Senator Manchin Will Not Support the Build Back Better Act – The National Law Review

December 20, 2021 by No Comments

Monday, December 20, 2021

Today, December 19, 2021, Senator Joe Manchin (D., W.Va.) said that he opposes the Build Back Better Act, which effectively prevents its passage.  While there are no immediate prospects for the Build Back Better Act to become law, future tax acts tend to draw upon earlier proposals.  With a view to future tax proposals, this blog summarizes the final draft that was released by the Senate Finance Committee on December 11, 2021 (the “Build Back Better Bill”), and compares it to the bill passed by the House of Representatives (the “House Bill”) and the prior bill that was released by the House Ways and Means Committee in September 2021 (the “Prior House Bill”), which the House Bill was based on.  In light of Senator Manchin’s announcement, this blog refers to the bills in the past tense.

Summary of Significant Changes to Current Law in the Build Back Better Bill

Individual taxation

  •  A 5% surtax would have been imposed on income in excess of $10 million ($5 million for a married individual filing a separate return) and a 3% additional surtax would have been imposed on income in excess of $25 million ($12.5 million for a married individual filing a separate return). The surtax would have also applied to non-grantor trusts but at significantly lower thresholds – the 5% surtax would apply to income in excess of $200,000 and the 3% surtax would apply to income in excess of $500,000.  The individual income tax rates would have otherwise remained the same as under current law.

  • The 3.8% net investment income tax would have been expanded to apply to the active trade or business income of taxpayers earning more than $400,000. As a result, active trade or business income allocated to a limited partner of a limited partnership or a shareholder of a subchapter S corporation would have been subject to the net investment income tax. Under current law, the tax applies only to certain portfolio and passive income.  Under current law, a limited partner of a limited partnership and a shareholder of a subchapter S corporation is otherwise not subject to self-employment taxes.  The Build Back Better Act would not have had otherwise imposed self-employment taxes on S corporation shareholders or limited partners.

  • The exemption of gains on the disposition of “qualified small business stock” would have been reduced from 100% to 50% for taxpayers earning more than $400,000/year, and all trusts and estates.

  • “Excess business losses” in excess of $250,000 ($500,000 in the case …….

    Source: https://www.natlawreview.com/article/senator-manchin-announces-he-will-not-support-build-back-better-act-where-things

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