President’s budget contains many tax proposals

President Joe Biden’s administration unveiled its fiscal year 2022 budget proposal on Friday. The Treasury says the proposed $ 6 trillion budget focuses on infrastructure, clean energy, and research and development, and among its many provisions, there are a host of proposed tax changes affecting individuals and businesses.

A set of tax and tax proposals, called the U.S. Plan for Families, would raise taxes on high-income individuals, make various recent tax credit expansions permanent, further limit similar exchanges, and address various administrative issues. tax, including the regulation of tax paid. back preparers.

Other proposals are grouped under the name of the United States Jobs Plan and include a variety of corporate tax changes, including increasing the corporate tax rate and imposing a minimum tax. on corporations, tax incentives to support housing and infrastructure, and clean energy incentives.

Along with the proposed budget, the Treasury published its General explanations of the administration’s revenue proposals for the 2022 financial year (Green Paper), which explains the budget revenue proposals. In a prepared statement, Treasury Secretary Janet Yellen called the budget’s tax proposals “fair and effective tax reform.”

Plan of American families

The proposed budget would make three changes to the taxation of high-income individuals:

  • Increase the top marginal tax rate for high incomes from 37% to 39.6% for taxpayers with taxable income above $ 509,300 for married taxpayers filing jointly and over $ 452,700 for tax filers single people;
  • Taxation of capital gains of high income individuals (with adjusted gross income greater than $ 1 million) at a rate of 37%;
  • Imposition of capital gains tax on property transferred by donation and on property owned on death; and
  • Streamline taxes on net investment income and self-employment contributions (SECA) so that all indirect business income of high income earners is subject to either net investment income tax or SECA tax.

Other proposed changes include:

  • Make permanent the expansion by the American Rescue Plan Act (ARPA), PL 117-2, of tax credits on premium assistance;
  • Make permanent the extension of the Labor Income Tax Credit (EITC) for eligible childless workers;
  • Make ARPA’s permanent changes to the Child and Dependents Tax Credit;
  • Extend the increase in the ARPA Child Tax Credit until 2025 and make its full refund permanent;
  • Increase the employer-sponsored child care tax credit for businesses to 50% of the first million dollars in eligible child care expenses;
  • Taxation of interest accrued as ordinary income for partners with taxable income greater than $ 400,000;
  • Limit the carryforward of the gain from similar exchanges to $ 500,000 per taxpayer ($ 1 million for married taxpayers filing jointly) per year;
  • Make Sec. 461 (l) limitation of excess business losses for unincorporated taxpayers.

To improve compliance and tax administration, the budget proposes:

  • Provide the IRS with multi-year credit to fight tax evasion;
  • Introduction of comprehensive financial account reports, which would apply to all business and personal accounts of financial institutions, including bank, loan and investment accounts above a threshold of $ 600;
  • Increase oversight of tax preparers by giving the Consolidated Revenue Fund explicit authority to regulate paid federal tax preparers, including establishing minimum proficiency standards;
  • Improving the accuracy of tax information by expanding the power of the Treasury to require electronic filing and improving the reporting of information;
  • Expand brokerage information reporting with respect to crypto-assets;
  • Address taxpayer non-compliance with listed transactions by extending the limitation period and making shareholders responsible for collecting unpaid corporate income taxes;
  • Modify various tax administration rules; and
  • Allow limited sharing of information on corporate tax returns to more accurately measure the economy.

American employment plan

The draft budget provides for the following corporate tax changes:

  • Raise the corporate tax rate to 28% from its current 21%;
  • Revise the overall minimum tax regime, prohibit deductions attributable to exempt income and limit reversals;
  • Repeal of the Global Low Tax Intangible Income (GILTI) exemption for income from foreign oil and gas extraction;
  • Repeal of the deduction for foreign intangible income (IEDI);
  • Replacement of Sec. 59A base erosion and anti-abuse tax (BEAT) with a new rule “to stop harmful reversals and put an end to low tax rate developments” (SHIELD);
  • Limit foreign tax credits on sales of hybrid entities;
  • Restrict excessive interest deductions from members of financial reporting groups for disproportionate borrowing in the United States;
  • Imposition of a minimum tax of 15% on the accounting income of large companies; and
  • Offer a 10% tax credit as an incentive to find jobs and business activities in the United States and remove tax deductions for expenses incurred in moving jobs overseas.

To support housing and infrastructure, the budget proposes:

  • Expand the tax credit for low-rental housing;
  • Offer an investment tax credit for new neighborhood houses;
  • Make Sec. 45D new markets tax credit; and
  • Provide federally subsidized state and local bonds for infrastructure.

In the area of ​​clean energy, the budget proposes:

  • Eliminate various tax preferences on fossil fuels;
  • Expand and improve various incentives for renewable and alternative energies;
  • Offer a tax credit for investments in electricity transmission;
  • Provide allocated credit for the production of electricity from existing nuclear facilities;
  • Establish new tax credits for the manufacture of qualifying advanced energy;
  • Establish tax credits for heavy and medium vehicles with zero emissions;
  • Provide tax incentives for sustainable aviation fuel;
  • Offer a production tax credit for low carbon hydrogen;
  • Extend and improve various incentives for energy efficiency and electrification;
  • Provide a tax credit for disaster mitigation;
  • Expand and improve the carbon monoxide sequestration credit;
  • Extend and enhance the credit of charging stations for electric vehicles; and
  • Reinstatement of superficial excise taxes and modification of the financing of the Oil Spill Liability Trust Fund

Alistair M. Nevius, JD, ([email protected]) is the JofAeditor-in-chief, Tax.


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