Yesterday the House of Representatives approved, 257 to 167, the Senate-passed fiscal cliff deal, clearing the measure for the President. Speaker Boehner (R-OH) voted in favor of the bill, and Ways and Means Committee Chairman Dave Camp (R-MI) joined him in urging support. A summary of the bill that includes revenue estimates has been released by the Joint Committee on Taxation, and is available [here]. The latest bill text is available [here]. The bill delays until March 1, 2013 the impact of sequestration, but does not address the debt ceiling. It does not affect the exemption on municipal bond interest, but that issue is likely to be revisited when the debt ceiling is addressed in February.
Highlights of the bill includes the following :
– Extension of the Bush-era tax rate reductions for all earners except individuals making over $400,000 and families making over $450,000. Their rates rise to 39.6 percent.
– Rates on capital gains and dividends would increase to 20% for high earners above $400,000 individuals/$450,000 for families.
– Extension of unemployment insurance.
– Extension of the Child Tax Credit, the Earned Income Tax Credit, and tax breaks for college tuition.
– A reset of the estate tax above previous rates, but below the rate that would have occurred absent a deal. The rates would be set at 40 percent, and estates under $5 million per person would be exempt.
– A permanent fix for the Alternative Minimum Tax.
– Corporate tax breaks, such as an extension of bonus depreciation.
– A “doc fix” that prevents rate cuts to doctors who treat Medicare patients.
– A reinstatement of the “Personal Exemption Phaseout” (PEP) and limits on itemized deductions (Pease) that had been phased out under the Bush tax cuts. These apply to couples with incomes over $300,000 and individuals with incomes over $250,000. These provisions do not touch the municipal bond exemption, but the Administration press release describing this provision notes, “This sets the stage for future balanced approached to deficit reduction, which could include additional revenue through tax reforms that reduce tax benefits for Americans making over $250,000.”
Other provisions that may be of interest to BDA members include:
– extension of the housing allowance exclusion for determining area median gross income for qualified residential rental project exempt facility bonds;
– extension of the new markets an empowerment zone tax incentives;
– extension of New York Liberty Zone bonds; and,
– for education, an extension of qualified zone academy bonds; extension of the small-issuer arbitrage rebate exception for governmental bonds for school construction; and extension of provisions for issuance of tax-exempt private activity bonds for qualified education facilities.
