On September 8, President Obama unveiled a proposal calling for a 100% tax deduction for plants and equipment for 2012 as a key component of the Administration’s new $447 billion American Jobs Act. The proposal calls for a full deduction of qualified capital investments through December 31, 2012 and allows all firms-large and small-to take an immediate deduction on investment in new plants and equipment.
Under current law, business are generally allowed to immediately deduct 100% of the cost of qualified property placed in service in 2011, and take 50% "bonus depreciation" on the cost of property placed in service in 2012. The President's proposal would extend the 100% expensing provision through the end of 2012. For the 100% expensing provision, this proposal also extends the longer placed in service date for property placed in service before January 1, 2014 for certain longer-lived and transportation property. The 50% bonus depreciation provision is not changed, but would be subsumed by the 100% expensing proposal in 2012. The expensing proposal is estimated to cost $5 billion over a ten year budget window.
On September 12, the President announced his recommendations to pay for his jobs plan including proposals to: tax "carried interest" in investment partnerships as ordinary income, repeal certain oil and gas provisions, limit certain individual itemized deductions and exclusions to a 28% tax rate, and lengthen the depreciation schedule for general or corporate aircraft to seven years.
Notably, the President recommended that new bicameral, 12-member congressional Joint Select Committee on the Deficit (the “Supercommittee”), be charged with finding the necessary revenue to pay for this plan as well as finding an additional $1.5 trillion in deficit reduction cuts over the next ten years (2012-2021).
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