Proposed Tax Reform 2021 as Explained by the Department of the Treasury

As hinted in our article last week, the U.S. Treasury (Treasury) has released its General Explanations of the Administration’s Fiscal Year 2022 Revenue Proposals” (the Green Book or the proposal ). The Green Book is a 114-page explanation of the tax proposals included in the Biden Administration’s 2022 fiscal year budget (beginning October 1, 2021).  

Recall that President Biden released two plans earlier this year; the American Jobs Plan and the American Families Plan that is incorporated in the 2022 budget. To finance these plans as reflected in his projected budget, President Biden is proposing a number of reforms to the Internal Revenue Code. These proposed changes are described by the Treasury in the Green Book as being intended to “raise revenue, improve tax administration, and make the tax system more equitable and efficient”. The Green Book discusses the Treasury’s interpretation in some detail of how these changes may appear if Congress can pass the legislation needed to enact the proposals.  The Green Book addresses Biden Administration proposals to:

• Increase individual income taxes on high-income taxpayers with incomes exceeding $400,000;
• Increase wealth transfer taxes on wealthy individuals with a net worth exceeding $1,000,000;
• Increase “C” corporation tax rates and providing for a new corporate alternative minimum tax on reported earnings in excess of $2 billion;
• Reform tax provisions on multi-national businesses;
• Eliminate tax incentives and “subsidies” in the traditional fossil fuel industry;
• Create tax incentives and subsidies supporting the renewable (clean) energy industry;
• Create incentives for on-shoring business to the U.S. and creating American jobs;
• Expand individual tax credits such as the earned income tax credit, the child and dependent care credits, and health insurance credits; and 
• Improve IRS funding to increase audit rates, provide more oversight of tax preparers, increase attention to tax shelters and listed transactions, and extend the statute of limitations on listed transactions, among others.

We will be reviewing and analyzing many of the detailed proposals in separate Our Thoughts On Articles beginning in the next week. For example, the wealth transfer provisions of the Code could substantially change the taxation of transfers under current law. As communicated in Green Book, the Administration believes that “the amount of appreciation accruing during the decedent’s life on assets that are still held by the decedent at death completely avoids federal income tax”. Therefore, the proposals introduce concepts that will tax unrealized gains when transferred through lifetime gifts or upon death.

As we noted when President Biden first released details of the American Families Plan, it’s necessary to remember that the proposals summarized in the Green Book are just that – proposals. It is the Treasury’s perspective on the President’s policy vision; it is not enacted law. The Green Book is a high-level summary provided by Treasury and is not statutory language or proposed bills.  There is much negotiation that still needs to take place, even among Democrats, before any of these items would become law.   

Related Articles

This article is part of a series discussing the Treasury Department’s Green Book Explanation of President Biden’s Tax Proposals. 

• Proposed Tax Reform 2021: Wealth Transfer Tax Proposals as Explained by the Department of the Treasury
• Proposed Tax Reform 2021: Proposed Increased Individual Income Taxes on High Income Taxpayers