2011 Jobs Act & Deficit Plan Overview And Summary (2)

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A summary of the President\’s current legislative proposal before Congress (September 2011)

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2011 Jobs Act & Deficit Plan Overview And Summary (2)

  1. 1. Parsing the President’s 2011 Jobs & Deficit Proposals: Impact on Businesses Paul M. Spizzirri, Esq., J.D., LL.M., M.B.A., M.A.F.M. Hall, Booth, Smith & Slover, P.C. Email: ps@hbss.net Phone: 404-954-6930 Website: www.hbss.net www.linkedin.com/in/spizzirri
  2. 2. Introduction Paul M. Spizzirri, Esq., J.D., LL.M., M.B.A., M.A.F.M. <ul><li>Paul heads up the HBSS Transactional Advisory Services practice group. Mergers, acquisitions, divestitures, and reorganizations transform a business, and these transformations are his specialty.  After counseling clients through corporate change events, he often continues to provide value by advising clients during the post-acquisition integration process and remaining as the client's General Counsel for legal matters.   As part of his practice Paul also has direct experience drafting legislation having drafted and lobbied legislation into law including sales, use, service, excise, property, and health care provider tax statutes.  He was also the principle author of several administrative regulations and provided advisory opinions including exemption decisions related to nonprofit organizations and served as a Property Tax Administrative Law Judge. </li></ul>
  3. 3. Introduction: <ul><li>Economic Growth & Deficit Reduction Plan </li></ul><ul><ul><li>Overview </li></ul></ul><ul><ul><li>Devilish Details, Specific Provisions </li></ul></ul><ul><li>American Jobs Act of 2011 (Legislation) </li></ul><ul><ul><li>Overview </li></ul></ul><ul><ul><li>Devilish Details, Specific Provisions </li></ul></ul><ul><li>Next Steps for the Proposals </li></ul>
  4. 4. President’s Proposals: Stated Goals <ul><li>In the short-term, spur jobs growth via the American Jobs Act of 2011 </li></ul><ul><li>Long-term, reduce the deficit and stabilize the debt </li></ul><ul><li>* from “Living Within Our Means and Investing in the Future: The President’s Plan for Economic Growth and Deficit Reduction”, September 2011, Office of Management and Budget report </li></ul>
  5. 5. Deficit Plan <ul><li>From the White House: </li></ul><ul><li>Paying for Our Investments and Reducing the Deficit </li></ul><ul><li>The plan produces approximately $4.4 trillion in deficit reduction net the cost of the American Jobs Act. </li></ul><ul><ul><li>$1.2 trillion from the discretionary cuts enacted in the Budget Control Act. </li></ul></ul><ul><ul><li>$580 billion in cuts and reforms to a wide range of mandatory programs; </li></ul></ul><ul><ul><li>$1.1 trillion from the drawdown of troops in Afghanistan and transition from a military to a civilian-led mission in Iraq </li></ul></ul><ul><ul><li>$1.5 trillion from tax reform </li></ul></ul><ul><ul><li>$430 billion in additional interest savings </li></ul></ul><ul><li>To spur economic growth and job creation, the plan includes one-time investment and relief in the American Jobs Act.  That adds to the deficit in 2012 but is fully paid for over 10 years, and deficit reduction phases in starting in 2013, as the economy grows stronger. </li></ul><ul><li>Deficit reduction is achieved in a balanced approach, with a spending cut to revenue ratio for the entire plan (including discretionary cuts) of 2 to 1.  </li></ul>
