The White House

Office of the Press Secretary

For Immediate Release
January 25, 2012

FACT SHEET: PRESIDENT OBAMA’S BLUEPRINT TO SUPPORT U.S. MANUFACTURING JOBS, DISCOURAGE OUTSOURCING, AND ENCOURAGE INSOURCING

In his State of the Union address, President Obama laid out a Blueprint for an America Built to Last, encouraging companies to create manufacturing jobs in the United States while removing deductions for shipping jobs overseas and encouraging insourcing. During the past two years, we have begun to see positive signs in American manufacturing – with the manufacturing sector adding more than 300,000 jobs since December 2009, with companies engaging in the emerging trend of “insourcing” by bringing jobs back and making additional investments in the United States. Manufacturing jobs are growing for the first time since the late 1990s.

The proposals the President is describing today are designed to build on this progress. They include six proposals that Congress should act on immediately to encourage job growth in the United States and that are fully paid for by closing tax loopholes that encourage the shifting of jobs and shielding of profits overseas. The President is also calling for Congress to extend current temporary tax incentives this year to bring more certainty to the near-term economy and for fundamental tax reform that would encourage more investment in America with a new international minimum tax, a lower rate for American manufacturing, and a simpler, broader tax code.

The President is proposing the following revenue-neutral reform package to support manufacturing, discourage outsourcing, and encourage insourcing that Congress should act on immediately:

1. Removing tax deductions for shipping jobs overseas and providing new incentives for bringing them back home (revenue neutral): The tax code currently allows companies moving operations overseas to deduct their moving expenses – and reduce their taxes in the United States as a result. The President is proposing to change that. These deductions will be denied, and companies will no longer be provided deductions for moving their operations abroad. At the same time, the President is proposing to give a 20 percent income tax credit for the expenses of moving operations back into the United States to help companies bring jobs home.

 For example: If a company was closing a plant to move that plant overseas and incurred $1 million in expenses – ranging from the cost of scrapping equipment to shipping physical capital to clean up costs – it could right now deduct those expenses, and get a tax reduction of $350,000 (assuming the firm faces the 35 percent statutory tax rate). The President proposes to eliminate this tax deduction. And, if a corporation moving jobs to the U.S. incurred similar expenses, the President proposes to provide that company with a tax credit of $200,000 to help offset these costs and encourage investment here at home.

2. Targeting the domestic production incentive on manufacturers who create jobs here at home and doubling the deduction for advanced manufacturing (revenue neutral): In conjunction with the President’s broader commitment to corporate tax reform, the Administration is proposing measures to provide incentives for manufacturing in the United States. The Administration is proposing to reform the current deduction for domestic production by more narrowly focusing it on manufacturing activities—for example, it would no longer cover oil production. These savings would be invested in expanding the deduction for manufacturers and doubling for advanced manufacturing technologies from its current level of 9 percent to 18 percent.

3. Introducing a new Manufacturing Communities Tax Credit to encourage investments in communities affected by job loss ($6 billion in credits): The President is proposing a new credit for qualified investments that help finance projects in communities that have suffered a major job loss event. This credit will provide $2 billion per year in incentives for three years. For this purpose, a major job loss event occurs when a military base closes or a major employer closes or substantially reduces a facility or operating unit, resulting in permanent mass layoffs. The tax credit would support qualified investments in this affected community – made in conjunction with State Economic Development Agencies and other local entities – that improve local economic growth.

4. Providing temporary tax credits to drive nearly $20 billion in domestic clean energy manufacturing ($5 billion in credits): The President is proposing to extend tax credits to drive nearly $20 billion of investment in domestic clean energy manufacturing, ensuring new windmills and solar panels will incorporate parts that are produced and assembled by American workers. This Advanced Energy Manufacturing Tax Credit – which was oversubscribed more than three times over – goes to investments in clean energy manufacturing in the United States. The additional $5 billion in tax credits the President is proposing will leverage nearly $20 billion in total investment in the United States.

