On Monday, September 13, 2021, the U.S. House of Representatives Ways and Means Committee released proposed tax changes as part of the reconciliation bill known as “Build America Back Better.”
The bill contains numerous proposed tax law changes for businesses and individual taxpayers.
Highlights of proposed regulations are:
- Changes in the corporate tax rate from flat 21% to a graduated top rate of 26.5%
- Modifications to exclusion of gain from the sale of Qualified Small Business Stock
- Permanently disallowing business losses (net business deductions more than business income) for non-corporate taxpayers
- New limitations on business interest deduction
- Changes to capitalization of Research and Development Costs (R&D)
- Limitations on Excessive Compensation for publicly traded corporations
- 3% Surcharge tax for high-income individuals
- Increases in Long Term Capital Gain Rate for high-income individuals
- Modifications to Net Investment Income Tax to cover income derived in ordinary course of trade or business
- Setting a maximum allowable deduction under Qualified Business Income Deduction (Section 199A)
- Modifications to Foreign Derived Intangible Income (FDII) and Global Low Taxed Intangible Income (GILTI)
- Changes to unified credit for estate and gift taxes to $5 million per taxpayer
- Modifications to Retirement Plans and Required Minimum Distributions (RMD)
Many of the tax provisions would take place after December 31, 2021. However, the changes relating to long term capital gains tax rate and Qualified Small Business Stock are proposed to be effective on or after September 13, 2021.
The much talked about elimination of the $10,000 cap on individual taxpayer’s ability to deduct state and local taxes was not part of the proposal. However, a few lawmakers have stated they will continue to advocate for the removal of the $10,000 cap to be part of the final version.
In addition, elimination of the step-up in basis at death, the elimination of like kind exchanges, and 15% minimum tax on corporations with worldwide book income over $2 billion were not included in this proposal.
Click here to read more about these proposals.
