March 6, 2014

The President’s 2015 Budget Plan

The President’s 2015 Budget Plan Tax & Business

This week, the Obama Administration issued its 2015 Budget Plan. Overall, the President’s tax plan, included in the overall budget, focuses on reducing the deficit while enforcing taxpayer compliance measures. Some of the main tax provisions call for making the research and development tax credit permanent, treating carried interest as ordinary income, reducing tax breaks for the oil and gas industry, and limiting interest deductions for multinational companies.

The plan also provides for modernizing the Internal Revenue Service so more filings can be accepted electronically and to strengthen fraud prevention within the Service.

The Budget provides for access to preschool to all four year old children and plans to invest in new efforts in workforce training.

Tax Highlights of the Fiscal Year 2015 Budget Include:
Individual Proposals:

  • Extend refundable Child Tax Credit
  • Extend Earned Income Tax Credit and expand it to workers without children
  • Expand the Dependent Care Credit
  • Extend the Exclusion from Income for Cancellation of Mortgage Debt
  • Extend the American Opportunity Tax Credit (AOTC)
  • Provide for student loan forgiveness in certain income based situations
  • Modify adoption credit for special needs children
  • Simplify minimum distribution rules
  • Increase standard mileage rate for volunteers
Manufacturing Proposals:
  • Provide tax incentives for locating jobs in the US
  • Disallow tax deductions for outsourcing jobs overseas
  • Make the Research  and Experiment Credit permanent
  • Extend credits for hiring veterans
  • Extend the renewable electricity production credit
  • Extend the deduction for energy efficient commercial property
  • Introduce new tax credit programs for advanced technology vehicles and alternative fuel vehicles
  • Create a new Manufacturing Communities Tax Credit
  • Reduction of taxes on natural gas
Small Business Provisions:
  • Increase expensing of qualifying property for small businesses
  • Eliminate capital gains on sale of small business stock
  • Increase deductible expenditure limits for start-up and organization costs
  • Expand Small Employers Health Insurance Deduction
Other Growth Provisions:
  • Extend the New Markets Tax Credit
  • Provide incentives for transportation infrastructure
  • Reform the Low Income Housing Credit
  • Expand credits available to REITS
  • Repeal Section 197 anti-churning rules
  • Repeal technical termination of partnership rules
International Reform:
  • Defer deductions of interest expense related to foreign subsidiaries
  • Redefine the Foreign Tax Credit
  • Limit income shifting by use of intangibles
  • Modify taxing for dual capacity tax payers
  • Limit the ability of domestic entities to repatriate
Financial Industry Reform:
  • Revise treatment of derivative contracts to marked to market
  • Modify sale of life insurance rules
  • Expand interest expense disallowance for corporate life insurance
Fossil Fuel Preferences:
  • Repeal of certain oil recovery credits
  • Repeal expensing for intangible drilling costs and percentage depletion
Other Changes:
  • Repeal LIFO method of accounting for inventories
  • Modify computation of partnership basis rules
  • Modify like kind exchange rules for realty
  • Allow Federal income tax refunds to offset state income tax delinquencies
Estate and Gift Provisions:
  • Restore Estate and Gift Taxes exemption and rates as in effect as of 2009
  • Require a minimum ten year term for GRATS
  • Simplify the Gift Tax Exclusions

There are some key revenue raisers in the provisions which include:

  • A “Buffet” type of Fair Share Tax
  • Taxation of carried interest as ordinary income
  • Limitation on accrual of tax favored retirement benefits
  • Increase tobacco taxes
  • Expand the FUTA base

Some non-tax provisions specific to the IRS include:

  • Require the IRS to accept more returns by electronic filing
  • Streamline audit procedures
  • Revise Offer-In-Compromise rules
  • Impose liabilities on shareholders for unpaid corporation taxes
  • Expand use of scanable codes for paper filings
  • Implement more mandatory e-filing requirements
  • Increase penalties for non-compliance
  • Stagger tax return filing dates

Other non-tax provisions include:  Increases to the minimum wage, extension of unemployment, access to preschool to all four year old children and plans to invest in new efforts in workforce training.

This is a vast plan potentially impacting all areas of taxation and business compliance. Before any of these proposals are enacted, they will be dissected by our divided Congress and thoroughly analyzed by our national media. We know not all of these proposals will become law. It remains to be seen which, if any, of these tax provisions make it to the President’s desk.

Your tax advisors at Marcum LLP will continue to keep you up to date on the progress of the Budget as it moves through Congress.

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