Revised Framework for “Build Back Better Act” Shifts Focus to Corporate and Individual Tax Rates

McCarthy Lebit — Thu, 28 Oct 2021 22:01:59 +0000

As Congress races to push through Biden’s Build Back Better Act (“BBBA”), President Joe Biden has revealed modifications to his spending framework. Noticeably absent from President Biden’s BBBA are taxes concerning estate planning. The new adjustments to the BBBA display a sharp change in direction away from estate tax planning. Instead, the revised BBBA aims to tax corporations and high-income Americans. The BBBA asserts that corporations reporting profits over $1 billion per year will now be assessed a 15% corporate minimum tax and a 1% surcharge on corporate stock buybacks. Furthermore, in an effort to prevent corporations from shipping jobs and profits overseas, the BBBA plans to implement a 15% global minimum tax on foreign profits of U.S. Corporations.

In an attempt to reduce the cost of prescription drugs and decrease the national deficit, the Biden administration intends to transform the tax infrastructure of high-income Americans. Specifically, the proposed BBBA increases the taxes of Americans who make more than $400,000 annually and assesses a new surtax on multi-millionaires and billionaires. The BBBA also plans to close the Medicare self-employment tax loophole by strengthening the net investment income tax for those making over $400,000 per year. The result of the BBBA is offsets estimated up to a total of $1,995 billion.

Consistent with the impact on large corporations and high-income Americans, the BBBA plans to strengthen the middle class by investing in affordable housing, higher education, and high-quality care for children, the elderly, and people with disabilities. The BBBA also presents the most cutting-edge climate change bill in American history.

Although the BBBA is being zealously promoted by the Biden administration, the transformative spending framework faces certain challenges ahead, as the Democrats only hold a razor thin majority in Congress. Please be patient and do not hesitate to contact us with any questions or concerns about your specific situation.

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This information is provided for general informational purposes only and should not be construed as legal advice. Readers should consult with qualified legal counsel regarding their specific circumstances before taking any action based on the information presented.

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President Biden’s $2.24 Trillion Infrastructure Overhaul and Corporate Tax Proposal

McCarthy Lebit — Wed, 07 Apr 2021 16:28:52 +0000

Following its $1.9T COVID-19 relief bill, the Biden Administration released details of its next spending bill, the “American Jobs Plan,” primarily aimed at funding initiatives in transportation, infrastructure, renewable energy, manufacturing, and the wars on climate change and inequality. The spending bill carries a $2.25T price tag, which is projected to be spent over the next 8 years. Funding for this bill is targeted to come primarily from tax increases on corporations. The Administration is proposing a corporate income tax increase from the current 21% rate to 28% on corporate domestic earnings, coupled with a minimum tax of 21% on corporate profits earned outside of the U.S. Currently, corporations generally pay approximately 13% income tax on profits earned overseas. President Biden’s new global minimum tax on corporations is a critical revenue component of the proposal, as it is anticipated to prevent corporations from “blending” tax rates paid across foreign jurisdictions, while also disposing of the current rule that allows U.S. corporations to pay zero tax on the first 10% of earnings on investments located in foreign countries. Additionally, for corporations generating revenue greater than $100 million, the American Jobs Plan is anticipated to impose a 15% minimum tax on “book income” instead of “taxable income”. The American Jobs Plan proposes repealing the Foreign-Derived Intangible Income deduction, which incentivizes corporations to bring their intellectual property into the U.S. President Biden further provides a tax credit for certain types of corporate activities meant to “onshore” work while denying certain other tax credits to corporations that move jobs overseas. The President’s proposal eliminates certain deductions and tax credits available to the fossil fuel industry. Another significant component of this proposal is a planned strengthening of the IRS. The Biden Administration believes a more aggressive IRS is required to ensure corporate tax compliance, and therefore, President Biden is looking to provide more funding to the IRS while granting broader enforcement initiatives to address tax evasion among corporations and high-net-worth individuals. The White House is also working on a second spending package, currently estimated at $1T, to be revealed later in April, focusing primarily on social measures, likely to be paid for by tax increases on wealthy individuals. These new plans are not shy about naming the funding sources for the spending bills. Those to be impacted can expect increased scrutiny and regulatory challenges to comply with. Corporations and high-income individuals should be working closely with their financial and legal advisors to monitor the status of these proposals and, if enacted, to plan accordingly. When new laws are passed, there are always planning opportunities and strategies available to ensure the best possible outcomes for our clients. For more information or to seek counsel from our Taxation group, please reach out to request a consultation or call us at 216-696-1422. _____ This information is provided for general informational purposes only and should not be construed as legal advice. Readers should consult with qualified legal counsel regarding their specific circumstances before taking any action based on the information presented.

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Revised Framework for “Build Back Better Act” Shifts Focus to Corporate and Individual Tax Rates

President Biden’s $2.24 Trillion Infrastructure Overhaul and Corporate Tax Proposal