Tax Relief for Cattlemen

At the end of December 2010, Congress passed a tax package known as the Reid-McConnell Tax Package. In addition to preventing the estate tax from reverting to pre-2001 levels of a 55 percent tax with a $1 million exemption, the tax package also addressed a variety of expiring tax issues that would have affected U.S. cattle producers.

SUMMARY OF TAX PACKAGE

• Two-year extension of 2001 and 2003 tax levels for all income levels
• Estate tax - Level set at $5 million and 35 percent tax rate for two years
• Unemployment Insurance extended for 13 months
• Capital Gains remains at 15 percent for two years
• AMT patch for two years
• Social Security payroll tax reduced 2 percent for 2011, from 6.2 percent to 4.2 percent
• Businesses will be allowed to write off the full cost (100 percent) of new capital investments for 2011
• One-year extension of ethanol tax credit at 45 cents and tariff at current rates

SUMMARY OF ESTATE TAX PROVISION

• Establishes an estate tax exemption of $5 million a person ($10 million per couple) and top rate of 35 percent
• Reinstates stepped-up basis
• Indexes the estate tax exemption for inflation
• Contains a spousal transfer of any unused estate tax exemption amount
• Estates of those dying in 2010 are given a choice of the new exemption and rate or current 2010 law (no estate tax and modified carryover basis)

EXTENSION OF BONUS DEPRECIATION

Under current law, businesses are allowed to recover the cost of capital expenditures over time according to a depreciation schedule. Congress allowed businesses, beginning January 1, 2008 through December 31, 2009, to take an additional depreciation deduction allowance equal to 50 percent of the cost of the depreciable property placed in service in those years. Under the Small Business Jobs Act of 2010, this temporary increase in the depreciation deduction allowance was extended through December 31, 2010. The bill extends and temporarily increases this bonus depreciation provision for investments in new business equipment. For investments placed in service after September 8, 2010 and through December 31, 2011, the bill provides for 100 percent bonus depreciation. For investments placed in service after December 31, 2011 and through December 31, 2012, the bill provides for 50 percent bonus depreciation. The provision also allows taxpayers to elect to accelerate some alternative minimum tax credits in lieu of bonus depreciation for taxable years 2011 and 2012.

CREDIT FOR CONSERVATION EASEMENTS

The tax package extended the provision encouraging contributions of capital gain real property for conservation purposes. The bill extends for two years (through 2011) the increased contribution limits and carry forward period for contributions of appreciated real property (including partial interests in real property) for conservation purposes.