Since Joe Biden’s presidential election victory over Donald Trump in November 2020, 民主党接管了众议院和参议院, 商界一直渴望听到什么 修改拜登政府提出的税法. 基于拜登总统的总统竞选, there was a consensus that the changes to the tax laws proposed by his administration would be mostly unfavorable to corporate and (some) high-income individual taxpayers. 这些建议的改变最近已向公众宣布, 在这篇文章中, and this article focuses on the proposed changes which will have a 业务影响. Whether or not any of these proposed changes will be passed by Congress is impossible to predict. In the last two weeks, we’ve seen some starting compromises proposed on the initial Biden plan. We expect compromises will be reached on some or all proposals and the actual changes to the law will be somewhere between the Biden administration initial proposals and the law that is currently in effect.
Long-term Capital Gains, Qualified Dividends, and Carried Interests Taxed as Ordinary Income
The new tax proposal made by the Biden administration changes how qualified dividends and long-term capital gains are taxed. 目前, individuals are taxed at preferential tax rates on these income items. The proposed change stipulates that the top long-term capital gains and qualified dividends tax rate should be increased from 20% to 25% (applicable to capital gains realized after September 13th, 2021). This could impact both how much and when 个人 invest or exit in businesses.
Almost hand in hand with the above-described changes is the proposal to extend the holding period required for applicable partnership interest to qualify for long-term capital gain from three to five years. Investment partnerships such as Private Equity and Venture Capital firms have fueled considerable growth for portfolio companies and significant wealth for investors over the last 25 years. The current treatment would continue to apply to gains attributable to certain real property trade or business and taxpayers with taxable income less than $400,000.
然而, this proposed change would have a major impact on a significant and business influential group of taxpayers, bearing in mind the additional taxes that they would have to pay if this proposed change becomes the law.
One of the most significant tax changes for all 企业纳税人 would be the introduction of a graduated tax rate structure beginning at 18% for corporations with taxable income less than $400,000, 最高税率为26.应纳税所得额超过500万美元的，按5%计算. 目前所有公司的企业税率为21%. It is very important to note that the graduated tax rate structure would completely phase out for corporations with taxable income in excess of $10 million, 而个人服务公司则一律受26个单位的限制.5%所得税税率. The proposed tax rate increase is a signal that a significant share of new revenues required to finance the envisioned infrastructure projects shall come from 企业纳税人. A change in the corporate income tax rate is probably one of the most important changes with the potential for the biggest 业务影响 to the tax law and President Biden will face strong opposition from the congressional Republicans. 作为一个提醒, the corporate income tax rate before the 减税和就业法案 of 2017 特朗普政府通过的法案 was 35%.
The proposed increase in the corporate income tax rate would not mark as big of a change (this time in an opposite direction) as was the case with the 减税和就业法案, 但税法的任何改变都提供了节省税收的机会. 例如, 即使这一提议在2021年成为法律, the increased rate would likely not be applied retroactively to the 2021 tax year. A corporate taxpayer could potentially save on taxes by accelerating cash inflows during 2021 or incurring some deductible expenses in 2022 rather than incurring those expenses in 2021.
The Biden administration shows an intention to make some of the largest US corporations pay a minimum tax on their worldwide income by proposing a minimum 15% tax on worldwide pre-tax book income. Any US corporation with book income in excess of $2 billion from its worldwide operations could be subject to this tax. It is important to note that this tax will be levied on book income of these corporations, 根据允许的某些扣减和抵免进行调整. 然而, it cannot be underestimated the 业务影响 if this proposal became law.
A so-called “book minimum tax” would be the difference between the book tentative minimum tax and the regular tax due on the corporation’s taxable income. The idea behind this minimum tax is to prevent large corporations from paying very little taxes (or no taxes at all) by reducing their income from operations with certain deductions such as stock-based compensation or bonus depreciation. The minimum tax is computed on book income before considering the above-mentioned deductions, thus increasing the likelihood that large corporations would end up paying what is perceived as a “fair(er)” amount of tax.
