By William H. Whitledge, P.C. and Karen F. Turk

On Wednesday, May 28, 2003, President Bush signed the $350 billion Jobs and Growth Tax Relief Reconciliation Act of 2003. The legislation includes the following provisions:

Accelerated Reduction in Individual Marginal Rates

The new law accelerates to taxable years beginning after December 31, 2002 the ordinary income marginal rate reductions for individuals that were slated to go into effect in 2006. The highest bracket drops from 38.6% to 35%, and the former 27%, 30% and 35% rates decline to 25%, 28% and 33% respectively. These lower rates are subject to a sunset provision effective for taxable years beginning after December 31, 2010.

Reduction in Taxes on Dividends and Capital Gains

The legislation also cuts the maximum capital gain tax rate from 20% to 15% as of May 6, 2003 and generally taxes corporate dividends at the 15% capital gain rate for tax years beginning after December 31, 2002, rather than the graduated ordinary income rates at which they have been taxed historically. However, the reduced dividend rate generally does not apply to dividends from real estate investment trusts. The dividend and capital gain rate reductions sunset as of December 31, 2008.

Expensing Increases

Some companies will be able to expense 50% of their investment in certain property acquired after May 5, 2003 under Code Section 168(k), up from the 30% rate previously permitted. In addition, small businesses may expense up to $100,000 annually under Code Section 179 until 2005, four times the amount previously allowed. 

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