Association of Equipment Manufacturers

1/3/2013
Advisor Newsletters - AEM Advisor

Key Provisions of ‘Fiscal Cliff’ Legislation Could Help Equipment Manufacturers in 2013

Though the battle over individual income tax rates commanded the majority of media attention, key provisions of the final “fiscal cliff” legislation could help agriculture and construction equipment manufacturers in 2013.

Here’s a quick rundown on the most important tax and policy issues included in the bill:

FARM BILL: The fiscal cliff legislation includes a partial, nine-month extension of the 2008 farm bill that will offer producers some level of certainty as they enter the spring planting season. This should allow decisions regarding equipment purchases for the coming year to proceed as normal.

Key components of the extension include the continuation of a dairy price support program that compensates producers when domestic milk prices fall below a specified level. This will stave off a dramatic increase in milk prices at the grocery store, dubbed the “dairy cliff.”

The extension also calls for modest cuts in direct payment subsidies. According to the Congressional Budget Office, the extension would cut $1.3 billion from this subsidy’s $50 billion cost over 10 years while the proposed House and Senate five-year farm bills would eliminate that subsidy completely.

The slimmed-down farm bill extension represents a funding cut for many programs dealing with farm energy and conservation programs, specialty and organic crops, and disaster relief.

The agreement also includes an extension of the biodiesel tax incentives through 2013 and retroactive to January 1, 2012. House and Senate Agriculture Committee leaders have vowed to resume work on a five-year farm bill immediately.

BONUS DEPRECIATION: The bill includes a one-year extension of 50-percent bonus depreciation through the end of 2013, a provision very much supported by equipment manufacturers and purchasers of equipment.

SECTION 179: The deal temporarily extends the previously enacted increase in the maximum amount and phase-out threshold under section 179 expensing. The provision approved by the House and Senate would return the maximum amount and phase-out threshold in 2012 and 2013 from $500,000 to $2 million – the levels in effect in 2010 and 2011.

ESTATE TAX: The bill includes a provision that holds the exemption level of the estate tax at $5 million. Congress did, however, agree to raise the top rate level from 35 to 40 percent. Had Congress neglected to act, the estate tax exemption could have dropped to $1 million with a top rate of 55 percent.

For more information on the fiscal cliff agreement or the path ahead to control the debt, please contact Anne Forristall Luke (AForristallLuke@aem.org, tel: 202-615-0096) or Nick Yaksich (NYaksich@aem.org, tel: 202-491-4272) in AEM’s Washington, D.C., office.

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