WASHINGTON - President Obama has signed into law legislation that allows tax rates to rise on the nation??s highest earners while also extending dozens of tax cuts for individuals and businesses, and delaying for two months automatic across-the-board spending cuts (known as sequestration) that were set to take effect on January 2.

The 154-page bill, passed mere hours before the nation was set to fall off of the proverbial fiscal cliff, contains various provisions of concern to the convenience store industry. Below is a brief summary of those provisions.

Taxes

• Permanently maintains the reduced 2001 and 2003 income tax rates for individuals earning up to $400,000 ($450,000 for married couples) while allowing income above that to be taxed at rates rising to 39.6%.
• Increases the estate tax rate from 35% to 40%, but maintains the exemption for estates worth less than $5 million for an individual, and up to $10 million for a couple (indexed for inflation).
• Prevents the alternative minimum tax (AMT) from affecting approximately 27 million taxpayers.
• Allows the payroll tax cut to expire, thereby returning the tax rate back to 6.2% from its current 4.2% rate. This means taxes will rise on approximately 77% of households.
• Regarding capital gains and dividend taxes, taxpayers who earn below the $400,000/$450,000 thresholds will continue to see their capital gains and dividends taxed at the reduced 15% rate, while the rate will rise to 20% for incomes above those limits. (The highest earners will actually see that rate rise to 23.8% because of an additional 3.8% investment tax included in the health-care law.)
• Extends for two years (2012 and 2013) the Work Opportunity Tax Credit allowing businesses to claim a credit equal to 40% of the first $6,000 of wages paid to new hires of one of eight targeted groups, including vocational rehabilitation referrals and qualified ex-felons.
• Extends through 2013 15-year cost recovery period for certain retail improvements made after December 31, 2011.
  
  Energy
• Extends for two years (2012 and 2013) the 30% investment tax credit for
  alternative vehicle refueling property.
• Extends for two years (2012 and 2013) the individual income tax credit for
  highway-capable plug-in motorcycles and 3-wheeled vehicles. This replaces the 10% tax credit that expired at the end of 2011.
• Extends the cellulosic biofuels producer tax credit for one additional year through
  2013. The legislation also expands the definition of qualified cellulosic biofuel production to include algae-based fuel.
• Extends for two years (2012 and 2013) the $1.00 per gallon tax credit for
  biodiesel, as well as the small agri-biodiesel producer credit of 10 cents per gallon. Additionally, the bill extends through 2013 the $1.00 per gallon tax credit for diesel fuel created from biomass. As applicable, fuel marketers will have to submit 2012 retroactive biodiesel blender credit claims with the IRS.
• Extends through 2013 the production tax credit for wind electricity.
• Extends the bonus depreciation allowance for cellulosic biofuel facilities placed in-service before the end of 2013.
• Extends through 2013 the 50-cent-per-gallon alternative fuel tax credit and
  alternative fuel mixture tax credit. This credit can be claimed as a nonrefundable excise tax credit or a refundable income tax credit.
  
  Miscellaneous Provisions
• Extends the 2008 Farm Bill until September 30, 2013. Importantly, the
  legislation does not include language restricting convenience stores?? ability to accept SNAP benefits. NACS will continue to oppose efforts to include such language in the Farm Bill reauthorization debate next Congress.
• Extends for one year the availability of unemployment compensation benefits.

In meeting the New Year??s Day deadline, lawmakers created a new deadline they will have to meet in two months, when sequestration (automatic spending cuts) is scheduled to take effect, the current continuing resolution funding the government expires, and the nation is expected to reach its statutory "debt limit."

Republicans in Congress have insisted that spending cuts be included in any deal to raise the debt limit, while President Obama has said such issues should be considered separate and apart from the debt limit. Many political observers expect the fight over the debt limit to be more acrimonious than the fiscal cliff negotiations because of the severe consequences for failing to raise the debt ceiling.