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Focus on Life Sciences: Provisions of New Tax Legislation Affect Life Sciences

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On January 1, 2013, the Senate and House of Representatives passed the American Taxpayer Relief Act, which the President signed into law on January 2, 2013.
January 8, 2013

On January 1, 2013, the Senate and House of Representatives passed the American Taxpayer Relief Act, which the President signed into law on January 2, 2013.

The fiscal cliff, an economically damaging set of tax hikes and spending reductions scheduled to begin in 2013, has been avoided for now. The following provisions and items are of interest to the Life Sciences industry:

INDIVIDUALS

Capital Gain and Dividend Tax Rates

  • For tax years beginning after December 31, 2012, the top rate for long-term capital gains and qualified dividends will rise to 20% (up from 15%) before the surtax described below for taxpayers with taxable income above certain thresholds
    • The thresholds are $450,000 for married filing jointly and surviving spouse filers, $425,000 for head of household filers, $400,000 for single filers and $225,000 for married filing separately filers
  • The top rate for long-term capital gains and qualified dividends will be 23.8% when the 3.8% surtax is included


BUSINESSES

Depreciation Provisions

The Act extends:

  • 50% bonus depreciation applicable for new property placed in service after December 31, 2012 and before January 1, 2014
  • Increased Code Section 179 expensing limitations ($500,000 with a $2,000,000 investment limit) has been extended through 2014


Extended 2012 through 2013 were the following credits and incentives:

  • Research tax credit
  • Various empowerment zone tax incentives
  • Work opportunity tax credit


ENERGY-RELATED TAX BREAKS

Extended through 2013 were the following credits:

  • Cellulosic biofuel credit
  • Credit for biodiesel and renewable diesel
  • Credits with respect to facilities producing energy from certain renewable resources


NO CHANGE FOR NEW TAX ON MEDICAL DEVICES

As expected, the 2.3% tax in the 2010 Healthcare Law will go into effect beginning in 2013. This tax applies mainly to medical devices used and implanted by medical professionals. The tax is expected to raise $29B in government revenues through 2022.

The resolution of the fiscal cliff now gives away to a series of mini-cliffs due to the need to raise the debt ceiling and establish government spending levels.

 

Under U.S. Treasury Department guidelines, we hereby inform you that any tax advice contained in this communication is not intended or written to be used, and cannot be used by you for the purpose of avoiding penalties that may be imposed on you by the Internal Revenue Service, or for the purpose of promoting, marketing or recommending to another party any transaction or matter addressed within this tax advice. Further, RubinBrown LLP imposes no limitation on any recipient of this tax advice on the disclosure of the tax treatment or tax strategies or tax structuring described herein.

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