There are relatively few tax provisions in the recently signed Infrastructure Investment and Jobs Act legislation, but more extensive changes may be coming in the fiscal year 2022 budget reconciliation bill that remains under consideration by Congress.
The biggest tax change in the signed infrastructure legislation is the end of the employee retention credit (ERC), making wages paid after Sept. 30, 2021, ineligible for the credit (except for wages paid by an eligible recovery startup business).
The Infrastructure Bill also added these focused tax provisions:
- Disaster relief: Extension of some disaster-related tax deadlines
- Tax deadlines: Expansion of the types of tax deadlines that are extended due to service in a combat zone
- Cryptocurrencies: expands cryptocurrency reporting requirements in an effort to stem underreporting of cryptocurrency transactions
Highlights of some of the individual/business changes in the “proposed” Build Back Better Act:
- No rate changes for individuals and corporations, in general
- No general corporate tax rate increase from 21%
- No changes to the rate structure for individual ordinary income
- No changes to the capital gains rate structure
- No changes to 199A (20% Qualified Business Income Deduction)
- No changes to 1031 exchanges for real estate
- No changes to carried interest
- No changes to the taxation of partnerships
- No recognition of unrealized gains at gift and death (i.e., the “date of death” step-up should survive)
- No wealth tax – the Senate may reconsider
What might be included in the Act:
- Income tax surcharge of 5% on Adjusted Gross income in excess or $10 Million (joint filer) and $200,000 for an estate & trust.
- Additional tax surcharge of 3% of excessive modified income that exceeds $25 million (joint filer) and $500,000 for estate & trust.
- Income from partnerships, S Corporations may be subject to the 3.8% Net Investment Income Tax (NIIT) if AGI is greater than $500,000 (Joint filers).
- Increased child credits added for 2021 are extended to 2022
- Earned income tax credit increased for childless taxpayers is extended to 2022.
- There are also some very specific changes for businesses, international provisions, and green energy.
Also, what is NOT changing:
The estate lifetime exemption is not changing at this time. Looks like we are back to the current exemption amount adjusted for inflation. (note: this is scheduled to sunset to the lower estate exemption levels after 2025).
More detailed information will be posted soon. We’ll share more news as the Act makes its way through Congress.