5. Reauthorizing 100% expensing of investment in plants and equipment ($4 billion): The President is proposing to extend for all of 2012 a provision that allows businesses to expense the full cost of their investments in equipment, spurring investment in the United States. Over the next two years, this would provide businesses large and small with $50 billion in tax relief, with much of that recovered by the Treasury in subsequent years.

6. Closing a loophole that allows companies to shift profits overseas (raises $23 billion): Corporations right now can abuse the tax system by inappropriately shifting profits overseas from intangible property created in the United States. The President is proposing to close this loophole.

At the same time as the President is calling for immediate enactment of this plan, he is also pushing forward on a framework for corporate tax reform that would encourage even greater investment in the United States, while eliminating tax advantages for outsourcing. This framework will include:

o Making companies pay a minimum tax for profits and jobs overseas and investing the savings in cutting taxes here at home, especially for manufacturing: The President is proposing to eliminate tax incentives to ship jobs offshore by ensuring that all American companies pay a minimum tax on their overseas profits, preventing other countries from attracting American business through unusually low tax rates. The savings would be invested in cutting taxes here at home, especially for manufacturing.

o Making permanent an expanded Research and Experimentation Tax Credit: The President has proposed to make permanent the Research and Experimentation Tax Credit, while enhancing and simplifying the credit. About 70 percent of the benefit directly supports jobs in the United States, and every dollar spent encourages U.S.-based investment, as only research and experimentation performed in the United States is eligible.

o Simplify the tax code and close loopholes: Over the nearly three decades since the last comprehensive reform effort, the tax system has been loaded up with special deductions, credits, and other tax expenditures that help well-connected special interests, but do little for our Nation’s economic growth. The President’s framework will close these loopholes and simplify the tax code so businesses can focus on investing and creating jobs rather than filling out tax forms.

Building on Progress

• Providing tax incentives to help businesses grow and invest: Building off earlier measures, the President signed into law a provision that allowed businesses, both large and small, to immediately write off 100% of the costs of new investment in equipment in the United States. This is among the 17 tax cuts the President has signed into law for small businesses, including measures that temporarily eliminated capital gains taxes on key small business investments and raised expensing limits for small firms.

• Providing tax incentives to support domestic investment in clean energy technology manufacturing: The Recovery Act’s Advanced Energy Manufacturing Tax Credit provided $2.3 billion in incentives that catalyzed an additional $5.4 billion in private sector investment in projects to manufacture the next generation of solar, wind, geothermal, vehicle, energy efficiency, and other clean energy technologies.

• Temporary tax cuts to increase investment and jobs: The President has signed into law $200 billion in tax relief and incentives for America’s businesses to encourage them to make new investments and create new jobs – relief that was paid out over the last three years. This includes provisions that directly benefit those businesses that did the most to boost investment and hiring.

• Cracking down on overseas tax avoidance and loopholes: The President has taken strong steps to crack down on overseas tax evasion and loopholes – measures that will save billions of dollars over the next decade and make sure that everyone plays by the same rules. This includes signing into law the Foreign Account Tax Compliance Act, which targets tax evasion by U.S. citizens holding investments in foreign accounts, as well as measures to crack down on abuse of foreign tax credits through games that allowed multinational companies to inappropriately reduce the amount of taxes they paid here at home.

WASHINGTON — The Internal Revenue Service today reopened the offshore voluntary disclosure program to help people hiding offshore accounts get current with their taxes and announced the collection of more than $4.4 billion so far from the two previous international programs.

The IRS reopened the Offshore Voluntary Disclosure Program (OVDP) following continued strong interest from taxpayers and tax practitioners after the closure of the 2011 and 2009 programs. The third offshore program comes as the IRS continues working on a wide range of international tax issues and follows ongoing efforts with the Justice Department to pursue criminal prosecution of international tax evasion. This program will be open for an indefinite period until otherwise announced.

“Our focus on offshore tax evasion continues to produce strong, substantial results for the nation’s taxpayers,” said IRS Commissioner Doug Shulman. “We have billions of dollars in hand from our previous efforts, and we have more people wanting to come in and get right with the government. This new program makes good sense for taxpayers still hiding assets overseas and for the nation’s tax system.”

