By: Scott Lawrence | 03/31/22
On March 28, 2022, the Treasury Department released details of the administration’s tax-related budget recommendations for FY2023, commonly referred to as the “Green Book.” It contains recommendations from the administration to Congress for forthcoming tax legislation.
Last year’s Green Book spawned both the Infrastructure Investment and Jobs Act (which was passed into law) and the Build Back Better Act (“BBBA”), which passed the House, but was stalled in the Senate. There remains hope by the administration that the BBBA will gain enough support to move forward in some fashion, but that remains to be seen. Accordingly, the Green Book proposals are intended to work in tandem with the BBBA, as if the BBBA were already enacted.
The Green Book reiterates many revenue provisions that were part of the BBBA including:
You can read more about these proposals in our discussion of the BBBA in this article.
The Green Book introduces several new revenue raising proposals. A few of the more prominent proposals are discussed below.
This proposal would impose a minimum tax of 20% on the total income of an individual inclusive of unrealized capital gains for all taxpayers with wealth in excess of $100 million. The proposal includes rules to allow prior taxes of unrealized gains to offset future taxes of realized gains.
This proposal would require a donor or deceased owner of appreciated property to recognize a gain upon transfer by gift of bequest of appreciated property. Certain exclusions would apply, and note that under current law, gain is typically not recognized.
This proposal would limit the use of donor advised funds to avoid private foundation payout requirements.
This proposal would repeal a number of fossil fuel friendly incentives including
This proposal would permanently extend the new markets credit.
Designed to raise more revenues than BEAT, this proposal would repeal the BEAT tax and replace it with a Under Taxed Profits Rule (“UTPR”). The UTPR is similar to the OECD Pillar Two Model Rules that are being adopted or evaluated by many of the US’s trading partners. The UPTR would apply primarily to foreign based multinationals with US subsidiaries with group revenues of $850 million or more. This proposal also includes a domestic minimum top-up tax that would protect US revenues from the imposition of UTPR imposed by other countries.
This provision is intended to benefit companies that are willing to reduce or eliminate a trade or business currently conducted outside the U.S. and start up, expand or otherwise move the same trade or business to the U.S. To the extent this action results in an increase in U.S. jobs, the proposal would provide for a general business credit equal to ten percent of the eligible expenses incurred in connection with the onshoring. Furthermore, the proposal would disallow deductions for expenses paid or incurred in connection with offshoring a US trade or business.
This proposal would recapture all previously deducted depreciation of real property as ordinary income. Currently, only deprecation in excess of straight-line depreciation must be recaptured.
In addition to proposed tax provisions, the Green Book encourages a number of matters to improve tax administration and compliance including:
As mentioned before, these proposals are merely recommendations. Congress can adopt some, all or none of these proposals. We must wait and see if the BBBA will be resurrected or if new, more tailored legislation emerges.
We will continue to monitor developments related to these proposed tax changes and communicate any significant changes that will impact our clients. For more information, please contact your Bennett Thrasher tax advisor by emailing [email protected].
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