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WASHINGTON ALERT


Stephanie Salmon, Artemis Strategies; Jeff Hannapel & Christian Richter, The Policy Group, Washington, D.C.


Regulations Set to Expire During Lame Duck Session


TAX RATES COULD RISE WHILE EXEMPTION LEVELS DECREASE. Te economic future of the U.S.


hangs on the choices Congress makes in the six weeks following the Novem- ber elections, in the so-called lame duck session. Te Bush-era tax cuts and the payroll-tax holiday are set to expire, across-the-board spending cuts to defense and non-defense programs will take affect, and the length of time un- der which people can collect emergency unemployment benefits will decrease. A number of tax provisions impor- tant to metalcasters are set to expire at the end of 2012, unless the President and Congress act on them. Most of the cuts made during the past 11 years will expire, raising rates and ratchet- ing down exemption levels across the board. Metalcasting facility owners are uncertain of their tax liability for 2013. Before leaving for the August recess, the House and Senate approved a bill to deal with the expiration of Bush-era tax cuts at year’s end. Te Republican- controlled House passed a measure to keep all the current tax rates for another year, while the Democratic-led Senate approved a bill that would continue tax breaks for households with incomes up to $250,000. Key tax provisions affecting the


metalcasting industry that have ex- pired in 2011 or will be expiring at the end of 2012 include: • Bonus Depreciation: A 100% bonus


ON THE HILL


Cross-State Pollution Rule Thrown Out


The U.S. Court of Appeals for the District of Columbia Circuit ruled to strike down an Environmental Protec- tion Agency (EPA) regulation to control air pollution with its Cross-State Air Pol- lution Rule in the eastern United States. The three-judge panel ruled the regu- lations were unlawful and EPA exceeded


18 | MODERN CASTING September 2012


its authority under the Clean Air Act. It is not consistent with EPA’s good neighbor provision, which allows states an initial op- portunity to implement reductions on pollut- ants. The cross-state air pollution rule was remanded back to the agency for rewriting. More than three dozen challenged the rule. The similar Clean Air Interstate Rule, enact- ed under the George W. Bush administra- tion, will remain in effect while EPA fixes its


Cross State Air Pollution Rule. The rule applies to Texas and 26 other eastern states. It creates caps on sulfur dioxide, which can lead to acid rain and soot harmful to humans and ecosystems, and nitrogen oxide, a component of ground-level ozone and smog. The rules were issued in July and later revised in October. They apply to emissions crossing state lines.


facturers to match their current sales revenues with current inventory replacement costs by taking the cost of replacing inventory into account. LIFO results in a more accurate measure of the financial condition of a business and the amount of income that can be taxed. In Febru- ary 2011, President Obama pro- posed repealing LIFO. Companies currently using this method would be subject to a one-time tax on their LIFO reserves and higher tax bills in the future.


depreciation is allowed for the purchase of new equipment placed in service in 2011. In 2012, bonus depreciation reverted to 50% of the purchase price and will go away entirely at the end of the year.


• Bush Tax Cuts: Te tax cuts enacted in 2001 and 2003 have been extend- ed until Dec. 31, 2012. Subchapter S Corporations pay at the individual tax rates. Tax increases would lead to automatic tax hikes beginning January 1, 2013. Te 35% bracket will increase to 39.6%; 33% bracket to 36%; 28% bracket to 31%; 25% bracket to 28%; and the 10-15% brackets will condense to 15%.


• Last In, First Out (LIFO): Tis method of accounting allows manu-


• Research and Development (R&D) Tax Credit: Created by Congress in 1981 to spur creation of U.S.- based innovation and economic activity, this credit has fostered private sector R&D investment in the metalcasting industry, bringing new, improved castings and services to market. Te R&D credit expired Dec. 31, 2011. Unless renewed, companies will not be able to take advantage of this tax credit.


• Section 179 Expensing: Te Section 179 expensing deduction could be taken on newly acquired equipment (both brand new and used) worth up to $500,000 in 2011. For 2012, the dollar limit for section 179 expensing is $125,000. For 2013 and later years, the dollar limit will revert to $25,000.


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