The program is similar to the 2011 program in many ways, but with a few key differences. Unlike last year, there is no set deadline for people to apply. However, the terms of the program could change at any time going forward. For example, the IRS may increase penalties in the program for all or some taxpayers or defined classes of taxpayers – or decide to end the program entirely at any point.

“As we’ve said all along, people need to come in and get right with us before we find you,” Shulman said. “We are following more leads and the risk for people who do not come in continues to increase.”

The third offshore effort comes as Shulman also announced today the IRS has collected $3.4 billion so far from people who participated in the 2009 offshore program, reflecting closures of about 95 percent of the cases from the 2009 program. On top of that, the IRS has collected an additional $1 billion from up front payments required under the 2011 program. That number will grow as the IRS processes the 2011 cases.

In all, the IRS has seen 33,000 voluntary disclosures from the 2009 and 2011 offshore initiatives. Since the 2011 program closed last September, hundreds of taxpayers have come forward to make voluntary disclosures. Those who have come in since the 2011 program closed last year will be able to be treated under the provisions of the new OVDP program.

The overall penalty structure for the new program is the same for 2011, except for taxpayers in the highest penalty category.

For the new program, the penalty framework requires individuals to pay a penalty of 27.5 percent of the highest aggregate balance in foreign bank accounts/entities or value of foreign assets during the eight full tax years prior to the disclosure. That is up from 25 percent in the 2011 program. Some taxpayers will be eligible for 5 or 12.5 percent penalties; these remain the same in the new program as in 2011.

Participants must file all original and amended tax returns and include payment for back-taxes and interest for up to eight years as well as paying accuracy-related and/or delinquency penalties.

Participants face a 27.5 percent penalty, but taxpayers in limited situations can qualify for a 5 percent penalty. Smaller offshore accounts will face a 12.5 percent penalty. People whose offshore accounts or assets did not surpass $75,000 in any calendar year covered by the new OVDP will qualify for this lower rate. As under the prior programs, taxpayers who feel that the penalty is disproportionate may opt instead to be examined.

The IRS recognizes that its success in offshore enforcement and in the disclosure programs has raised awareness related to tax filing obligations. This includes awareness by dual citizens and others who may be delinquent in filing, but owe no U.S. tax. The IRS is currently developing procedures by which these taxpayers may come into compliance with U.S. tax law. The IRS is also committed to educating all taxpayers so that they understand their U.S. tax responsibilities.

More details will be available within the next month on IRS.gov. In addition, the IRS will be updating key Frequently Asked Questions and providing additional specifics on the offshore program.

Payroll Tax Holiday
Ok! Lesson learnt! Not more than a few hours after my last newsletter, Congress decided to pass a two month extension of the payroll tax holiday. Yes, it’s kind of “kicking the can” down the road, but it’s money in your pocket. We can talk politics another day. Based on what I’m reading, Congress will likely come to some manner of compromise so that the payroll tax rates stay at 2011 rates through 2012. All bets are off for next year, though.

Tax Organizers Sent
Again, while tax organizers are not required, clients coming back from last year, within the next day or so, should have their organizers received by email. Please reply to this message if you don’t get it by tomorrow OR if you have any questions about the information in it. On my side, it is a new technology platform, but I think it’ll keep your information more secure, allowing you to send me the source documents in an efficient and secure manner and allowing me to deliver tax returns also in a secure and efficient manner. Of course, questions, please drop me a line by email and I’ll do my best to immediately respond.

What to do now?
At this time of the year, while we are early on in the season, now would be a good time to start sifting through your bank records and organizing. Your employer, banking institution, etc, won’t get around to sending out the information returns and your broker statements for a few more weeks. So, now is the time to really go through your records or perhaps even your calendar to start identifying potential tax deductions. If you have a question if something’s deductible, then drop me an email and I’ll be happy to give you a thumbs up or thumbs down.

