04/09/2024

Tax Agenda Highlights From President Biden’s Proposed Budget

Review this analysis from Clark Schaefer Hackett to learn more

President Joe Biden has unveiled his proposed budget for the 2025 fiscal year, outlining various tax provisions impacting businesses and individual taxpayers. Although these proposals face significant hurdles in the Republican-controlled U.S. House of Representatives, their fate may shift after the November elections. Below is a summary of the key tax proposals outlined in the budget.

Business Tax Provisions

The proposed budget includes many changes that could affect businesses’ tax outlook, several of which Biden has previously endorsed. Among the most notable:

• Corporate tax rates. Under this proposal, the tax rate for C corporations would increase from 21 percent to 28 percent — still below the 35 percent rate that was in effect before the Tax Cuts and Jobs Act (TCJA). The effective global intangible low-taxed income (GILTI) rate would increase to 14%, and additional proposed changes would further increase the effective GILTI rate to 21%. The corporate alternative minimum tax rate would go up to 21 percent, from 15 percent.
• Executive compensation. Biden proposes extending the current limitation on the deductibility of compensation in excess of $1 million for certain executives in publicly owned C corporations to privately held C corporations. A new aggregation rule would treat all members of a controlled group as a single employer for purposes of determining covered executives.
• Excess business loss (EBL) limitation. Under the TCJA, noncorporate taxpayers can apply their business losses to offset only business-related income or gain, plus there’s an inflation-adjusted threshold (for 2024, $305,000 or $610,000 if filing jointly). The proposal would make this limitation permanent and treat EBLs carried forward from the prior year as current-year business losses rather than as net operating loss deductions.
• Stock buyback excise tax. The Inflation Reduction Act (IRA) created a 1 percent excise tax on the fair market value when corporations repurchase their stock to reduce the difference in the tax treatment of buybacks and dividends. The proposal would quadruple the tax to 4 percent. It also would extend the tax to the acquisition of an applicable foreign corporation by certain affiliates of the corporation.
• Like-kind exchanges. Owners of certain real property can defer the taxable gain on the exchange of the property for real property of a “like-kind.” The proposal would allow the deferral of gain up to an aggregate amount of $500,000 for each taxpayer ($1 million for joint filers) each year for real property like-kind exchanges. (Other types of assets wouldn’t be eligible.) Excess like-kind gains would be recognized in the year the taxpayer transfers the real property.

Please select this link to read the complete article from OSAP Partner Clark Schaefer Hackett (CSH).