General Explanations of the - U.S. Department of the …

General Explanations of the

Administration's Fiscal Year 2022 Revenue Proposals

Department of the Treasury May 2021

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TABLE OF CONTENTS

REVENUE PROPOSALS .......................................................................................1

AMERICAN JOBS PLAN ....................................................................................................... 2 Reform Corporate Taxation ................................................................................................. 3 Raise the Corporate Income Tax Rate to 28 Percent ......................................................... 3 Revise the Global Minimum Tax Regime, Disallow Deductions Attributable to Exempt Income, and Limit Inversions.................................................................................. 4 Reform Taxation of Foreign Fossil Fuel Income................................................................ 9 Repeal the Deduction for Foreign-Derived Intangible Income (FDII) ............................ 11 Replace the Base Erosion Anti-Abuse Tax (BEAT) with the Stopping Harmful Inversions and Ending Low-Tax Developments (SHIELD) Rule ........................................... 12 Limit Foreign Tax Credits from Sales of Hybrid Entities................................................. 16 Restrict Deductions of Excessive Interest of Members of Financial Reporting Groups for Disproportionate Borrowing in the United States ................................................ 18 Impose a 15 Percent Minimum Tax on Book Earnings of Large Corporations ............... 21 Provide Tax Incentives for Locating Jobs and Business Activity in the United States and Remove Tax Deductions for Shipping Jobs Overseas........................................... 22 Support Housing and Infrastructure ................................................................................. 24 Expand the Low-Income Housing Tax Credit................................................................... 24 Provide Neighborhood Homes Investment Tax Credit ..................................................... 26 Make Permanent the New Markets Tax Credit (NMTC) .................................................. 29 Provide Federally Subsidized State and Local Bonds for Infrastructure ......................... 30 Prioritize Clean Energy....................................................................................................... 33 Eliminate Fossil Fuel Tax Preferences............................................................................. 33 Extend and Enhance Renewable and Alternative Energy Incentives ............................... 38 Provide Tax Credit for Electricity Transmission Investments .......................................... 41 Provide Allocated Credit for Electricity Generation from Existing Nuclear Power Facilities ............................................................................................................... 42 Establish New Tax Credits for Qualifying Advanced Energy Manufacturing.................. 44 Establish Tax Credits for Heavy- and Medium-Duty Zero Emissions Vehicles ............... 46 Provide Tax Incentives for Sustainable Aviation Fuel ..................................................... 48 Provide a Production Tax Credit for Low-Carbon Hydrogen.......................................... 49 Extend and Enhance Energy Efficiency and Electrification Incentives............................ 50 Provide Disaster Mitigation Tax Credit ........................................................................... 53 Expand and Enhance the Carbon Oxide Sequestration Credit ........................................ 54 Extend and Enhance the Electric Vehicle Charging Station Credit ................................. 56 Reinstate Superfund Excise Taxes and Modify Oil Spill Liability Trust Fund Financing 57

AMERICAN FAMILIES PLAN............................................................................................ 59 Strengthen Taxation of High-Income Taxpayers ............................................................. 60 Increase the Top Marginal Income Tax Rate for High Earners ....................................... 60 Reform the Taxation of Capital Income............................................................................ 61 Rationalize Net Investment Income and Self-Employment Contributions Act Taxes ....... 65 Support Workers, Families, and Economic Security ....................................................... 68

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General Explanations of the Administration's Fiscal Year 2022 Revenue Proposals

Make Permanent the American Rescue Plan Expansion of Premium Tax Credits .......... 68 Make Permanent the Expansion of the Earned Income Tax Credit (EITC) for Workers

Without Qualifying Children ................................................................................ 70 Make Permanent American Rescue Plan Changes to the Child and Dependent Care Tax

Credit .................................................................................................................... 73 Extend the Child Tax Credit Increase Through 2025 and Make Permanent Full

Refundability ......................................................................................................... 77 Increase the Employer-Provided Childcare Tax Credit for Businesses ........................... 81 Close Loopholes ................................................................................................................... 82 Tax Carried (Profits) Interests as Ordinary Income ........................................................ 82 Repeal Deferral of Gain From Like-Kind Exchanges ...................................................... 84 Make Permanent Excess Business Loss Limitation of Noncorporate Taxpayers ............. 85 Improve Compliance ........................................................................................................... 86 Implement a Program Integrity Allocation Adjustment and Provide Additional Funding

for Tax Administration .......................................................................................... 86 Introduce Comprehensive Financial Account Reporting to Improve Tax Compliance.... 88 Improve Tax Administration.............................................................................................. 90 Increase Oversight of Paid Tax Return Preparers ........................................................... 90 Enhance Accuracy of Tax Information ............................................................................. 92 Expand Broker Information Reporting with Respect to Crypto Assets............................. 94 Address Taxpayer Noncompliance with Listed Transactions ........................................... 96 Modify Tax Administration Rules ..................................................................................... 99 Authorize Limited Sharing of Business Tax Return Information to Measure The Economy

More Accurately.................................................................................................. 101

TABLE OF REVENUE ESTIMATES........................................................103

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General Explanations of the Administration's Fiscal Year 2022 Revenue Proposals

