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January 21, 2013
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President Signs American Taxpayer Relief Act into Law

H.R. 8 directly impacts U.S. agriculture.

The U.S. House of Representatives and the U.S. Senate passed the American Taxpayer Relief Act of 2012 (H.R. 8) prior to the president signing the legislation into law on Wednesday, Jan. 2, 2013. The legislation has direct implications on farm and ranch families, according to Missouri Cattlemen’s Association (MCA) Executive Vice President Mike Deering.

“It was essential that something was passed so farmers and ranchers may know what the year to come will hold,” said Deering. “Many agriculturists were waiting on the outcome of this bill so they could plan their next move.”

H.R. 8 will permanently extend the 2001 and 2003 tax rates for individuals with income below $400,000 for an individual or $450,000 per couple. Rates for incomes over these thresholds will increase from 35% to 39.6%. Dividends and capital gains will rise from 15% to 20% for those over these thresholds.

Most critically for small businesses, such as farmers and ranchers, is the estate tax. The estate tax exemption of $5 million per individual or $10 million per couple was retained and will be indexed for inflation. The exemption is expected to be $5.25 million per taxpayer in 2013, up from $5.12 million in 2012). The Act clarifies that estate and gift tax exemptions are portable between spouses, meaning a surviving spouse can use a deceased spouse’s unused exemption on future transfers.

The tax rate for estate, gift and generation-skipping transfers above the exemption level was increased from 35% to 40%.

“This is not perfect, but it is now permanent, and we won’t have to spend as much time protecting these levels,” said Deering. “We would prefer complete elimination of this nonsensical and ludicrous tax, but that was not an option with this Congress. The good news is producers now have a level of certainty when planning the future of their estates. This takes a lot of guessing out of the equation.”

By permanent, Deering means the estate, gift and generation-skipping transfer tax laws are not scheduled to sunset, as was the case with the previous law. They can be changed, however, through legislation.

This legislation also extended the 2008 Farm Bill to Sept. 30, 2013, due to Congress not passing the 2012 Farm Bill. According to Colin Woodall, National Cattlemen’s Beef Association vice president of government affairs, the failure to pass the 2012 Farm Bill has serious consequences for U.S. agriculture.

“The great strides we made in achieving our policy priorities came through strategic action, and in some cases, stealth. Our playbook is now open, and it will be much harder to replicate some of our wins,” said Woodall “We will need to rally all of our members to help us when the Senate and House Agriculture Committees start all over on the 2013 Farm Bill.”

Editor’s Note: Adapted from a news release by the Missouri Cattleman’s Association.



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