As the year-end approaches, we want to make you aware of some of the potential changes to business taxes which President-elect Joe Biden campaigned on. These are not concrete policy proposals as yet, but they are suggestive of the direction a new Administration might take.
These possible changes include:
- An increase to the corporate income tax rate from 21% under current law to 28%. This would apply to C Corporations only.
- The imposition of a minimum tax on corporations showing book profit of $100 million or more. This would be an effective “Alternative Minimum Tax” (AMT) on businesses, under which a corporation would be required to pay the greater of 15% minimum tax or the regular corporate rate, while allowing for net operating loss (NOL) and foreign tax credits.
- The creation of a Manufacturing Communities Tax Credit, the purpose of which would be to reduce the tax burden on businesses experiencing workforce layoffs or the closure of a major government institution.
- Expanding and making permanent the New Markets Tax Credit (established in 2000).
- Providing tax credits to small businesses which offer retirement savings plans to employees.
- Several renewable-energy-related tax credits would be expanded as well, including carbon capture, use, and storage, and the Energy Investment Tax Credit and Electric Vehicle Tax Credit would be reinstated.
Some other changes proposed on the campaign trail, but with little detail, include:
- A potential 10% surtax on corporations who offshore jobs to foreign nations in order to sell goods or services back to the U.S. market.
- An advanceable 10% “Made in America” tax credit for restoring production, revitalizing existing facilities which are either closed or in the process of closing, retooling facilities in order to increase manufacturing jobs, or to expand manufacturing payroll.
Whether any or all of these proposed changes will be addressed legislatively in 2021 is a question, and whether they would pass in Congress is another. A third question is, if enacted, when would the changes take effect? We simply cannot know yet – the crystal ball is very cloudy.
Stay tuned, though – we will be delving into more of the tax changes Biden is proposing in the coming weeks and months.
If you would like to discuss how possible tax increases in 2021 could potentially impact your business income tax liabilities, please click here to email me directly.
Until next Wednesday – Happy Thanksgiving!