LOUISVILLE, Ky. (AP) — Liquor company Brown-Forman is declaring a special cash dividend of $4 per share, a step that many companies are taking ahead of impending tax increases and government spending cuts at the start of 2013.
The White House and Republican congressional leaders are trying to strike a deal to avoid falling off the fiscal cliff, as the combination of simultaneous tax hikes and spending cuts have been dubbed.
On Tuesday, Brown-Forman Corp. became the latest company to issue a special end-of-year payment to protect investors from potentially having to pay higher taxes on dividend income starting in January.
The company said that the special dividend will be paid on Dec. 27 to shareholders of record on Dec. 12.
Earlier this month the Louisville, Ky., company, whose brands include Jack Daniel's and Southern Comfort, announced that it increased its quarterly dividend by 9 percent to 25.5 cents per share. The quarterly dividend will be payable Dec. 26 to stockholders of record on Dec. 5.
Many companies are reviewing their dividend policies now that it appears investors could soon pay higher taxes. Since 2003 investors have paid a maximum 15 percent on dividend income. But that historically low rate will expire in January unless Congress and President Barack Obama reach a compromise on taxes and government spending. As it stands, dividends will be taxed as ordinary income in 2013, the same as wages, so rates will go up depending on which income bracket a taxpayer is in. For the highest earners, the dividend rate would jump to 43.4 percent.