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As retailers work to recover from the recent lengthy recession, RILA also supports the bonus depreciation and other stimulus provisions intended to encourage economic growth and job creation.
With the enactment of the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 (TRUIRJCA), /1/ the AMT exemption was adjusted and extended through 2011, and individual tax relief enacted in 2001/2003 was extended through 2012. TRUIRJCA also extended dozens of other expiring tax provisions generally through 2011, including the state and local sales-tax deduction and the other business provisions listed above.
TRUIRJCA also provided important economic stimulus incentives for business investments – 100-percent expensing for certain business assets placed in service in 2011 and 50-percent bonus depreciation for such assets in 2012.
RILA urges Congress to enact legislation to extend the temporary business tax provisions that expire at the end of 2011. In addition, RILA urges Congress to extend all of the individual tax relief enacted in 2001/2003, which is now scheduled to expire at the end of 2012. Ideally, these tax provisions should be made permanent.
Should Congress undertake fundamental tax reform, RILA will continue to advocate for permanent tax policy with respect to the individual tax rates as well as business tax provisions to ensure a stable, consistent and predictable tax code that fosters economic growth and the competitiveness of American businesses in the global marketplace. Additionally, RILA believes that tax reform legislation should permanently repeal the AMT to provide additional tax relief, especially to moderate-income earners.
Since the tax code was last reformed in 1986, Congress has enacted dozens of important tax provisions for American businesses to encourage:
Unfortunately, due to budgetary and political constraints, too many of these provisions were enacted on a temporary basis, requiring repeated extensions (increasingly on a retroactive basis). The uncertainty resulting from such temporary tax policy makes it difficult for American businesses, which rely on five- and ten-year business strategies, to plan effectively for the future and remain competitive in an increasingly global economy.
During economic downturns, such as the recent recession, Congress has also enacted temporary tax provisions to help stimulate the economy and job growth. For example, in the Economic Stimulus Act of 2008, Congress expanded the amount of new equipment purchases that small businesses could immediately expense and allowed all businesses to claim 50-percent bonus depreciation on qualifying assets placed in service during 2008. For businesses unable to utilize the bonus-depreciation incentive (e.g., businesses with net operating losses), the Housing and Economic Recovery Act of 2008 allowed companies in 2008 to claim unused corporate AMT credits or R&D credits in lieu of the bonus depreciation and receive a refund to invest in new property or equipment. With the enactment of the American Recovery and Reinvestment Act of 2009, these provisions, designed to stimulate business investments, were extended through 2009. As the economy continued to seek its footing, the bonus depreciation provision was extended through 2010 under the Small Business Jobs Act, and full business expensing was provided for 2011 under TRUIRJCA (with 50-percent expensing in 2012).
For individuals and families, the temporary nature of much of the tax code also makes it increasingly difficult for them to plan for the future, especially in terms of saving for education and retirement. Beginning in 2001 with the Economic Growth and Tax Relief Reconciliation Act, /2/ substantial tax relief was provided for individuals, including owners of pass-through businesses (e.g., S corporations, partnerships, and sole proprietorships), ranging from lower tax rates, expanded child tax credit, and marriage penalty relief to expanded expensing of equipment, lower rates on capital investments, and estate-tax relief. Through subsequent legislation – Jobs and Growth Tax Relief Reconciliation Act of 2003, /3/ Working Families Tax Relief Act of 2004, /4/ and Tax Increase Prevention and Reconciliation Act of 2005 /5/ – these temporary provisions were generally aligned to expire at the end of 2010 – and all were extended through 2012 under TRUIRJCA.
Making the tax relief enacted since 2001 permanent will help stimulate the nation’s economy. By enabling American taxpayers, especially low-and moderate-income earners, to retain more of their earnings, the tax relief will stimulate savings, investment and spending on retail purchases. Moreover, permanent extension of this tax relief will make it easier for families to plan their financial future by eliminating the uncertainty about whether and when their taxes will increase should these temporary tax provisions expire.
Another temporary provision affecting a growing number of individuals is the AMT. Under current law, individual taxpayers are generally required to pay either the regular tax or the AMT, whichever is greater. Unlike the regular tax, however, the various aspects of the AMT were never indexed for inflation. As a result, it now affects several million taxpayers, with millions more at risk each year (and affecting increasingly lower amounts of taxable income) if the exemption amount is not extended and adjusted for inflation.
Originally established in 1969 to ensure that the top income earners in the United States (which numbered a few hundred individuals) did not entirely escape taxation, the AMT has grown far beyond its intended purpose and now threatens millions of Americans and a growing number of moderate-income earners. In past years, Congress has annually enacted legislation to constrain the AMT’s expansion by increasing the exemption amount from the alternative tax. Permanent repeal of the AMT will provide much-needed certainty as well as critical tax relief to the middle-income earners and families.
For more information, please contact Mark Warren, tax consultant, at mark.warren@rila.org.
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