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Fiscal Cliffhanger: Steps CFOs Should Consider Now

CFO Insights


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The potential year-end changes have triggered a surge in fourth-quarter special and accelerated dividends designed to provide shareholders some relief from next year’s tax bill.

CFO Insights: Fiscal cliffhanger: Steps CFOs should consider now

The fiscal cliff. Will it be resolved by year-end and how?

For Chief Financial Officers (CFO), that uncertainty has them racing against the year-end deadline that may bring higher taxes on corporate dividends and executive compensation if the White House and Congress can’t resolve the “fiscal cliff” by December 31. If no agreement can be reached, a number of taxes will automatically rise in 2013, including rates on dividend income, which will jump from the 15% set under the Bush-era tax cuts to a maximum rate of approximately 43% for some taxpayers. That figure includes a 3.8% tax on net investment income put in place under the Affordable Care Act for taxpayers with income above $250,000, which goes into effect January 1, 2013, regardless of what happens with the Bush-era tax cuts between now and year-end.

In this issue of CFO Insights, we outline some options that either closely held or publicly traded companies can potentially use to help offset fiscal cliff uncertainty—an accelerated dividend, a special dividend, dividends-in-kind and a leveraged recapitalization. Compensation planning steps for consideration are also discussed, some of which could benefit the corporation as well as employees in general

Download the CFO Insights article, "Fiscal cliffhanger: Steps CFOs should consider now," to learn more.

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