 2012. So, the top individual income tax rate would remain at 35 percent and the rate for capital gains and dividends would stay at 15 percent.

Asset expensing. For new assets that are acquired in 2011, 100 percent expensing would be allowed. Other than the requirement that the asset must be new, there aren’t any other details on the type of assets that would qualify for this provision.

Expiring provisions. It appears that the deal includes an extension, in general, of expiring provisions. We will have to wait for the details of what does and does not get extended.

Alternative Minimum Tax


The deal apparently includes a two-year “AMT patch.” Unknown at the present time is what the exact exemption levels will be.

Estate Tax

The deal is that the estate tax would return (for two years only - apparently 2011 and 2012) with an exemption of $5 million and a 35 percent top rate. That is precisely what the Republican-led House passed in the summer of 2006, but which the Senate failed to consider. There is no mention of whether the “stepped-up” basis rule would apply, but in the 2006 House bill it did. There is also no mention of how to handle the confusing modified carry-over basis rule applicable to estates of decedents dying in 2010 and whether or not that rule applies to inherited assets that are sold after 2010 for purposes of computing gain on sale (or what tax rate applies to adjusted taxable gifts reported on Form 706 for deaths after 2010, where the gifts were made in 2010).

Other Provisions

FICA tax. While the employer portion of the FICA tax would remain at 6.2 percent, the deal is that the employee portion would decline to 4.2 percent - for 2011 only.

Unemployment Benefits. Reports are that the deal includes an extension of jobless benefits for 13 months (which sets the issue up for a replay just in time for next Christmas). The extension is for those whose benefits have not already run out.

Source: Illinois Farm Bureau



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