Dear ELFA Member:

As you have likely read in news reports, Congress has passed legislation that allows the country to avert many portions of the so-called fiscal cliff, and the President is expected to sign the bill into law in the coming days.

This legislation will make permanent the individual income tax rates that have been in effect since 2001 for families with incomes below $450,000 annually and individuals with incomes below $400,000 annually. The bill also delays the budgetary sequester on discretionary spending until March.

There are many portions of the deal that impact ELFA members, and we would highlight the inclusion of the business tax extenders in the package. This includes the extension of the active finance exemption to Subpart F, the research and development tax credit, and increased expensing under section 179 of the Internal Revenue Code.

Notably, and contrary to what many expected, bonus depreciation and the production tax credit for the construction of wind energy facilities were both extended through the end of 2013. Read a summary prepared by the Washington Council Ernst & Young and a summary of all of the tax provisions contained within the bill put out by the Senate Finance Committee.

The one major portion of the fiscal cliff that was untouched by the deal was the expiration of the payroll tax holiday that was in effect for the last two years.  This means that payroll tax rates will go back up two percentage points to 6.2% for 2013.

Costing $1.8 trillion over 10 years, the most significant provision from a budgetary prospective was the permanent “patching” of the alternative minimum tax (AMT).  This could have significant impact on the outlook for tax reform in the coming Congress.

For the equipment finance industry, the deal’s immediate impact is the extension of tax provisions utilized by many ELFA members and the macroeconomic impact of the broader tax provisions.  The longer-term impact of the deal is not entirely clear.  While the legislation does not lay out a legislative fast-track for tax reform, it doesn’t take any steps that make tax reform harder, and one can argue that having permanent tax rates and the permanent “patching” of the AMT now makes tax reform easier in the future.

If you have any questions about this legislation or other federal government issues please feel free to contact Andy Fishburn, ELFA’s Vice President of Federal Government Relations, at


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