  6. 6. Deficit Plan <ul><li>From the White House, Press Release: </li></ul><ul><li>The President …. lays out five principles for [the tax reform] to follow: </li></ul><ul><li>lower tax rates; </li></ul><ul><li>cut wasteful loopholes and tax breaks; </li></ul><ul><li>reduce the deficit by $1.5 trillion; </li></ul><ul><li>boost job creation and growth; and </li></ul><ul><li>comport with the “Buffett Rule” that people making more than $1 million a year should not pay a smaller share of their income in taxes than middle-class families pay. </li></ul>
  7. 7. Deficit Plan <ul><li>Proposed Tax Changes include: </li></ul><ul><li>(projected increase of revenue over 10 yrs) </li></ul><ul><li>Allow expiration of 2001 and 2003 cuts on high-income taxpayers; return estate tax to 2009 parameters. ($866 bn) </li></ul><ul><li>Reduce the value of tax deductions for households w/ income >$250k, Individuals >$200k ($410 bn) </li></ul><ul><li>Repeal “last-in, first-out” method of accounting for business inventories, reduce deductions, beginning w/ 2013 tax years ($52 bn) </li></ul><ul><li>Eliminate tax deductions and credits for oil and gas activities ($41 bn) </li></ul><ul><li>Raise taxes on investment partnerships profits ($13 bn) </li></ul><ul><li>Change tax rules for taxpayers also subject to foreign taxes ($10 bn) </li></ul><ul><li>Repeal lower-of-cost-or-market inventory accounting method for deductions on merchandise before its sold ($8 bn) </li></ul><ul><li>From USA Today.com: Spending cuts in Obama deficit plan would spread the pain. </li></ul>
  8. 8. Deficit Plan <ul><li>Plan Savings: </li></ul><ul><li>Increase pension contributions by federal workers ($20.7 billion) </li></ul><ul><li>Increase pharmacy co-pays for military health care ($15.1 billion) </li></ul><ul><li>Start an annual premium fee for TRICARE signup ($6.7 billion) </li></ul><ul><li>Increase fees charged by Fannie Mae/Freddie Mac ($27.5 billion) </li></ul><ul><li>Increase airline ticket fees for airport security ($15 billion) </li></ul><ul><li>New fee to pay for Air Traffic Control system ($10.9 billion) </li></ul><ul><li>Various Postal Service reforms ($18.5 billion) </li></ul><ul><li>*per Jamie Dupree’s Washington Insider Blog, http://www.wsbradio.com/weblogs/jamie-dupree </li></ul>
  9. 9. Deficit Plan: Savings <ul><li>New safeguards for worker retirement benefits ($16 billion) </li></ul><ul><li>Reform the National Flood Insurance Program ($4.1 billion) </li></ul><ul><li>National Wireless Initiative ($7 billion) </li></ul><ul><li>Dispose of unneeded government property ($4.1 billion) </li></ul><ul><li>Improve pension information collection ($3.1 billion) </li></ul><ul><li>Strengthen IRS tax enforcement ($3.2 billion) </li></ul><ul><li>Strengthen Treasury debt collection ($911 million) </li></ul><ul><li>Reform Abandoned Mine Lands programs ($1.2 billion) </li></ul><ul><li>Provisions on Unemployment Insurance system ($32.9 billion) </li></ul><ul><li>*per Jamie Dupree’s Washington Insider Blog, http://www.wsbradio.com/weblogs/jamie-dupree </li></ul>
  10. 10. Deficit Plan: Savings <ul><li>Financial Crisis Responsibility Fee ($30 billion) </li></ul><ul><li>New pesticide registration fees ($816 million) </li></ul><ul><li>Charge for use of hazardous waste e-system ($31 million) </li></ul><ul><li>Special assessment on nuclear power utilities ($2.1 billion) </li></ul><ul><li>Repeal oil and gas R&D program ($150 million) </li></ul><ul><li>Savings at Department of Interior ($1.6 billion) </li></ul><ul><li>Raise diesel fuel tax for boats ($1.1 billion) </li></ul><ul><li>*per Jamie Dupree’s Washington Insider Blog, http://www.wsbradio.com/weblogs/jamie-dupree </li></ul>
