How Build Back Better Could Impact Your Business
Overview
On November 15, President Biden signed into law the $1 trillion infrastructure package that passed both chambers with bipartisan support and includes $550 billion in new spending and $450 billion of redirected unused funds. While there was some bipartisan support for the measure, the Build Back Better bill is very partisan with Senators Manchin and Sinema controlling the negotiations. It barely passed the House totaling $3 trillion, but is expected to be cut by half or more if a version of it can pass the Senate. It includes several provisions of interest to startups and businesses.
Corporate and High-Income Taxes
It would raise $1.48 trillion in revenue over 10 years by increasing taxes on corporations and high-income individuals, including:
- Imposing a 15% minimum tax on income corporations report on their financial statements or “book income,” with adjustments if such income is over $1 billion.
- To raise $124.2 billion over 10 years, creating a 1% excise tax on the fair market value of stock buybacks by publicly traded U.S. corporations/subsidiary, excluding employee retirement plan funding or if total transactions for the year are less than $1 million.
- Reducing deductions for foreign income of U.S. companies, which would yield a 15% global intangible low-taxed income (GILTI) rate and 15.8% foreign-derived intangible income rate, which would raise $144.3 billion over 10 years.
- Increasing the base erosion and anti-abuse tax (BEAT) to 18% from 10% by tax year 2025, which would raise $67.1 billion over 10 years.
Individual Taxes
Individual tax changes would include:
- Imposing a 5% surtax on modified adjusted gross income that exceeds $10 million and applying 3% tax to income that exceeds $25 million – both would raise $227.8 billion over 10 years.
- Expanding the 3.8% net investment income tax to cover business income of single filers earning more than $400,000 and joint filers making more than $500,000, raising $252.2 billion over 10 years.
- Permanently disallowing excess business losses of noncorporate taxpayers, which would raise $160.3 billion over 10 years.
Tax Credits
SALT Cap: Increase the $10,000 cap on the state and local income tax deduction to $72,500 through 2031 to address changes implemented in 2017.
CTC and EITC: The measure includes tax provisions designed to aid certain households, such as:
- Extending the expanded child tax credit from the March pandemic relief package through 2022 and making the credit fully refundable after 2022, costing $184.6 billion over 10 years.
- Extending an expanded version of the earned income tax credit (EITC) for childless workers through 2022, which would cost $13.3 billion over 10 years.