Here’s how you may be able to take advantage of the recently passed tax cut bill sooner rather than later. The generous depreciation provisions may be of use to those of you who have held off on purchases of equipment. Further, the changed withholding schedules show that members could be reducing their tax withholding figures by substantial amounts.
The Legislative Alert describes the bill in general, and the US Treasury has provided updated withholding schedules.
LEGISLATIVE ALERT: PASSAGE OF “THE TAX CUT BILL” AND THE RESPONSE BY YOUR COMPANY
Monday, June 9, 2003
Action item: President Bush has asked business associations like ASHI to contact their small business members and urge them to take advantage of the new “Tax Cut Bill” as soon as possible to ignite its positive effects on the economy.
President Bush has signed into law H.R.2, known as the President’s Tax Cut Bill.
The purpose of the bill is to provide tax cuts and economic stimulus to spur the economy and generate jobs. While the media has focused on the dividends/capital gains provisions, the bill does much of its work by putting more dollars into the hands of consumers to spend in the marketplace, and by granting depreciation tax breaks that could help your small business.
The President is ardent in his desire to see the bill boost the economy as quickly as possible. The bill will allow you to adjust your employees’ withholding; it may influence your company to purchase equipment; it may affect other parts of your business in positive ways.
You may wish to contact your accounting professionals quickly to determine how best to take advantage of the Tax Cut Bill for your benefit and that of your employees.
Withholding: You will receive IRS mailings telling you the new lower tax withholding rates. However, the schedules are already available on Treasury and IRS Web sites. You can access them immediately at www.treas.gov/press/releases/js436.htm
Depreciation: The bill also includes significant tax breaks for small businesses. One of the core benefits that certainly could affect your imminent equipment purchasing plans is that the bill expands the bonus depreciation from 30 percent to 50 percent through 2005.
Further, it increases the $25,000 expensing allowance to $100,000 for 2003 through 2005, the $200,000 phase-out limit to $400,000 for 2003 through 2005, and includes off-the-shelf computer software placed in service in 2003 through 2005 as qualifying property.
You may also be interested to note that the bill also diminishes the so-called “marriage penalty” that affects many of our members in a very personal sense.
Of course, any major tax bill is lengthy and complex; these are only highlights. A more detailed summary follows. We strongly urge that you use it only in conjunction with your business and tax advisors. But like the President, we are confident the bill will help many of our members, and we encourage you to strategize soon how to best use it for your benefit.
SUMMARY/HIGHLIGHTS OF H.R.2, THE TAX CUT BILL
Jobs and Growth Tax Relief Reconciliation Act of 2003 - Title I Acceleration of Certain Previously Enacted Tax Reductions
(Sec. 101) Amends the Internal Revenue Code to accelerate the increase to the $1,000 child tax credit to include 2003 and 2004. Maintains the levels and the sunset established under the Economic Growth and Tax Reconciliation Act of 2001
(EGTRRA) for years following. Provides for advance payment for 2003.
(Sec. 102) Accelerates the increase in the 15 percent bracket for joint filers to twice that of single filers to make such increase applicable to 2003 and 2004. Maintains the levels and the sunset established under EGTRRA for years following.
(Sec. 103) Accelerates the increase in the standard deduction for joint filers to twice that of single filers to make such increase applicable to 2003 and 2004. Maintains the levels and the sunset established under EGTRRA for years following.
(Sec. 104) Revises the expansion of the 10 percent bracket for married taxpayers filing jointly scheduled to increase from $12,000 to $14,000 in 2008 as follows: (1) $14,000 through 2004; and (2) $12,000 for 2005 through 2007. Maintains the levels and the sunset established under EGTRRA for years following. Revises inflation adjustment provisions.
(Sec. 105) Accelerates to 2003 individual income tax rate reductions scheduled to begin in 2006. Maintains that level and the sunset established under EGTRRA for years following.
(Sec. 106) Increases the $49,000 (for 2001 through 2004) and $35,750 (for 2001 through 2004) alternative minimum tax exemption amounts to $58,000 (for 2003 and 2004) and $40,250 (for 2003 and 2004), respectively.
(Sec. 107) Establishes that the sunset provisions of EGTRRA apply to this title.
Title II: Growth Incentives for Business
(Sec. 201) Revises provisions concerning the special allowance for certain property acquired after September 10, 2001, and before September 11, 2004, with respect to certain property the original use of which commenced after May 5, 2003, to increase the 30 percent bonus to 50 percent and extend the placed in service date through January 1, 2005 (2006, in certain cases).
(Sec. 202) Increases the $25,000 expensing allowance to $100,000 for 2003 through 2005, the $200,000 phase-out limit to $400,000 for 2003 through 2005, and includes off-the-shelf computer software placed in service in 2003 through 2005 as qualifying property. Provides for inflation adjustments.
Title III: Reduction in Taxes on Dividends and Capital Gains
(Sec. 301) Reduces, for the regular and alternative minimum tax, the 10 and 20 percent adjusted net capital gain rates to 5 (zero percent in 2008) and 15 percent, respectively, for taxable years beginning on or after May 6, 2003, with transition rules for years that include May 6, 2003.
(Sec. 302) Provides, for the regular and alternative minimum tax, for the taxation of dividends received by an individual from domestic corporations at net capital gain rates. Includes as qualified dividend income dividends from qualified foreign corporations (corporations incorporated in the United States or certain corporations eligible for benefits under of a comprehensive tax treaty with the United States).
(Sec. 303) Sunsets provisions of this title December 31, 2008.
Title IV: Temporary State Fiscal Relief
Provides $10 billion for State and local government assistance and $10 billion for Medicaid assistance through September 30, 2004. Amends the Social Security Act to add a new title, Temporary State Fiscal Relief.
Title V: Corporate Estimated Tax Payments for 2003
Requires payment of 25 percent of September 2003 corporate estimated taxes by October 1, 2003.
See your tax advisors for more detailed explanation.