Senate Democrats have released details of two new tax plan proposals – a minimum tax on large corporations and a tax on billionaires – that, if enacted, would be used to help pay for spending for social infrastructure under the Build Back Better Plan.
The proposed new tax plan would impose a 15% minimum tax on companies that report over $1B in profits. Foreign tax credits and business credits would continue to apply, as would loss carryforwards in certain cases. The minimum tax would be creditable against regular tax paid in future years.
The proposed tax would apply to individual taxpayers with more than $100M in annual income or more than $1 billion in assets for three consecutive years. Under this new tax plan proposal:
- Tradable assets (stocks, etc.) would be marked to market annually, with tax paid on any unrealized gains. Unrealized losses would be deductible and could be carried back three years in certain circumstances.
- Nontradable assets would be subject to an additional tax in the form of a deferred interest charge when sold. This would then be calculated on the realized gain over the holding period of the asset.
- Transition rules would apply in the first year. Tradable stock of 1B would be treated as nontradable and would allow the tax on first year mark to market gains to be spread over five years.
Further, other specific rules would apply and the proposed taxes reportedly would raise hundreds of billions of dollars. Taxes are aimed to close loopholes and ensure large corporations and the wealthiest individuals pay their fair share of federal tax.
If enacted, then the billionaire tax would apply to taxable years beginning after December 31, 2021. Likewise, the corporate profits minimum tax would apply to taxable years beginning after December 31, 2022.