Tuesday, September 13, 2011

Nonprofits and the American Jobs Act of 2011 Proposed by President Obama

The White House has released the text of the American Jobs Act of 2011, as well as a section-by-section summary of the proposed legislation.  Reproduced below are a few provisions of the sectional summary that should interest the nonprofit sector:

Section 101 – Temporary Payroll Tax Cut for Employers, Employees, and the Self-Employed. This section extends and expands the existing temporary reduction in payroll taxes. For calendar year 2012, it: (a) further reduces the Old Age, Survivors and Disability Insurance (social security) portion of the payroll tax that was paid by employees during 2011 from 4.2 percent (reflecting the existing 2 percent temporary reduction from the permanent rate) to 3.1 percent; and (b) adds a new reduction in the portion of this tax that is paid by employers from 6.2 percent to 3.1 percent. The employer reduction applies to up to $5 million of wages that are paid by the employer. With limited exceptions, the reduction in amounts paid by employers is available to all employers, whether private businesses or tax-exempt organizations. The employer reduction is not available, however, to Federal, State and local government employers (other than State colleges and universities) or with respect to household workers. This section contains equivalent reductions for individuals subject to self-employment taxes. Transfers from general revenues are provided to protect the social security trust fund.
 
Section 102 – Temporary Tax Credit for Increased Payroll. For the last quarter of 2011 and for calendar year 2012, the proposal provides a payroll tax credit that fully offsets the employer social security tax that otherwise would apply to increases in wages from the corresponding period of the prior year. For example, if an employer paid wages subject to social security tax of $5 million in 2011 and $6 million in 2012, the credit to which the employer would be entitled would eliminate the employer’s portion of social security taxes on the $1 million of increased wages. The credit would be available on up to $50 million of an employer’s increased wages. Generally, the credit is available to all employers, whether private businesses or tax-exempt organizations, but would not be available to Federal, State and local government employers (other than State colleges and universities) or with respect to household workers. Transfers from general revenues are provided to protect the social security trust fund.

Section 201 – Returning Heroes and Wounded Warriors Work Opportunity Tax Credits. Under current law, employers that hire veterans who have been unemployed for at least 6 months and have a service-connected disability are eligible for a maximum tax credit of $4,800. This section increases the amount of that credit to $9,600. This section also creates two new hiring credits for veterans. The first is a credit of $2,400 for employers that hire veterans who have been unemployed for at least 4 weeks. The second is credit of $5,600 for veterans who have been unemployed for at least 6 months. Under this section, these credits are also available to tax-exempt entities and public universities. Finally, this section authorizes the Secretary of the treasury to provide alternative methods for certifying a veteran’s unemployed status.

Section 227 – Private Schools. This section allows certain private, nonprofit elementary or secondary schools to be eligible to receive program services for limited purposes, including meeting requirements of the Americans with Disabilities Act and the Rehabilitation Act.

Section 401 – 28 Percent Limitation on Certain Deductions And Exclusions. This section would limit the value of all itemized deductions and certain other tax expenditures for high-income taxpayers by limiting the tax value of otherwise allowable deductions and exclusions to 28 percent. No taxpayer with adjusted gross income under $250,000 for married couples filing jointly (or $200,000 for single taxpayers) would be subject to this limitation. The limitation would affect itemized deductions and certain other tax expenditures that would otherwise reduce taxable income in the 36 or 39.6 percent tax brackets. A similar limitation also would apply under the alternative minimum tax. This section would be effective for taxable years beginning on or after January 1, 2013.

JRB

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