President Biden

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party lines, including every Democrat who threatened to vote against the resolution unless it included a provision that repealed the cap on the SALT deduction, and including those moderates who threatened to oppose the resolution unless the $1 trillion bipartisan infrastructure bill was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

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

The Dog Days[i]

I’ve never much cared for the month of August. In New York, at least for me, the eighth month of the year – named by the Roman Emperor, Augustus, to honor himself[ii] – evokes memories of very warm, very humid days, and anxious thoughts about the upcoming school year.[iii]

Although I no longer stress over returning to class, August has continued to be my least favorite month and, by the look of things, this year will be no different.

We begin the month with the Senate having finally agreed to take up debate of the $1.2 trillion bipartisan infrastructure package backed by the White House.[iv]


Continue Reading Step Transaction or Substance Over Form? Loss Disallowance in Any Case

Movement Toward Tax Increases

You may have read last week that Democrats on the Senate Budget Committee announced they had reached a deal on a budget resolution that will enable them to bypass Senate Republicans on the way to enacting most of the “social infrastructure” programs called for under the President’s American Families Plan.[i] Significantly, after the announcement, Senator Manchin, who is not a member of the Committee, indicated he would not stand in the way of the budget resolution, thereby practically assuring its passage and the start of the reconciliation budget process.


Continue Reading Employee-Shareholders, Reasonable Compensation And Employment Taxes

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

Recap

Last week, we considered several of the revenue proposals included in the Biden Administration’s 2022 Budget that are probably of interest – or should we say, “of concern”? – to the owners of closely held businesses.[i]


Continue Reading Biden’s 2022 Revenue Proposal, Profits Interests, and The Alchemy of Compensation

Extra, Extra![i]

Last Friday afternoon, as millions of unsuspecting Americans prepared for the long Memorial Day weekend[ii] – for many, perhaps, their first mask-less holiday celebration in almost 15 months – the Biden Administration released its 114-page “Green Book” for the federal government’s 2022 fiscal year.[iii]


Continue Reading The Biden Administration’s Revenue Proposals for Fiscal Year 2022: Tax Increases and Forced Recognition of Capital Gains

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