Daily Tax Update - January 25, 2012: President's "Blueprint" Proposes Higher Taxes on Wealthy, Lower Corporate Rates & Tax On Overseas Profits

PRESIDENT’S “BLUEPRINT” PROPOSES HIGHER TAXES ON WEALTHY, LOWER CORPORATE RATES & TAX ON OVERSEAS PROFITS:  Today, President Obama released a “blueprint for an economy that's built to last,” calling for “closing loopholes,” lowering rates, and eliminating incentives that make it more attractive for companies to ship jobs overseas.  Today, National Economic Council Director Gene Sperling said that additional details on the minimum tax and on other corporate tax provisions will be released around February 13, when President Obama releases his fiscal year 2013 budget blueprint.

  • In his State of the Union Address last night, the President said, "[W]e have a huge opportunity, at this moment, to bring manufacturing back.  But we have to seize it.  Tonight, my message to business leaders is simple:  Ask yourselves what you can do to bring jobs back to your country, and your country will do everything we can to help you succeed.  We should start with our tax code.  Right now, companies get tax breaks for moving jobs and profits overseas.  Meanwhile, companies that choose to stay in America get hit with one of the highest tax rates in the world.  It makes no sense, and everyone knows it.  So let’s change it. First, if you’re a business that wants to outsource jobs, you shouldn’t get a tax deduction for doing it.  That money should be used to cover moving expenses for companies like Master Lock that decide to bring jobs home."  The President continued, "Second, no American company should be able to avoid paying its fair share of taxes by moving jobs and profits overseas.  From now on, every multinational company should have to pay a basic minimum tax.  And every penny should go towards lowering taxes for companies that choose to stay here and hire here in America.  Third, if you’re an American manufacturer, you should get a bigger tax cut.  If you’re a high-tech manufacturer, we should double the tax deduction you get for making your products here.  And if you want to relocate in a community that was hit hard when a factory left town, you should get help financing a new plant, equipment, or training for new workers.  So my message is simple.  It is time to stop rewarding businesses that ship jobs overseas, and start rewarding companies that create jobs right here in America.  Send me these tax reforms, and I will sign them right away."
  • On the issue of the payroll tax holiday, Obama said, "Right now, our most immediate priority is stopping a tax hike on 160 million working Americans while the recovery is still fragile.   People cannot afford losing $40 out of each paycheck this year.  There are plenty of ways to get this done.  So let’s agree right here, right now:  No side issues.  No drama.  Pass the payroll tax cut without delay.  Let’s get it done."
  • On the issue of tax reform, Obama said, "[W]e need to change our tax code so that people like me, and an awful lot of members of Congress, pay our fair share of taxes.  Tax reform should follow the Buffett Rule.  If you make more than $1 million a year, you should not pay less than 30 percent in taxes.  And my Republican friend Tom Coburn is right:  Washington should stop subsidizing millionaires.  In fact, if you’re earning a million dollars a year, you shouldn’t get special tax subsidies or deductions.  On the other hand, if you make under $250,000 a year, like 98 percent of American families, your taxes shouldn’t go up.  You’re the ones struggling with rising costs and stagnant wages.  You’re the ones who need relief.   Now, you can call this class warfare all you want.  But asking a billionaire to pay at least as much as his secretary in taxes?  Most Americans would call that common sense."
  • Ways and Means Committee Chairman Dave Camp made the following statement in response to President Obama’s State of the Union address: "Instead of focusing on tax reform that can create jobs, the President spent his time talking about how he intends to take more money away from employers, investors and savers in order to create new carve-outs for the few industries and projects favored by his administration.  That is nothing more than the usual Washington game that has led to a tax code already littered with lobbyist loopholes.  Washington needs to get out of this game of picking winners and losers and instead treat all Americans and employers fairly.  At the end of the night, there was still no coherent plan for tax reform that will create a stronger and growing economy with more jobs for American families."
  • The tax provisions in the President’s blueprint include:
    •  "Removing tax deductions for shipping jobs overseas and providing new incentives for bringing them back home";
    • Targeting the domestic production incentive on manufacturers who create jobs in the United States and doubling the deduction for advanced manufacturing
    • Providing temporary tax credits for domestic clean energy manufacturing
    • Reauthorizing 100% expensing of investment in plants and equipment (i.e., bonus depreciation)
    • "Closing a loophole that allows companies to shift profits overseas" (i.e., the Administration’s "excess returns" proposal);
    • "Making companies pay a minimum tax for profits and jobs overseas"
    • Making permanent an expanded R&E Tax Credit
  • The President’s remarks can be accessed here.
  • The blueprint can be accessed here.
  • A fact sheet released today on the President’s tax proposals can be accessed here.

UPDATED GUIDANCE PRIORITY PLAN RELEASED:  Today, the Treasury Department and the IRS released the second quarter update to the 2011-2012 Guidance Priority Plan.  The document contains 14 new guidance items that have been or will be published. In addition, the update reflects one project that was closed without publication because the statute was subsequently repealed. The agencies said that they intend to update and republish the 2011-2012 plan during the plan year.

  • The document can be accessed here.

SENATOR LEVIN COMMENTS ON FATCA IMPLEMENTATION: On January 11, Senator Levin (D-MI) sent the IRS and Treasury Department a letter commenting on implementation of the Foreign Account Tax Compliance Act ("FATCA") provisions of the Hiring Incentives to Restore Employment Act. The letter suggests further expansion of the private banking rules described in Notice 2011-34 to private placement life insurance accounts, hedge fund accounts, and private equity accounts, as well as several other modifications to "strengthen" the private banking rules. The letter also recommends that the $50,000 depository account exception be applied by reference to the maximum value of the account during the calendar year rather than the year-end approach of Notice 2011-34, suggests 45-day and 90-day deadlines for new and existing recalcitrant accountholders to provide requested documentation, suggests Treasury and the IRS adopt a "clear set of principles" to identify foreign retirement plans that should be treated as deemed compliant, argues that FFI groups should not be permitted to include non-participating FFI affiliates, and recommends requiring US shareholders of FFI CFCs to take on certain responsibilities with respect to their subsidiaries’ FATCA compliance.

TAX BILLS INTRODUCED JANUARY 24TH:

1. [112nd] H.R.3819 : To amend the Internal Revenue Code of 1986 to allow the transfer of required minimum distributions from a retirement plan to a health savings account.
Sponsor: Rep Huizenga, Bill [MI-2] (introduced 1/24/2012)      Cosponsors (None)
Committees: House Ways and Means
Latest Major Action: 1/24/2012 Referred to House committee. Status: Referred to the House Committee on Ways and Means.

2. [112nd] H.R.3820 : To amend the Internal Revenue Code of 1986 to modify the dependent care credit to take into account expenses for care of parents and grandparents who do not live with the taxpayer.
Sponsor: Rep Israel, Steve [NY-2] (introduced 1/24/2012)      Cosponsors (3)
Committees: House Ways and Means
Latest Major Action: 1/24/2012 Referred to House committee. Status: Referred to the House Committee on Ways and Means.

INTERNAL REVENUE SERVICE - CIRCULAR 230 DISCLOSURE:
As provided for in Treasury regulations, advice (if any) relating to federal taxes that is contained in this communication (including attachments) is not intended or written to be used, and cannot be used, for the purpose of (1) avoiding penalties under the Internal Revenue Code or (2) promoting, marketing or recommending to another party any plan or arrangement addressed herein.

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