TAX TAKE: Continued Concern Over the Lack of Proposed Effective Dates

Tax Alert

As the Administration continues to roll out business and individual tax increase proposals to fund its traditional and "social" infrastructure goals, taxpayers are becoming increasingly concerned with the lack of effective dates associated with these proposals. The potential timing for enactment of an infrastructure package (perhaps the end of September, at the earliest) suggests that any tax increases would be effective for 2022. The determination of effective dates, however, is complicated (particularly with respect to individual tax increases) and dependent on a variety of factors. Among those factors are: 

  • The importance of equity and fairness to taxpayers (including advance notice of any tax law changes)
  • Revenue considerations
  • Prevention of taxpayer avoidance or manipulation
  • The potential impact of tax law changes on the economy and capital markets

Thus, there is a delicate balance that policymakers would like to maintain between providing taxpayers with certainty for tax planning purposes and preventing tax avoidance and negative market consequences (such as, for example, triggering a sell-off of stocks in advance of a change in capital gains rates). Potentially overtaking all of these concerns is the fiscal reality that policymakers are in need of significant revenue to fund the ambitious infrastructure proposals of the Biden Administration. Effective dates (as well as any associated transition or "grandfather"-type rules) are often the last to be finalized in a piece of legislation and subject to change up until the legislation is finally voted on and enacted.

While right now, signs point to a prospective effective date starting in 2022 for any tax increases, it is important to monitor introduced bills, press releases, the pending Treasury Department "Greenbook," and other statements of policymakers indicating a receptivity to retroactive effective dates for these tax increase proposals. #TaxTake

Upcoming Speaking Engagements and Events

On May 12, Loren will present Overlay of Potential International Tax Reform and OECD Pillars I and II, a panel discussion at the ABA Virtual 2021 May Tax Meeting.

Loren will speak at The Tax Council's 2021 Annual Spring Tax Policy Conference on May 13. She will participate in a panel discussion titled IRS/Treasury Update: The Players, the Policies, and Recent Developments.

In The News

Jorge commented on the likelihood Democrats push through some version of President Biden's proposed tax increases to fund his infrastructure plan in InvestmentNews. "You're definitely going to have one major tax bill passed, and it's going to include tax increases," Jorge said.

In Tax Notes, Loren discussed the Biden Administration's proposal to increase the GILTI tax rate to 21 percent saying the rate increase is "overkill in terms of what we need for a global minimum tax conversation."

Marc discussed the legislative process involved in completing President Biden's infrastructure plan in Bloomberg Law. Marc said an energy proposal introduced by Senate Finance Chairman Ron Wyden (D-OR), which builds on Biden's energy plan, is an example of what is common when presidents offer policy proposals: A White House proposal is often very high-level, and members will either flesh it out or offer their own version.

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