Issue link: http://www.insightdigital.biz/i/104912
INSIGHT FROM ... Rick Stezenski, CPA Steve Koritzinsky, CPA Tax insights for manufacturers Businesses can benefit from recent law changes t h e p r e s i d e n t s i g n e d a l a s t- m i n u t e compromise bill on Jan. 3 that settled nearly all of the unresolved fiscal cliff tax issues. The income tax rate changes will primarily affect businesses operated as passthrough entities such as S Corporations and LLCs. Tax changes in fiscal cliff legislation: �� akes permanent the 2001/2003 tax cuts on income under M $400,000/ $450,000 for joint filers �� op rates of 39.6 percent for ordinary income and 20 T percent for capital gains/dividends �� einstate phase-outs for exemptions and itemized R deductions �� ermanently indexes the Alternative Minimum Tax P �� ermanent extension of $5 million gift and estate tax P exemption �� xtension of 50 percent bonus depreciation and rules for E equipment expensing under Section 179 of the IRS code �� xtension of research credit E While the U.S. corporate tax rate is one of the highest in the industrialized world, both Republicans and Democrats appear to support tax reform for businesses operating as C Corporations. While these businesses currently pay up to a 35 percent federal income tax rate, there is support for an across-the-board rate reduction to something around 28 percent. However, this could be dampened by a reduction in tax incentives available to manufacturers and the topic will likely be addressed later in 2013. Corporate income tax reform changes: �� ower income tax rates L �� limination of bonus depreciation and favorable limits on E capital expenditures under Section 179 �� otential reductions to last in, first out inventory; research P and development credit; and domestic production deduction benefits 24 | Insight on Manufacturing ��� January 2013 Manufacturers should claim the research credit for 2012, which was extended in the legislation. Businesses will be able to benefit from other recent law changes. All manufacturers can expense 50 percent of the cost of new equipment placed in service in 2012 under bonus depreciation. In addition, Section 179 provides an opportunity to expense 100 percent of new and used equipment placed in service in 2012, up to $500,000, subject to phase-outs. ���The state also has a program that provides tax credits for companies that are expanding their workforce, facilities, and training offered to employees.��� Also, in December 2011, the U.S. Treasury issued new regulations known as the Tangible Property/Repair regulations. While these regulations contain both good and bad, they are not effective until tax years beginning in 2014, while providing manufacturers the opportunity to adopt the favorable aspects of these rules for 2012. The most significant opportunity in these regulations relates to real property ��� namely buildings and leasehold improvements. At a high level, the opportunity is to retroactively expense your remaining tax basis of prior years��� qualifying repairs, remodels and renovations to real property. Tax deductions for repairs made in 2012: �� oof repairs R �� arking lot repairs P �� ther remodels and renovations to buildings O w w w.in s i g h t o n m f g .c o m