Although Congress averted many of the consequences of a possible tumble over the fiscal cliff with last-minute action, you should be aware of the potential impact on your business of the American Taxpayer Relief Act of 2012. We encourage you to review the highlights of the new law below and call us if you have any concerns about how your tax situation will change as we prepare your returns for this filing season.
Several popular business tax provisions were set to expire at the end of 2012. For example, small business expensing under Internal Revenue Code Section 179 was increased retroactive to Jan. 1, 2012, and extended through 2013. The dollar limit that can be expensed in 2012 and 2013 is $500,000 and there is a $2 million investment limit. You also can make use of the 15-year recovery period for qualified leasehold improvements, retail improvements and restaurant property until the end of 2013.
Many other business tax benefits that had expired or were set to expire were extended through 2013, including:
Effective January 1, 2013, the State of California will be collecting a new 1% tax on the sales price of lumber products. AB 1492 signed into law September 11, 2012, imposes a tax on lumber products and engineered wood products. This tax will be separately shown on sales receipts and will be administered by the State Board of Equalization. This additional revenue pool will be used to review timber harvest plans within the state and spread the cost of forest regulation across all lumber used in California.
"This legislation helps our state's timber industry tremendously by putting more people to work here in California and getting more Californians to buy California timber," said Senator Tom Harman. "Today, seventy percent of our lumber is imported from nearby states and beyond, causing jobs to be exported outside California. This bill brings major reform to California's timber industry and much-needed relief to California businesses."
The assessment of this tax is basically for all products purchased that contain at least 10% wood. Regulations have been adopted by the Board of Forestry and Fire Protection which help clarify which products are subject to the tax. Examples of products subject to the tax include: