WASHINGTON -- The tax bill signed by President Obama last week extends the current tax rates and provides economic incentives. The National Automatic Merchandising Association observed that the vending industry should applaud this measure, which offers tax relief.
"In particular, the vending industry will benefit from the 100% expensing provision," NAMA noted. "This will help the industry keep and grow jobs.
The $858 billion package negotiated by the White House and Congressional leaders, proposes among other things to extend the 25%, 28%, 33% and 35% personal income tax brackets through 2012. It also temporarily extends bonus depreciation. For investments placed in service after Sept. 8, 2010, and through Dec.31, 2011, the bill provides for 100% bonus depreciation. For investments placed in service after Dec. 31, 2011 and through Dec. 31, 2012, the bill provides for 50% bonus depreciation. "During 2011, vending operators will be able to depreciate 100% of equipment purchased in 2011," NAMA explained.
The bill also extends increases in the maximum amount and phase-out threshold under section 179, the association added. Under current law, a taxpayer with a sufficiently small amount of annual investment may elect to deduct the cost of certain property placed in service for the year, rather than depreciate those costs over time.
Another valuable provision of the tax law is a temporary payroll tax holiday, NAMA continued. Under current law, employees pay a 6.2% Social Security tax on all wages earned up to $106,800 (in 2011) and self-employed individuals pay a 12.4% Social Security self-employment tax on all their self-employment income up to the same threshold. The tax legislation provides a payroll and self-employment tax holiday during 2011 of two percentage points. This means employees will pay only 4.2% on wages, and self-employed individuals will pay only 10.4% on self-employment income up to the threshold.
The measure also reinstates the Business Research and Development tax credit for two years (through 2011), and extends enhanced charitable deduction for contributions of food inventory, the association observed.
Moreover, it extends the Work Opportunity Tax Credit (WOTC). Under current law, NAMA explained, businesses are allowed to claim a work opportunity tax credit equal to 40% of the first $6,000 of wages paid to new hires of members of one of nine targeted groups. They include members of families receiving benefits under the Temporary Assistance to Needy Families (TANF) program, qualified veterans and designated community residents, among others. The WOTC program had been slated to expire on Aug. 31, 2011. The bill extends this provision through Dec. 31, 2011, and is effective for employees hired after the date of enactment.
Another provision important to the vending industry is the exclusion of small business capital gains, NAMA reported. Generally, non-corporate taxpayers may exclude 50% of the gain from the sale of certain small business stock acquired at original issue and held for more than five years. For stock acquired after Feb. 17, 2009, and on or before Sept. 27, 2010, the exclusion is increased to 75%. For stock acquired after Sept. 27, 2010, and before Jan. 1, 2011, the exclusion is 100%, and the AMT preference item attributable for the sale is eliminated.
The measure specifies a tax rate of 35% of the entire value of estates over $5 million. An estate tax has not been in effect during 2010; had Congress not acted, the rate would have jumped to 55% of estates worth more than $1 million.
Additional information may be had by emailing Ned Monroe, NAMA's senior vice-president of government affairs, at firstname.lastname@example.org.