On December 17, 2010, President Obama signed into law the “Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 (2010 Tax Relief Act) (H.R. 4853),.  The new law retains Bush-era tax rates for all taxpayers; offers 13 months of extended benefits to the unemployed and attempts to stimulate the economy with a Social Security payroll tax cut for all workers.  Cost of this bill is estimated at $858 billion over two years.

Highlights from the 2010 Tax Relief Act:

Individuals

  • Bush-era tax cuts for all income levels remain in place through 2012
  • Capital Gains/Dividends rates remain in place through 2012
  • Itemized deductions/Personal exemptions remain as is through 2012
  • Individual Tax Credits extended through 2012 are as follows:
    • Child Tax Credit
    • Earned Income Tax Credit
    • Adoption Credit
    • Dependent Care Credit
    • American Opportunity Tax Credit
  • Alternative Minimum Tax Patch is provided for in 2010 and 2011
  • Payroll Tax Cut
    • Reduces the employee’s share of FICA tax withheld from their pay from 6.2% to 4.2%
    • Effective for calendar year 2011, for wages earned up to taxable wage base of $106,800
  • Extension of unemployment benefits for next 13 months through December 31, 2011
  • Estate Tax Relief with maximum tax rate of 35% and exclusion amount of $5 million

Business Incentives

  • Bonus Depreciation
    • 100% for qualified investments made after September 8, 2010 and before January 1, 2012
    • 50% for qualified investments made after December 31, 2011 and before January 1, 2013
    • Alternatively, in lieu of bonus depreciation, corporation may elect to claim additional research or minimum tax credits, which will be refundable in 2011 and 2012
  • Small Business Stock Gain Exclusion extended through December 31, 2011
  • Work Opportunity Tax Credit is extended through December 31, 2011
  • Business Extenders (renewed retroactively from January 1, 2010 through December 31, 2011)
    • Research Tax Credit
    • Indian Employment Credit 
    • New Markets Credit
    • Empowerment Zones
    • District of Columbia Tax Incentives
  • A number of the Energy Incentives are extended for one or two years
  • A number of the Disaster Incentives are extended for one or two years

Notable Omissions from the 2010 Tax Relief Act:

A number of key tax incentives and/or categories of key tax incentives were excluded from the 2010 Tax Relief Act.  CCG is highlighting these omissions due to the crucial benefit they provide to our communities; the companies in these communities; and the jobs that our clients create in these communities.  Coalitions will be forming to begin lobbying Congress to extend these programs, as Congress did for the other similar incentives within this Act due to their job creation influence.  The key tax incentives and/or categories are as follows:

  • Renewal Community Zones
    • Expired on December 31, 2009, and very similar to the Federal Empowerment Zone Program which was retroactively extended through December 31, 2011
  • Work Opportunity Tax Credit Program – Categories
    • Katrina – expired on August 28, 2009; proposals were to extend to August 28, 2010
    • Unemployed Veteran and Disconnected Youth – expires on December 31, 2010; proposals were to extend to December 31, 2011

CCG monitors all state and federal legislation, and issues Tax Alerts as necessary to keep you up to date.  Please visit www.ccg.com, and click on our “News” section for up to date information.

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