The Senate approved (89-8) The American Taxpayer Relief Act (H.R. 8) and the House, after a day of intense internal debate, followed suit (257-167).

The legislation includes a provision to extend most of the provisions of current farm law for ’13. However, a number of programs that expired in ’11 and ’12 were not extended and new dairy policy was not included as a result of objections by Speaker Boehner (R-Ohio).

House Agriculture Committee Chairman Lucas (R-Okla.) said a nine-month extension of most farm programs is the best way to avoid a spike in milk prices and preserve the agriculture safety net while dealing with the fiscal cliff.

However, the extension does not apply to some programs that expired in ’11 and ’12. The agriculture provisions of H.R. 8 are not fully consistent with an agreement that the leaders of the House and Senate Agriculture committees announced earlier, which included the extension of certain expiring conservation programs, disaster assistance and a new dairy policy that was included in the legislation previously approved by the full Senate and the House Agriculture committee.

H.R. 8 would make permanent the current $5 million per spouse exemption, indexed for inflation, for the estate tax, but raise the top rate to 40% from 35%. It also makes permanent a ’10 provision extending a portability law that allows a spouse to transfer his or her estate tax exemption to a surviving spouse.

Nearly half—$1.8 trillion—of the $3.9 trillion cost of the plan is accounted for by making permanent the patch that keeps the alternative minimum tax from affecting more than 4 million taxpayers. Under the agreement, taxpayers who earn below the $400,000/$450,000 thresholds would continue to have capital gains and dividends taxed at 15% but it would rise to 20% for those with incomes above those limits. The high earners actually will see their rate rise to 23.8% because of an additional 3.8% investment tax included in the ’10 health care law.

The legislation includes a number of tax extenders that business interests have supported including the research and development tax credit covering tax years ’12 and ’13. It also includes a two-month delay in the automatic spending cuts, also known as sequestration, setting up another “cliff” in early March when sequestration becomes effective.

Another “cliff” is anticipated in late March because the FY13 Continuing Resolution that funds government agencies and programs is set to expire on March 29. In the meantime, the new Congress and the Administration will have to begin negotiations immediately on raising the US debt limit which, according to Treasury, was reached on Dec. 31.

The text of H.R. 8 is available on the NCC’s website at www.cotton.org/issues/2013/upload/American-Taxpayer-Relief-Act.pdf.