The Global Intangible Low-Tax Income (GILTI) became effective in 2017 with the 减税和就业法案 特朗普政府通过的法案, with an intent to currently tax US shareholders of certain controlled foreign corporations (CFCs) on their share of earnings and profits generated by these corporations. The Biden administration tax proposal does not interfere with the core concept behind GILTI but changes how the GILTI inclusion on US shareholders’ tax returns are calculated.
目前, 我们公司的股东, and certain individual shareholders who make an election to be taxed as corporations, are allowed a 50% deduction from the GILTI inclusion under IRC Section 250 which significantly reduces the tax rate paid on a GILTI inclusion. 拜登政府的 建议将这个扣除额从50%减少到37.5%,, 因此, raise more tax revenues by increasing the effective tax rate on the inclusion amount. A potential decrease in the allowed deduction would also affect certain individual shareholders who elect to tax their GILTI inclusions using corporate income tax rates by making this election less attractive with a reduced potential for tax savings.
Another unfavorable change to the 企业纳税人 when it comes to computation of a GILTI inclusion is the proposal to reduce the 10% deduction for qualified business asset investment (QBAI) to 5%. This deduction is part of the original GILTI rules and is very important to the US shareholders of corporations that are CFCs with significant amounts of fixed (tangible) assets on their balance sheets.
The Biden administration tax proposal includes another change that may affect US shareholders of controlled foreign corporations. Current rules allow for a so-called “high tax exception” which eliminates the portion of a GILTI inclusion in instances where the effective tax rate paid on income from a single tested unit is higher than 18.9%(现行企业所得税21%的90%). 新提案规定取消这一例外. 然而, 即使不排除, the application of this exception would be more difficult in the future if the US corporate income tax rate is increased as the effective tax rate threshold would also be increased.
往好的方面想, 然而, there is a possibility that the Biden administration will propose an increase in foreign tax credit for taxes attributable to GILTI income. U.S. corporate shareholders of a CFC are allowed an 80% credit for taxes deemed paid on GILTI income under current regulations. The most recent news indicates that the new foreign tax credit limitation could be raised to 95% of foreign taxes deemed paid on this income.
目前, the federal income tax on GILTI inclusion is computed on an aggregate basis. This means that tested income of all CFCs could be offset by tested losses from other CFCs regardless of the jurisdiction under which these CFCs operate. The same approach is allowed for applying for the foreign tax credits as a single FTC limitation is applied to GILTI income from all CFCs. The Biden administration proposes to change this approach by applying a country-by-country method to determining the GILTI inclusion. The proposed method would prevent the blending of income earned in low-tax jurisdictions with that earned in high-tax jurisdictions. 类似的, the foreign tax credit limits would also be applied on this basis which would prevent offsetting the tax liability arising from GILTI income from one jurisdiction with foreign taxes paid or accrued in other jurisdictions.
An alternative to the country-by-country approach that may prove to be simpler is to divide CFCs’ global income into two categories: low-tax and high-tax. 在这种方法, the income from high-tax jurisdictions would be excluded by a mandatory high-tax exception. This would mean that only income from low-tax jurisdictions would form the GILTI inclusion. This method may be less complicated and easier for the IRS to enforce as taxes paid in low-tax jurisdictions would be less than US taxes on GILTI, 从而消除了一些复杂的外国税收抵免问题.
重大税法修改, 就像拜登政府提议的那样, require attention on the Individual and 企业 taxpayers’ part to avoid tax spikes that could result from the lack of planning. The focus of the Biden administration seems to be to increase tax revenue collection from high-earning individuals and larger 企业纳税人 thus having a significant 业务影响 (high-earning individuals use corporate structures too), as is the case for many other governments who need to fund the pandemic and it is very important for these taxpayers to be ready for change should the proposals become the law. 然而, 从目前美国国会的情况来看, 要预测这些变化中的哪一个是不可能的, 如果有任何, 会像拜登政府最初设想的那样通过吗. The reality seems to suggest that President Biden will have to make many compromises to ensure that the core of his intended changes sees the light of the day.