On Friday November 5th, the US House of Representatives passed the Infrastructure Investment and Jobs Act (H.R. 3684). There are very few tax provisions in this legislation, with more vast changes expected in the upcoming budget reconciliation bill currently under consideration by Congress.
Under the new legislation comes the end of the employee retention credit (ERC). The ERC was originally created under the Coronavirus Aid, Relief, and Economic Security Act and later extended by the Consolidated Appropriations Act to include eligible employer wages paid during the third and fourth quarters of 2021. H.R. 3684 repeals the 4th quarter extension consequently ending the ERC as of 9/30/21.
With the passing of the Bipartisan infrastructure Bill, the Biden administration’s Build Back Better, Reconciliation Bill is now in limbo until the Congressional Budget Office (CBO) completes its cost estimate of the entirety of the Democratic-backed social spending package. It is estimated that the CBO will complete its analysis around Thanksgiving.
The tax and spending provisions of the $1.75 trillion Build Back Better framework include:
- A 15% minimum tax on corporate profits for firms with earnings over $1 billion reported to shareholders, and a 1% surtax on stock buybacks
- A 5% surtax on “modified adjusted income” above $10 million, as well as an additional 3% on “modified adjusted income” above $25 million (for taxable years beginning after 12/31/21)
- A Global Minimum Tax, consistent with OECD, The Organization for Economic Co-operation and Development, of 15%
- The Net Investment Income Tax would be extended to cover net investment income derived in the ordinary course of a trade or business for individuals with taxable income of greater than $400,000 for individuals filing single, $500,000 for joint return filers as well as for trusts and estates. (for taxable years beginning after 12/31/21)
- Continue the limitation on excess business losses
- Universal, free preschool for three- and four-year olds, and an extension of an expanded child tax credit through 2022
- Extend the expanded Affordable Care Act premium tax credits through 2025
- Extend for one year the current expanded Earned Income Tax Credit for childless workers
- Increased IRS enforcement aimed at the wealthy
Also worthy of note, is what’s not in the framework:
- Corporate and individual tax rate increases (other than the individual surcharges and the corporate alternative minimum tax noted above)
- Capital gain rate increases
- Restrictions on carried interests
- Tightened estate and gift tax rules, rules on grantor trusts
- Restrictions on certain individual retirement accounts (IRAs)
- A “billionaires’ tax”
- Any change to the existing $10,000 cap on the deductibility of state and local taxes
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