The Biden administration has introduced several tax proposals to mop up funds for new government investments in areas such as education, infrastructure, and family programs to fulfill the plan of Build Back Better says, William D King. This article highlights the broader aspects of the tax proposals, which constitute some significant changes that are to come into effect from January 1, 2022.
Changes in Individual Income Taxes explained by William D King
Proposals for three new inclusions in Individual Income taxes include imposing a surcharge on MAGI or modified adjusted gross income obtained by adjusting the investment interest expense against gross income says, William D King. The proposed surcharge rate is 5% on MAGI, exceeding $10 million, and also 3% on MAGI over $25 million.
The other proposal is to expand Child Tax Credit (CTC) through 2022 by extending the ARPA or American Rescue Plan Act so that the entire CTC is fully refundable permanently.
The third proposal is about temporarily expanding EITC or Earned Income Tax Credit eligibility. Within the ambit of the ARPA, amount, and also phase-in rates through the entire 2022.
Changes in Corporate and International Taxes
Corporations with profits over $1 billion will now have to pay a minimum tax of 15% on corporate book income. And the change will come into effect from December 31, 2022.
According to William D King, effective December 31, 2021, an excise tax of 1% will be payable on the value of stock repurchases, net of issuance of stock, during the taxable year. Excluded from the scope of taxes are stocks contributed to pensions, retirement accounts, and also ESOPs or employee stock-ownership plans.
Effective from the tax year beginning after December 31, 2021. There will be changes to the GILTI or Global Intangible Low-Taxed Income that would comprise of the following:
- Calculate GILTI by considering the country.
- The reduction of GILTI deduction by 5% will result in a tax rate of 15%.
- Reduce QBAI or Qualified Business Asset Investment to 5%.
- Reduction in FTC haircut credit to 5% while allowing carrying forward Foreign Tax Credits (FTCs) for 5 to 10 years but disallowing carrybacks.
- Exemption allowed for GILTI from expense allocation rules.
- Include FOGEI or foreign oil and also gas extraction income.
Other Modeled Tax Proposals
- The requirement to amortize R&D (research and development) expenses over five years. That were due to start after 2021 will now begin after 2025.
- In a push to green energy and other efforts, there is a proposal for modifying, extending. And creating several tax credits through 2031 or 2033.
- Reinstate the Superfund tax on imported petroleum and crude oil at 16.4 cents per gallon after inflation indexation. And increase the Superfund tax on the sale of chemicals to make it double.
Major Proposals not modeled
Among major proposals not modeled is the proposal to make permanent. Or extend some chosen ARPA expansions for premium tax credits enabling households. With higher income to qualify for credits while enhancing the subsidy for lower-income families says, William D King.
Make changes aimed at cryptocurrency, like introducing rules for common control and wash sales.
Modify the BEAT or base erosion and anti-abuse tax for multinational corporations.