Senate Finance Committee Releases Tax News

There have been many articles and lots of news commentary about the Build Back Better Act and the tax consequences that could be in it if passed. On December 13, 2021, the Senate Finance Committee released the tax provisions in the act as of that date. Of course, the House and Senate must come together on final provisions, but these are what the Senate wants in the final version. They represent what the Senate calls “targeted improvements” to the 1180 page portion of the actⁱ.

There is no SALT change yet.

SALT, State and Local Taxes deduction provisions slated to last through 2025 would not be changed if the Senate gets its version. The House version provides for higher limits for deductions.

Corporate Minimum Tax

The Senate and House versions of the act have the same 15% minimum tax rate on the profits of large corporations. These include corporations with more than $1 billion in average annual adjusted financial statement income for the current and two previous tax years.

Child Tax Credit

The House and the Senate also agree:

Child tax credit 2021 expansion extends through 2022.
Also extends advance payments of the credit monthly through 2022.
The greater refundability of the credit would extend beyond 2022.

Earned Income Tax Credit

Again, the Senate and House versions are the same:

Extends the 2021 changes to the earned income tax credit through 2022.
The increase in the earned income and phaseout amounts would be indexed for inflation in 2022.

High-income Taxpayers

It is becoming a little repetitive, but again the House and Senate versions are the same, with these provisions:

Small business stock – Current provisions for the exclusion of gain for stock of qualified small businesses held for more than five years would now be changed to disallow 75% and 100% exclusions for taxpayers with adjusted gross income over $400,000.
Net investment income tax - The bill would expand the reach of the Sec. 1411 net investment income subject to a surtax of 3.8% of certain high-income taxpayers (taxable income over $400,000 for single filers and $500,000 for married couples filing jointly) to include income derived in the ordinary course of a trade or business.
Surcharge on high-income individuals, estates, and trusts – it is proposed that a new tax be levied on modified adjusted gross income over $10 million. The tax rate would be 5% and on $200,000 for an estate or trust, plus 3% of modified AGI over $25 million for individuals ($12.5 million for married taxpayers filing separately) and $500,000 for an estate or trust.

There are plenty more provisions in the 1180 pages that are not tax related, and some minor ones that are. As with all business tax matters, it is a complex topic and a moving target when it comes to business deductions and tax rates. The safe approach to business decisions that influence tax and retirement planning is to consult with tax professionals.

i Senate Finance Committee Tax News Release – Journal of Accountancy.com