NOTES The Administration's proposals are not intended to create any inferences regarding current law. Within the General Explanations of the Administration's Fiscal Year 2022 Revenue Proposals, unless otherwise stated:

? "AGI" refers to Adjusted Gross Income ? "Budget" refers to the Fiscal Year 2022 Budget of the U.S. Government ? "Code" refers to the Internal Revenue Code ? "C-CPI-U" refers to the Chained Consumer Price Index for Urban Consumers ? "IRA" refers to Individual Retirement Account or Annuity ? "IRS" refers to the Internal Revenue Service ? "Section" refers to the respective section of the Internal Revenue Code ? "Secretary" refers to the Secretary of the Treasury ? "Treasury" refers to the Department of the Treasury ? "TIN" refers to Taxpayer Identification Number

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General Explanations of the Administration's Fiscal Year 2022 Revenue Proposals

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General Explanations of the Administration's Fiscal Year 2022 Revenue Proposals

REVENUE PROPOSALS

In the Fiscal Year 2022 Budget, the President proposes a number of reforms to the Internal Revenue Code (Code) that would modernize our tax system to respond to today's challenges. These changes would raise revenue, improve tax administration, and make the tax system more equitable and efficient. The American Jobs Plan includes revenue proposals that reform corporate taxation, support housing and infrastructure, and prioritize clean energy. Reforms to the corporate income tax aim to collect sufficient revenue, build a fairer tax system, and reduce tax incentives that encourage profit shifting and offshoring. Housing and infrastructure tax credits would support low-income housing, economic development, and public school and transportation infrastructure. The American Jobs Plan would eliminate all fossil fuel subsidies that linger in the Code, while substantially expanding tax incentives that encourage clean energy sources, energy efficiency, carbon sequestration, and electric vehicle adoption. The American Families Plan includes revenue proposals that strengthen the taxation of highincome taxpayers, expand tax credits for low- and middle-income workers and families, and invest in improved taxpayer compliance and service. Income tax rates for those with the highest incomes would increase, and loopholes, such as the carried interest preference and the like-kind real estate preference, would be eliminated for those with the highest incomes. Reformed taxation of capital income would even the tax treatment of labor and capital income and eliminate a loophole that lets substantial capital gains income escape taxation forever. The economic security of families and workers would be supported through more generous child tax credits, an expanded earned income tax credit, expanded child and dependent care tax credits, and more generous premium tax credits. Finally, transformative investments in taxpayer compliance would provide the Internal Revenue Service with the resources and information that it needs to build a fairer and more efficient tax administration system.

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General Explanations of the Administration's Fiscal Year 2022 Revenue Proposals

American Jobs Plan

Reform Corporate Taxation ................................................................................................. 3 Raise the Corporate Income Tax Rate to 28 Percent ......................................................... 3 Revise the Global Minimum Tax Regime, Disallow Deductions Attributable to Exempt Income, and Limit Inversions.................................................................................. 4 Reform Taxation of Foreign Fossil Fuel Income................................................................ 9 Repeal the Deduction for Foreign-Derived Intangible Income (FDII) ............................ 11 Replace the Base Erosion Anti-Abuse Tax (BEAT) with the Stopping Harmful Inversions and Ending Low-Tax Developments (SHIELD) Rule ........................................... 12 Limit Foreign Tax Credits from Sales of Hybrid Entities................................................. 16 Restrict Deductions of Excessive Interest of Members of Financial Reporting Groups for Disproportionate Borrowing in the United States ................................................ 18 Impose a 15 Percent Minimum Tax on Book Earnings of Large Corporations ............... 21 Provide Tax Incentives for Locating Jobs and Business Activity in the United States and Remove Tax Deductions for Shipping Jobs Overseas........................................... 22

Support Housing and Infrastructure ................................................................................. 24 Expand the Low-Income Housing Tax Credit................................................................... 24 Provide Neighborhood Homes Investment Tax Credit ..................................................... 26 Make Permanent the New Markets Tax Credit (NMTC) .................................................. 29 Provide Federally Subsidized State and Local Bonds for Infrastructure ......................... 30

Prioritize Clean Energy....................................................................................................... 33 Eliminate Fossil Fuel Tax Preferences............................................................................. 33 Extend and Enhance Renewable and Alternative Energy Incentives ............................... 38 Provide Tax Credit for Electricity Transmission Investments .......................................... 41 Provide Allocated Credit for Electricity Generation from Existing Nuclear Power Facilities ............................................................................................................... 42 Establish New Tax Credits for Qualifying Advanced Energy Manufacturing.................. 44 Establish Tax Credits for Heavy- and Medium-Duty Zero Emissions Vehicles ............... 46 Provide Tax Incentives for Sustainable Aviation Fuel ..................................................... 48 Provide a Production Tax Credit for Low-Carbon Hydrogen.......................................... 49 Extend and Enhance Energy Efficiency and Electrification Incentives............................ 50 Provide Disaster Mitigation Tax Credit ........................................................................... 53 Expand and Enhance the Carbon Oxide Sequestration Credit ........................................ 54 Extend and Enhance the Electric Vehicle Charging Station Credit ................................. 56 Reinstate Superfund Excise Taxes and Modify Oil Spill Liability Trust Fund Financing 57

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General Explanations of the Administration's Fiscal Year 2022 Revenue Proposals

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