Set Your Appointment
Nowack is ready to receive your tax appointments for the 2011 tax season. Please feel free to call or e-mail and set a time that works for you. As in year’s past, an appointment is optional. I can receive information by fax, online (by secure portal upload), FedEx or mail. I prefer not to receive documents by an unencrypted e-mail just because that compromises your sensitive information.

Client Communication
With tax season now here, my commitment to you is to respond to your phone calls within one business day. If I’m not with another client, I’m happy to answer the phone as calls come in. In general though, should your call go to voice mail, I will return your call between 3 and 4pm. There may be a few exceptions to this, but I will do my best to return all calls in that window. Email will typically get you a better response time. But if neither of those options work, please email me your concern and we can set up an appointment to discuss whatever is present for you.

Welcoming Referrals
We are still expanding and welcome referrals to friends, colleagues, for their small business or individual needs. We also help folks have had some tax problems as well.

Hoping that 2012 brings you more peace, joy and wealth!

Best,
Josh

Late on December 22, House and Senate leaders agreed to end their stalemate over extending the payroll tax break. Under the agreement, for the first two months of 2012, a 4.2% Social Security tax would continue to apply to workers’ pay (10.4% OASDI tax for self-employment income).

However, the agreement calls for new language to be inserted into the tax relief bill to prevent a potential payroll tax problem for employers. According to information provided by the House Ways & Means Committee, the revision would allow employers to withhold employee payroll taxes at 4.2% (instead of 6.2%) on all wages paid during the two-month extension period, subject only to the full 2012 wage base ($110,100) and without regard to the $18,350 cap (two-twelfths of the wage base of $110,100) on wages earned through the end of February, 2012. If an employee’s wages during the first two months of 2012 exceed $18,350, and the payroll tax reduction is not extended for the remainder of 2012, an amount equal to 2% of those excess wages would ultimately be recaptured on the worker’s individual tax return for 2012.

Both the Senate and House approved the bill on the morning of December 23. It will now be sent to the President for his expected signature.

Under the agreement, both Republicans and Democrats in the Senate and House will immediately appoint negotiators to a conference to forge a full-year extension of the payroll tax reduction.

The IRS wants to remind all taxpayers that with the New Year fast approaching, there is still time for you to take steps that can lower your 2011 taxes. However, you usually need to take action no later than Dec. 31 in order to claim certain tax benefits.
Here are six tax-saving tips for you to consider before the calendar turns to 2012:

1. Make Charitable Contributions – If you itemize deductions, your donations must be made to qualified charities no later than Dec. 31 to be deductible for 2011. You must have a canceled check, a bank statement, credit card statement or a written statement from the charity, showing the name of the charity and the date and amount of the contribution for all cash donations. Donations charged to a credit card by Dec. 31 are deductible for 2011, even if the bill isn’t paid until 2012. If you donate clothing or household items, they must be in good used condition or better to be deductible.

2. Install Energy-Efficient Home Improvements – You still have time this year to make energy-saving and green-energy home improvements and qualify for either of two home energy credits. Installing energy efficient improvements such as insulation, new windows and water heaters to your main home can provide up to $500 in tax savings. Homeowners going green should also check out the Residential Energy Efficient Property Credit, designed to spur investment in alternative energy equipment. The credit equals 30 percent of the cost of qualifying solar, wind, geothermal, or heat pump property. For details see Special Edition Tax Tip 2011-08, Home Energy Credits Still Available for 2011 on the IRS.gov website.

3. Consider a Portfolio Adjustment – Check your investments for gains and losses and consider sales by Dec. 31. You may normally deduct capital losses up to the amount of capital gains, plus $3,000 from other income. If your net capital losses are more than $3,000, the excess can be carried forward and deducted in future years.

4. Contribute the Maximum to Retirement Accounts – Elective deferrals you make to employer-sponsored 401(k) plans or similar workplace retirement programs for 2011 must be made by Dec. 31. However, you have until April 17, 2012, to set up a new IRA or add money to an existing IRA and still have it count for 2011. You normally can contribute up to $5,000 to a traditional or Roth IRA, and up to $6,000 if age 50 or over. The Saver’s Credit, also known as the Retirement Savings Contribution Credit, is also available to low- and moderate-income workers who voluntarily contribute to an IRA or workplace retirement plan. The maximum Saver’s Credit is $1,000, and $2,000 for married couples, but the amount allowed could be reduced or eliminated for some taxpayers in part because of the impact of other deductions and credits.

