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TAX TAKE: Tax Preview of the FY 2024 Budget and Greenbook

Tax Alert

"I want to make it clear," President Biden said last week, "I'm going to raise some taxes." On March 9, we'll find out more when he releases his fiscal year 2024 budget proposal. Accompanying the budget, the U.S. Department of the Treasury will release a document to explain the Administration's revenue proposals, the "General Explanations of the Administration's FY 2024 Revenue Proposals" (commonly referred to as the Greenbook).

Although the FY 2022 and FY 2023 editions of the Greenbook were instrumental in the formulation of the Build Back Better (BBB) and Inflation Reduction Act (IRA) legislation considered in the last Democrat-controlled Congress, the FY 2024 Greenbook is not likely to have the same impact in the current divided Congress. Nevertheless, it will be a useful indicator of the Administration's tax legislative agenda and priorities, particularly with control of the House, Senate, and White House up for grabs in 2024 and the pending expiration of the Tax Cuts and Jobs Act (TCJA) individual and estate tax relief provisions at the end of 2025.

At a minimum, we expect the FY 2024 Greenbook to repeat several major proposals contained in last year's edition, since many of them were considered as part of BBB but ultimately were not enacted as part of the IRA. Some of the most significant tax increases outlined last year include:   

  1. Increasing the corporate tax rate to 28 percent.    
  2. Adopting an undertaxed profits rule (UTPR) and a domestic minimum top-up tax.    
  3. Reinstating the top marginal individual tax rate to 39.6 percent.    
  4. Taxing long-term capital gains and qualified dividends of high-income taxpayers at ordinary income rates.    
  5. Treating transfers of appreciated property by gift or on death as realization events.    
  6. Imposing a minimum tax of 20 percent on total income (generally including unrealized capital gains) on taxpayers with wealth greater than $100 million.

In his State of the Union address and subsequent public remarks, President Biden has previewed the inclusion of tax increases in the pending budget, including a quadrupling of the one percent stock buyback excise tax and the imposition of the so-called "billionaire's minimum tax," so we expect greater detail on these proposals in the upcoming Greenbook. 

Moreover, given the progress other countries have made in adopting the Organisation for Economic Cooperation and Development's (OECD) Pillar Two framework, we expect this year's Greenbook to include more detail about the Biden Administration's legislative proposals designed to mitigate the impact the global anti-base erosion (GloBE) rules would have on U.S. taxpayers. This is of particular importance now that the OECD has released administrative guidance clarifying how global intangible low-taxed income (GILTI) will be treated in the context of other countries imposing an income inclusion rule (IIR)/(UTPR) or a qualified domestic minimum top-up tax. 

Although attention will be primarily focused on the Greenbook's proposed tax increases, some significant tax relief proposals may be included as well. President Biden has already endorsed an extension of the expanded child tax credit, and there is hope that recently expired TCJA provisions enjoying bipartisan support, such as the research and development (R&D) amortization fix and bonus depreciation, may also be included. In addition, there are a host of expiring tax provisions that the budget may propose extending or making permanent – particularly items such as the new markets tax credit and the work opportunity tax credit, although neither is scheduled to expire until the end of 2025.

Tax pros are always keenly focused on what is and what isn't in the Greenbook. Whether any of the proposals can actually become legislation given the divided Congress remains to be seen. One thing we do know is that tax legislative proposals never die, nor do they fade away. Many unenacted proposals simply leap-frog from the prior Administration of the same party. Maybe that's why it's still called the Greenbook. #TaxTake

Upcoming Speaking Engagements and Events 

On March 20, Loren will speak at the TEI Midyear Conference on a panel titled, "Legislative & Regulatory Tax Policy Roundtable: Much of the Latter & None of the Former?"

In the News

Jorge commented on the written responses provided by IRS Commissioner nominee Daniel Werfel to questions posed by members of the Senate Finance Committee in Bloomberg Tax. Jorge said Werfel's answer was not just "a canned, one-sentence response," and instead detailed the IRS systems and processes that Werfel intends to improve if confirmed as IRS Commissioner.

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