To: Americans for the Arts members
From: Nina Ozlu Tunceli, Chief Counsel, Gov’t & Public Affairs, Americans for the Arts
Date: January 2, 2013
Re: Impact of Fiscal Cliff Tax Legislation Enacted into Law
The following are some quick highlights of the Fiscal Cliff Tax Legislation that was enacted into law last night. The legislation only addresses major tax issues, while raising the debt ceiling limits and preventing the automatic sequestration spending cuts from beginning will be dealt with over the next two months.
- Charitable Deductions: Good news is that the charitable tax giving incentives were not specifically capped and no changes were made to the exempt status or classification of charities, such as nonprofit arts organizations. While no changes have been made in this important round, tax reform revenue raisers are still on the table as Congress and the White House negotiate staving off deep sequestration cuts in the coming months. Americans for the Arts will continue advocating the importance of this issue on behalf of the nonprofit arts sector.
- IRA Rollover: Extends for two years, retroactive to 2012, the popular IRA Rollover, which provides incentives for charitable giving. Important note: donation deadlines have been extended by a month so that donors can designate their IRA distributions in January 2013 for tax year 2012.
- Marginal Rates: Permanent extension has been made of the current Bush-era lower tax rates for families earning up to $450,000, and singles earning up to $400,000. However, for earners above these levels, their rates will increase to Clinton-era levels of up to 39.6 percent.
- Capital Gains/Dividends: The tax rate on capital gains and dividends will remain at 15 percent for earners with income up to the $450,000(families)/$400,000(singles). However, the rate permanently goes up to 20 percent for those earners above the threshold.
- Estate Tax: Permanently sets the estate tax at the current level with a $5 million exemption that is now indexed for inflation and a top tax rate of 40 percent.
- Alternative Minimum Tax: A permanent patch has been made to the AMT for upper-middle class earners so that it is now annually indexed to inflation.
- Payroll Tax Cut Holiday: This recession-fighting strategy that cut payroll taxes by two percent for the last couple of years in order to bolster take-home pay has now expired and was not renewed in 2013.