Fiscal Cliff Dodged for Now

Posted 02/01/2013

Sequestration and other items left to simmer.

Although potential spending cuts were in play until final passage of the Fiscal Cliff legislation in the U.S. House of Representa­tives, the Senate bill remained intact and was sent to the president with a vote of 257-167. The American Taxpayer Relief Act of 2012 did not address spending cuts sought by House Republicans.

Many believe the Fiscal Cliff debate is over; such is not the case. The 113th Congress has been sworn in and President Obama has taken his second-term oath of office, so Congress and the administration will be faced with multiple fiscal challenges:

February – Sometime this month, the debt ceiling or legal borrowing limit will be reached and Congress will face legislation to raise the debt limit. Republicans have insisted that the debt ceiling legislation must include significant spending cuts. The president has recently indicated he won’t negotiate on the debt ceiling.

March – The Fiscal Cliff legislation prevented budget sequestration from kicking in until March 2013. The $110 billion in spending cuts for the remaining Fiscal Year 2013 will be divided between domestic and defense programs.

End of March – Appropriations (funding to run the government) for Fiscal Year 2013 expire without congressional action.

In last month’s issue of AutoInc., we highlighted key tax provisions that would be in jeopardy without Fiscal Cliff legislative action. Let’s take a look at key provisions of the new Fiscal Cliff legislation (see Fiscal Cliff chart on page 9) that is now public law.

1. Marginal Tax Rates/Credits permanently extended up to $400,000 (single) and $450,000 (married).
2. No cap on deductions.
3. Capital Gains taxes: Made permanent are a 15 percent top capital gains and dividends rate up to $400,000 (singles), $450,000 (married) and a 20 percent rate for both single and married filers above the threshold.
4. Estate Taxes: Permanent extension of current policy with a $5 million exemption indexed for inflation and 40 percent top rate.
5. Tax Extenders: 2-year extension through 2013, including the Section 179 Small Business Expensing.

Per earlier comments, budget sequestration has been delayed for two months or until March 1, 2013. Although the sequester might not directly impact many auto repair facilities, those repairers located in communities with a strong military presence could see significant cuts.

To view more on the American Taxpayer Relief Act of 2012, visit ASA’s legislative website: www.TakingTheHill.com, and the Communities area at www.ASA shop.org.

Taking the Hill

California Finalizes Amendments to Aftermarket Parts Standards The California Department of Insurance (DOI) has published the amendments to its Standards for Repair and Use of Aftermarket Parts. The proposed amendments include verbiage affecting partial loss, written estimates, supplements, parts quality and replacement crash parts. To see the full text of the amendments, click here. The new regulations were effective Jan. 30, 2013, with compliance required on March 30, 2013. Any claims handling that takes place on or after the compliance date of March 30, 2013, will be required to comply with these regulations. – Kaitlyn Dwyer

Bob Redding is the Automotive Service Association's Washington, D.C., representative. He is a member of several federal and state advisory committees involved in the automotive industry. For more information about the legislative activities of ASA, visit www.TakingTheHill.com.