5. Make a Qualified Charitable Distribution – If you are age 70½ or over, the qualified charitable distribution (QCD) allows you to make a distribution paid directly from your individual retirement account to a qualified charity, and exclude the amount from gross income. The maximum annual exclusion for QCDs is $100,000. The excluded amount can be used to satisfy any required minimum distributions that the individual must otherwise receive from their IRAs in 2011. This benefit is available even if you do not itemize deductions.

6. Don’t Overlook the Small Business Health Care Tax Credit – If you are a small employer who pays at least half of your employee health insurance premiums, you may qualify for a tax credit of up to 35 percent of the premiums paid. An employer with fewer than 25 full-time employees who pays an average wage of less than $50,000 a year may qualify. For more information see the Small Business Health Care Tax Credit page on IRS.gov.

And here is one final tip to remember: you should always save receipts and records related to your taxes. Good recordkeeping is a must because you need records to prepare your tax return, and it will help you to file quickly and accurately next year.

For more year-end tax information and to access all IRS forms and publications, visit the IRS website at http://www.irs.gov

* AZ – $7.65
* CO – $7.64
* FL – $7.67
* MT – $7.65
* OH – $7.70 (most employers)
* OR – $8.80
* VT – $8.46
* WA – $9.04

Please note: Some states have specific company exemptions and the effective dates usually span a pay period

When a couple is divorced, the marital assets are parsed based upon negotiations between the spouses, attorneys or perhaps even over trial.  In any case, when the divorce terms are finalized, the divorce decree then would dictate how the marital assets are to be split between the former spouses.  At that point, marital assets qualify under Internal Revenue Code Section 1041 which says that you won’t have a gain or loss on your tax bill as a result of splitting up assets between spouses.  So if the wife gets the house, she doesn’t recognize a gain by virtue of taking title from the husband.  She would, however, recognize a gain/loss if she then sells it to someone else.

In a similar vein, when a retirement account gets separated, there is no penalty (10%) for withdrawing the money to make the transfer.  This allows the receiving spouse to take the retirement funds, pay any applicable income tax, but NOT pay any penalty for the early withdrawal.  However, if you complete a trustee-to-trustee transfer or otherwise transfer the funds to your personal retirement account, that option to withdraw without a penalty no longer applies.  So to be clear, if you think you may need the money, pull it out, pay the normal tax, but you wouldn’t have to pay the penalty.

As always – if you have questions – drop me a line at joshn@nowackcpa.com

So what does that mean to you?

It should make your life a little easier. Folks, like me, in the tax preparation world will ask you a few less questions as this is implemented because we will know how much you paid for the stock because it’ll be right there. For those that are a little negligent with their tax work and forget to include stock sales in their tax return, it should lessen the shock letter when the IRS sends out their “Oops” notices (more fomally known as a CP2000 notice). See, when the IRS has information about you, that is income information, they will send you a note indicating that they have income and will recalculate your tax bill and let you know how much to pay. In the past, many taxpayers would just take out their checkbook and send in a check thinking that the government is right. Well, this added information should help the IRS get the number to be a little more accurate, but still, as is the case whenever you receive an IRS note, get competent technical advice prior to calling the IRS. It’s kind of like going into the Lion’s Den at meal time and asking what’s for dinner. Sometimes the IRS can be incredibly helpful – at other points – incredibly unhelpful. Best to know your rights.

Anyway, what this all means to you is a few more numbers on your statements that make your investment advisor’s job and my job a little easier. The IRS knows the true basis of your stock so, for folks making up numbers on their stock purchase prices will want to use the “right” numbers – but I wouldn’t worry so much about it.

Of course, if you have questions – keep them coming. I’ve received lots of good ones.

Hope that the holiday cheer is warming up your house!