  11. 11. Deficit Plan: Savings <ul><li>Health Savings: </li></ul><ul><li>Reduce Medicare coverage of patients' bad debts ($20 billion) </li></ul><ul><li>Changes in Medical Education payments ($9.1 billion) </li></ul><ul><li>End extra payments to rural providers ($2.1 billion) </li></ul><ul><li>Reduce Critical Access Hospital payments ($1 billion) </li></ul><ul><li>Change rules on Critical Access designation ($3 billion) </li></ul><ul><li>Adjust payments for some post-acute care ($32.5 billion) </li></ul><ul><li>Equalize certainly Medicare payments ($4.5 billion) </li></ul><ul><li>Encourage better use of inpatient rehab ($2.6 billion) </li></ul><ul><li>Adjust skilled nursing facility payments ($2 billion) </li></ul><ul><li>Match Medicare & Medicaid drug payment policies ($135 billion) </li></ul><ul><li>*per Jamie Dupree’s Washington Insider Blog, http://www.wsbradio.com/weblogs/jamie-dupree </li></ul>
  12. 12. Deficit Plan: Savings <ul><li>Health Savings: (cont.) </li></ul><ul><li>Recover wrongful Medicare payments ($2.3 billion) </li></ul><ul><li>Reduce Medicare waste, fraud & abuse ($500 million) </li></ul><ul><li>Penalties for failure to use e-health records ($500 million) </li></ul><ul><li>Medicare payments dealing with advanced imaging ($400 million) </li></ul><ul><li>Require prior okay for advanced imaging ($900 million) </li></ul><ul><li>Medicare &quot;Interactions&quot; ($7 billion) </li></ul><ul><li>Increase &quot;income-related premiums&quot; for Parts B & D ($20 billion) </li></ul><ul><li>Modify Part B deductible for new enrollees ($1 billion) </li></ul><ul><li>New Medicare 'home health copayments' ($400 million) </li></ul><ul><li>Part B premium surcharge for some beneficiaries ($2.5 billion) </li></ul><ul><li>Reduce the Medicaid provider tax threshold ($26.3 billion) </li></ul><ul><li>*per Jamie Dupree’s Washington Insider Blog, http://www.wsbradio.com/weblogs/jamie-dupree </li></ul>
  13. 13. Deficit Plan: Savings <ul><li>Health Savings: (cont.) </li></ul><ul><li>Single blended matching rate to Medicaid & CHIP ($14.9 billion) </li></ul><ul><li>Limit Medicaid reimbursement of durable medical equipment ($4.2 billion) </li></ul><ul><li>Strengthen Medicaid third party liability ($1.3 billion) </li></ul><ul><li>Alter Disproportionate Share Hospital allotments ($4.1 billion) </li></ul><ul><li>Reduce waste, fraud and abuse in Medicaid ($110 million) </li></ul><ul><li>Change income determination for benefits ($14.6 billion) </li></ul><ul><li>Ban 'pay for delay' Rx agreements ($2.7 billion) </li></ul><ul><li>Reduce exclusivity for generic biologics ($3.5 billion) </li></ul><ul><li>Streamline FEHBP pharmacy benefit contracting ($1.6 billion) </li></ul><ul><li>Prevention and Public Health Fund investments ($3.5 billion) </li></ul><ul><li>Accelerate State Innovation Waivers ($4 billion) </li></ul><ul><li>Cut administrative costs ($400 million) </li></ul><ul><li>*per Jamie Dupree’s Washington Insider Blog, http://www.wsbradio.com/weblogs/jamie-dupree </li></ul>
  14. 14. Deficit Plan: Savings <ul><li>Tax Reform Provisions: </li></ul><ul><li>Allow Bush tax cuts to expire for wealthy and return estate tax to 2009 levels ($866 billion) </li></ul><ul><li>Limit deductions for high income earners ($410 billion) </li></ul><ul><li>Change tax treatment for hedge fund income ($12.5 billion) </li></ul><ul><li>End special depreciation for corporate jets ($4.65 billion) </li></ul><ul><li>Repeal oil and natural gas percentage depletion ($10.4 billion) </li></ul><ul><li>Repeal oil and natural gas domestic deduction ($16.4 billion) </li></ul><ul><li>Repeal expensing of intangible drilling costs ($12.8 billion) </li></ul><ul><li>Repeal deduction for tertiary injectants ($83 million) </li></ul><ul><li>Repeal oil and gas exception on passive loss ($187 million) </li></ul><ul><li>Increase amortization for independent producers ($1.5 billion) </li></ul><ul><li>Modify rules for dual capacity taxpayers ($9.9 billion) </li></ul><ul><li>*per Jamie Dupree’s Washington Insider Blog, http://www.wsbradio.com/weblogs/jamie-dupree </li></ul>
