There are many important tax changes taking effect in 2012. Some are the result of tax legislation enacted in prior years, or are triggered by effective dates in regs, rulings and other guidance, or will occur by default in 2012 absent Congressional action.
Business changes taking effect in 2012 and late 2011.
New guidance on deduction vs. capitalization of tangible property costs. IRS has issued temporary regs, generally effective in tax years beginning after 2011, on the application of Code Sec. 162(a) and Code Sec. 263(a) to amounts paid to acquire, produce, or improve tangible property. Among other things, these new regs clarify and expand the standards in the current regs; provide certain new bright-line tests for applying these standards; provide guidance under Code Sec. 168 regarding the accounting for, and dispositions of, property subject to that section; and amend the general asset account regs.
Basis reporting requirements. The complex stock basis and character reporting rules under Code Sec. 6045(g) apply to shares in a regulated investment company (RIC, i.e., a mutual fund), or stock acquired in connection with a dividend reinvestment plan (DRP), if acquired after 2011.
Estimated taxes for large corporations. For a corporation with assets of at least $1,000,000,000 (determined as of the end of the previous tax year), the amount of any required installment of corporate estimated tax which is otherwise due in July, Aug. or Sept. of 2012 is 100.5% of that amount, and the amount of the next required installment after the installment due in July, Aug. or Sept. of 2012 is appropriately reduced to reflect the amount of the 0.5% increase. (P.L. 112-43, Sec. 502, P.L. 112-41, Sec. 505)
Use of smartcards or other electronic media to provide qualified transportation fringes. Beginning in 2012, after numerous postponements, the rules under which employers can provide their employees with qualified mass transit fringe benefits through the use of employer-provided credit cards, debit cards, smartcards, or other electronic media officially go into effect (although employers could rely on the guidance before 2012).
Community health needs assessment mandatory. To qualify as tax-exempt, for tax years after Mar. 23, 2012, under Code Sec. 501(r)(3), charitable hospital organizations will need to (i) conduct a community health needs assessment during the tax year or in either of the two tax years immediately preceding the tax year, and (ii) adopt an implementation strategy to meet the community health needs identified therein. (Notice 2011-52, 2011-30 IRB 60)
Longer writeoff period for certain property. For specialized realty assets (qualified leasehold improvement property, qualified restaurant property, and qualified retail improvement property) placed in service after 2011, a 39-year (up from 15-year) writeoff period generally applies.
Reduced bonus depreciation allowance for qualified property. For qualified property acquired and placed in service after 2011 and before 2013 (after 2012 and before 2014 for aircraft and certain long-production period property), a 50% (down from 100%) bonus first-year depreciation allowance applies under Code Sec. 168(k).
Reduced expensing. For a tax year beginning in 2012, the Code Sec. 179 expensing election is reduced to $139,000, with a $560,000 investment-based ceiling (down from $500,000/$2 million). For tax years beginning after 2012, it will be further reduced to $25,000 with a $200,000 investment-based ceiling. Additionally for a tax year beginning after 2011, expensing can no longer be claimed for qualified real property.
Individual changes taking effect in 2012. Individual changes that apply in 2012 include the following. Note that Congress may retroactively amend one or more of these rules:
Reduced alternative minimum tax (AMT) exemption amounts. Absent another AMT “patch,” the AMT exemption amounts for tax years beginning after 2011 revert to the significantly lower “permanent” amounts of $33,750 for unmarried taxpayers, $45,000 for joint filers, and $22,500 for marrieds filing separately.
Reduced adoption credit. For 2012, the total expenses that may be taken as a credit for all tax years with respect to the adoption of a child by the taxpayer will be limited to $12,650 (down from $13,360 for 2011), and the credit for the adoption of a special-needs child will also be $12,650 (down from $13,360 for 2011). Furthermore, the adoption credit will no longer be refundable.
No parity for exclusion from income for employer-provided mass transit and parking benefits. For 2012, unless Congress changes the rules, the exclusion for qualified parking rises from $230 to $240 due to an inflation adjustment, but falls from $230 to $125 for employer-provided transit and vanpooling benefits.
Protective claims for estate tax refunds. For estates of decedents dying after 2011, a Code Sec. 2053 protective claim for refund of estate tax must be filed by either: (i) attaching one or more completed Schedules PC to the estate's Form 706 at the time the return is filed; or (ii) filing a Form 843 with the IRS office where the Form 706 for the decedent's estate was previously filed, with the notation “Protective Claim for Refund under Section 2053” entered across the top of page 1 of the Form 843. (Rev Proc 2011-48, 2011-42 IRB 527)
Reporting foreign assets. Beginning in 2012, U.S. taxpayers who have an interest in certain specified foreign financial assets with an aggregate value exceeding $50,000 must report those assets to IRS on Form 8938, Statement of Specified Foreign Financial Assets, with their tax return.
2012 Key Tax Changes
