BUILD BACK BETTER ACT: VOTE LIKELY TODAY AS BIDEN URGES ACTION
President Biden pushed The House to vote today on his historic Build Back Better (BBB) Act. During a speech today about U.S. economic recovery he asked every House member to vote yes on the bills tackling infrastructure, social spending, and tax measures.
President Biden said, “Send the infrastructure bill to my desk, send the Build Back Better Act to the Senate.”
Key Tax Provisions of the Revised Build Back Better Act
Note: The revised draft legislation would include the following significant changes, effective January 1, 2022, unless otherwise noted:
Individual Income Taxes
Modified Adjusted Gross Income. Generate new surcharge on modified adjusted gross income (MAGI), defined as adjusted gross income less investment interest expense, equal to 5 percent on MAGI in excess of $10-million plus 3 percent on MAGI above $25 million.
American Rescue Plan Act. Extend the American Rescue Plan Act (ARPA) Child Tax Credit (CTC) expansion through 2022, making the entire CTC fully refundable on a permanent basis.
Earned Income Tax Credit. Extend the ARPA’s temporary expansion of the Earned Income Tax Credit (EITC) eligibility, the phase-in rates, and the amount through 2022.
IRAs. Restrict Individual Retirement Accounts (IRAs) additions when balances reach $10 million and accelerate required minimum distributions for those accounts.
SALT. Increase the cap on the state and local tax (SALT) deduction from $10,000 to $80,000 and extend this cap through 2030 and revert back to $10,000 in 2031. The higher SALT cap amount would also apply to the 2021 tax year.
Pass-through Business Taxes
Net Investment Income Tax. Stretch the base of the 3.8 percent Net Investment Income Tax (NIIT) to cover active business income for pass-through firms.
TCJA. Make the active pass-through loss limitation permanent. It was enacted in the 2017 Tax Cuts and Jobs Act (TCJA).
Corporate and International Taxes
Minimum Corporate Tax. A 15 percent minimum tax would be imposed on corporate book income for corporations with profits over $1 billion. This minimum tax would be effective for tax years beginning after December 31, 2022.
Excise Tax. The creation of 1 percent excise tax on the value of stock repurchases during the taxable year, net of new issuances of stock, effective for repurchases after December 31, 2021. Excluded from the 1 percent tax are stock contributed to retirement accounts, pensions, and employee-stock ownership plans (ESOPs).
Global Intangible Low-Taxed Income. Incoming changes to the Global Intangible Low-Taxed Income (GILTI) regime, effective for tax years beginning after December 31, 2022, including:
- Lowering the deduction for GILTI to 5 percent, making the tax rate 15 percent
- GILTI being calculated on a country-by-country basis
- Decreasing the deduction for Qualified Business Asset Investment (QBAI) to 5 percent
- Lowering the foreign tax credit (FTC) haircut to 5 percent. Also, allowing FTCs to be carried forward for 5 to 10 years and disallowing FTC carrybacks
- The exemption of GILTI from expense allocation rules
- The inclusion of foreign oil and gas extraction income (FOGEI)
Tax Revenue Impacts of the Updated Build Back Better Act
DIG DEEPER:
How The $3.5 Trillion Budget Blueprint Could Impact Your Clients
The new reporting requirements on brokers are addressed in Section 80603 of the bill. “Broker,” by definition in Sec. 6045 (c)(1), is expanded to include “any other person who (for a consideration) regularly acts as a middleman with respect to property or services…A person shall not be treated as a broker with respect to activities consisting of managing a farm on behalf of another person.” In turn, the bill defines a “digital asset” as “any digital representation of value which is recorded on a cryptographically secured distributed ledger or any similar technology as specified by the Secretary.