As policymakers and practitioners analyze the proposals contained in the recently released Treasury Department Greenbook, it is also worth noting what proposals were not included in this important document.
A number of significant tax proposals that President Biden discussed on the campaign trail – including a proposed 28 percent cap on itemized deductions, eliminating the Section 199A pass-through deduction, imposing Social Security tax on income over $400,000, and revising the estate and gift tax rates and exemption amounts – were not included in the Greenbook.
Similarly, the Greenbook does not address pending changes to certain provisions enacted as part of the Tax Cuts and Jobs Act of 2017 (TCJA), including the anticipated changes regarding the treatment of research and development expenses and the interest expense deduction limitation, both of which are slated to become effective at the beginning of 2022. It is also silent with respect to longer-term changes to TCJA provisions like the phase-down of bonus depreciation beginning in 2023 and the multiple changes to the individual tax regime beginning in 2026.
Finally, the Greenbook does not provide any relief from the cap on state and local tax deduction, which is of significant concern to a number of prominent House and Senate Democrats.
While the exclusion of these proposals from the Greenbook does not prohibit Congress from considering their inclusion in the pending infrastructure package(s) (though it is important to note that the Byrd rule prevents Social Security modifications from being made in a bill that passes through reconciliation), it can be interpreted as a sign that the Administration is less interested in pursuing these proposals in this context. That said, if any of these excluded provisions impact your organization favorably or negatively, it will be important to monitor them, since the need for revenue offsets is expected to continue throughout the remainder of the year. #TaxTake
In the News
In Tax Notes, Loren weighed in on President Biden's SHIELD proposal. Loren said it would be difficult to draft legislation that incorporates a yet-to-be-agreed-on Organisation for Economic Co-operation and Development (OECD) rate for SHIELD. She noted that would also require Congress to approve what is happening at the OECD.
Jorge discussed in Bloomberg Law proposed reporting requirements for foreign cryptocurrency investors. Treasury's recently released Greenbook proposes requiring cryptocurrency brokers to provide information to the IRS on foreign individuals indirectly holding accounts with them. Jorge said "[The Treasury Department and IRS] clearly feel that right now there's a blind spot for foreign owners."
In Tax Notes, Jorge commented on whether the lessons learned from the Affordable Care Act (ACA) can be used by Democrats to pass the Biden Build Back Better infrastructure package. He said that if the ACA is any guide, "whatever the opening proposals are, that's going to be significantly reduced once you start whipping the votes and really having a temperature check with all pockets of the Democratic caucus to find the lowest common denominator."
Jorge discussed in Bloomberg Law the political impact of rescinding a broad business tax break enacted in the TCJA. "The political ramifications right now [of eliminating the tax break] would be challenging," he said.
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