President Obama released his $3.99 trillion fiscal year federal budget proposals on February 2, 2015.
The proposals encompass provisions affecting taxes for both businesses and individuals, as well as proposed changes to Affordable Care Act requirements, and a brief discussion about possibilities for comprehensive tax reform. We can anticipate debate on some of the following provisions:
- A proposed increase in the top long-term capital gains rate.
- A potential limit on itemized deductions for higher income taxpayers.
- A proposed “second earner” credit for middle-income families in which both spouses work.
- A recommendation to increase the child and dependent care credit.
- A proposal to treat a person’s death as a taxable sale of his appreciated assets. This would cause many estates to incur significant capital gains taxes.
- A proposed reduction to the top corporate tax rate.
- A recommendation to modify limits on the immediate expensing rules for depreciable assets.
- A recommendation to make the research tax credit permanent.
- A recommendation to eliminate LIFO accounting for tax purposes.
- A proposal to enact a one-time 14 percent tax on earnings accumulated in controlled foreign corporations that have not previously been subject to U.S. tax.
This alert provides a more detailed summary of the Fiscal Year 2016 budget proposals. It includes discussions on the likelihood of enactment for some of these provisions, but the important thing for readers to remember is that this is just the first hand in a poker game that will go on throughout the legislative session. Some cards will be changed, some hands will fold, and any final tax package — if there even is one this year — may bear little resemblance to these proposals.