Legislative update - Congress passes tax bill; JCT revenue estimate 

January 1: Most 2001 and 2003 tax cuts would be extended permanently under a bill negotiated by the White House and Senate leaders. Enactment will avert the “fiscal cliff” on taxes and forestall the budget sequester until March 1.

H.R. 8, the American Taxpayer Relief Act of 2012, passed the Senate, 89-8, just after 2 a.m. The House then passed the bill, also on January 1, 2013.


Read the legislation: American Taxpayer Relief Act of 2012 [PDF 212 KB]

JCT revenue estimate

The Joint Committee on Taxation (JCT) also today released a revenue estimate of the revenue (tax) provisions in the American Taxpayer Relief Act of 2012, as passed by the Senate on January 1, 2013.


Read the JCT revenue estimate: JCX-1-13 [PDF 27 KB]

KPMG observation

The bill is scored as losing revenue because the revenue is estimated using a current law baseline. Under the current law baseline, all the tax cuts expired on December 31, 2012. Thus, extending any of them results in a revenue loss for congressional scoring purposes.

Initial overview of provisions

Under the bill:


  • All wage-earners will face a tax increase today with the expiration of the 2% payroll tax holiday, which was in effect the past two years and not extended.
  • The alternative minimum tax exemption is indexed for inflation; the 2012 exemption amount is $78,750 / $50,600 (married filing jointly / single taxpayers).
  • Taxpayers with incomes greater than $450,000 / $400,000 (joint filers/singles) will have their marginal income rate increase to 39.6%.
  • The personal exemption phaseout (“PEP”) is set at $250,000 and the itemized deduction limitation (“Pease”) is set at $300,000.
  • Business and individual extenders, led by the research credit, are extended two years, through 2013, as approved by the Senate Finance Committee in August 2012; the committee’s energy extenders are included.
  • Bonus depreciation is extended one year.
  • The estate tax exemption is $5 million, indexed for inflation, and the top rate is 40%.
  • Tax on capital gains and dividends remains at 15%, except incomes greater than $450,000 / $400,000 (joint filers / singles) will be taxed at 20%.

The bill includes a Medicare “doc fix” and extended unemployment benefits.



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