It’s Complicated
The Code includes a number of complex rules that are aimed at those overseas business and investment activities of U.S. taxpayers that Congress has determined may result in the improper deferral or avoidance of U.S. income tax.Continue Reading Enough Already – Eliminate Downward Attribution and Accidental CFCs
Summertime in Washington
On August 11, the Senate passed the $3.5 trillion budget resolution for the 2021-2022 fiscal year – S. Con. Res. 14, as amended – by a vote of 50 to 49, strictly along party lines, including Democratic Senators Manchin and Sinema who have repeatedly questioned the wisdom of such an expensive measure. The Senate’s overview[i] of the budget resolution began as follows:
On July 13th, 2021, the Senate Budget Committee, with the support of Leader Schumer and President Biden, announced a framework agreement of $3.5 trillion in FY2022 Budget Reconciliation instructions to enact the Build Back Better agenda. The agreement calls for the $3.5 trillion in long-term investments to be fully offset by a combination of new tax revenues, health care savings, and long-term economic growth. In addition, the agreement would prohibit new taxes on families making less than $400,000 per year, and on small businesses and family farms.
Then, on August 24, the House also passed the budget resolution – H. Res. 601 – by a vote of 220 to 212, also strictly along party lines, including every Democrat who threatened to vote against the resolution unless it included a provision that repealed the cap on the SALT deduction, and including those moderates who threatened to oppose the resolution unless the $1 trillion bipartisan infrastructure bill was enacted first, all of whom submitted to the Speaker.[ii]
Continue Reading Tax Increases Are In Sight
The Calm Before?
I’m confused.[i] For better or worse, I’m pretty sure that I am not alone.
Last week, in a letter addressed to the American people, forty-six of the fifty Republicans in the U.S. Senate indicated they would not vote in favor of increasing the federal debt ceiling to accommodate the additional spending that is called for under the $3.5 trillion Budget Resolution recently passed by Senate Democrats.[ii] If the Democrats require such an increase in the deficit to fund their programs – as described in the Administration’s American Jobs and American Families Plans[iii] – the letter explained, they will have to do so without Republican support, using the reconciliation process, in much the same way the Democrats will be increasing taxes[iv] to help cover the cost of those programs.Continue Reading Tax Distributions as Fraudulent Conveyances?
Compare and Contrast
Have you spoken to anybody about the infrastructure bill on which the Senate is about to vote? I know I haven’t, except to explain that Speaker Pelosi has stated the House will not consider the bill unless and until the Senate also adopts a budget resolution for the President’s tax and spending plans.Continue Reading Increased Capital Gain Rate, Nonresident Aliens, and ESBTs
Head-Scratchers
The Code is chock-full of provisions that will challenge the intellectual capacity, not to mention the patience, of most tax professionals. The complexity of these rules does not arise out of some sadistic intent on the part of Congress, the Treasury, or the IRS to torment taxpayers and their advisers;[i] rather, it is often a reaction to, and a direct function of, the complicated, multifaceted schemes that many of those very same taxpayers and advisers devise with the intent of reducing the taxpayer’s income tax liability.Continue Reading Bona Fide Intercompany Loan – Are you Sure?
Not Good
As Mr. Biden settled into the White House, and as the Democrats began planning how to best utilize their slim Congressional majority to enact and pay for their sweeping legislative agenda, the principal concern among most owners of successful closely held businesses was Mr. Biden’s proposal to almost double the federal income tax rate applicable to the long-term capital gains recognized by an individual taxpayer.[i]Continue Reading Tax Increases in Sight? Time to Sell the Business? Focus on Economics
I Read the News Today
Much of today’s news is dominated by the future of the Administration’s broadly defined infrastructure plan. Discussions among “those in the know” inevitably turn into debates over the wisdom of pursuing the bipartisan legislative approach favored by centrists from both sides of the political divide as contrasted with the “go-it-alone through reconciliation” budget process being pushed by the more progressive wing of the President’s party.Continue Reading Tax Changes in the Offing? “Close Scrutiny” of Business Owners’ Economic Benefits Remains a Constant
What A Ride
No one anticipated that the Administration’s proposed tax increases would fly through Congress easily – at least no one residing in a state in which the recreational use of marijuana has not been legalized. Query, however, whether anyone foresaw the rollercoaster-like developments of the last several days.Continue Reading Partners, S Corp. Shareholders and Biden’s 2022 Revenue Proposal: No More Business as Usual
Tax Gap
In a report released last week, the U.S. Treasury Department explained that the so-called “tax gap” – i.e., the difference between the amount of federal income taxes owed by taxpayers for a taxable year and the amount actually paid for such year – “disproportionately benefits high earners who accrue more of their income from non-labor sources where misrepresenting is common.”[i]
According to the report, the largest contributors to this shortfall are the underreporting of income and the overclaiming of deductions on tax returns. These practices, the report continues, are prevalent among higher-income taxpayers with “opaque income sources,” among which the report includes sole proprietorships, partnerships and S corporations, rental real estate, and small C corporations;[ii] in other words, the owners of closely held businesses.
The President is relying upon the data in the Treasury’s report to pressure Congress into closing the tax gap, in part, by increasing the IRS’s enforcement capabilities, requiring more information reporting with respect to “opaque income streams,” and regulating tax return preparers.[iii]Continue Reading “Opaque Income Sources” + “Tax Gap” = More Enforcement + Tax Hikes = Anyone’s Guess
A Night to Remember?
Did you listen to the President’s speech last Wednesday? He addressed a joint session of Congress to pitch the Administration’s $1.8 trillion American Families Plan. Due to COVID-related restrictions, there were only about one hundred elected officials present in the House Chamber;[i] other invited guests brought the total in attendance to approximately two hundred.[ii]
The sparsely occupied room was to be contrasted with the targeted audience: the almost 27 million U.S. viewers who tuned into Mr. Biden’s speech, and whom he hoped to enlist in his effort to sway a closely divided Congress.[iii]Continue Reading The President’s Recent Tax Proposals: What Do They Mean for Business Owners?