  15. 15. Deficit Plan: Savings <ul><li>Business “Loophole” Provisions: </li></ul><ul><li>Repeal LIFO method of inventory accounting ($51.8 billion) </li></ul><ul><li>Repeal LCM inventory accounting method ($8.2 billion) </li></ul><ul><li>Repeal coal industry exploration expensing ($411 million) </li></ul><ul><li>Repeal coal percentage depletion ($1.1 billion) </li></ul><ul><li>Repeal capital gains treatment for royalties ($353 million) </li></ul><ul><li>Repeal coal industry domestic deduction ($389 million) </li></ul><ul><li>Modify rules on sales of life insurance ($929 million) </li></ul><ul><li>Modify &quot;Dividend-received-deduction&quot; ($5.48 billion) </li></ul><ul><li>Expand life insurance interest expense disallowance ($5.6 billion) </li></ul><ul><li>*per Jamie Dupree’s Washington Insider Blog, http://www.wsbradio.com/weblogs/jamie-dupree </li></ul>
  16. 16. Deficit Plan: Savings <ul><li>International Tax Provisions: </li></ul><ul><li>Defer deduction of interest on deferred income ($35.6 billion) </li></ul><ul><li>Determine foreign tax credit on pooling basis ($52.8 billion) </li></ul><ul><li>Tax changes dealing with offshore intangibles ($19.1 billion) </li></ul><ul><li>Limit income shifting through property transfers ($1.2 billion) </li></ul><ul><li>Limit earnings stripping by expatriated entities ($3.9 billion) </li></ul><ul><li>*per Jamie Dupree’s Washington Insider Blog, http://www.wsbradio.com/weblogs/jamie-dupree </li></ul>
  17. 17. Deficit Plan: Savings <ul><li>Other Savings Provisions: </li></ul><ul><li>Reinstates Superfund taxes ($18.7 billion) </li></ul><ul><li>Makes 0.2% unemployment insurance surtax permanent ($14.6 billion) </li></ul><ul><li>Increase certainly on worker classification ($7.7 billion) </li></ul><ul><li>Total tax provisions - $1.57 trillion </li></ul><ul><li>*per Jamie Dupree’s Washington Insider Blog, http://www.wsbradio.com/weblogs/jamie-dupree </li></ul>
  18. 18. American Jobs Act of 2011: Overview <ul><li>Unveiled September 8 th , text of bill introduced September 12 th </li></ul><ul><li>Included as part of the President’s Economic Growth and Deficit Reduction Plan. </li></ul><ul><li>Total Price Tag = $447 billion </li></ul>
  19. 19. American Jobs Act of 2011: Overview <ul><li>$447 billion jobs package breakdown: </li></ul><ul><li>Extension & Expansion of Cut in Payroll Taxes = $240 billion </li></ul><ul><li>Modernizing Schools & Infrastructure = $140 billion </li></ul><ul><li>Bulk of plan ($400bn over 10 yrs) paid for by tax changes to limit itemized deductions ( incl. charitable donations) taken by individuals making >$200k annually and families making over $250k annually </li></ul><ul><li>Remainder of plan paid for by offsets relating to corporate jets, oil subsidies, and “dual capacity taxpayers” </li></ul>
  20. 20. American Jobs Act of 2011: Details <ul><li>Tax cuts aimed to spur business hiring & growth: </li></ul><ul><li>Cut the payroll tax in half on the first $5 million in payroll, targeting the benefit to the 98 percent of firms with payroll below this threshold. </li></ul><ul><li>A complete payroll tax holiday for added workers or increased wages up to $50 million. </li></ul><ul><li>Extend 100% expensing into 2012. </li></ul><ul><li>Reform regulatory reductions to help entrepreneurs and small businesses access capital.  </li></ul><ul><li>* From the White House, Office of the Press Secretary – Fact Sheet: The American Jobs Act, dated September 8, 2011; Fact Sheet: The President’s Plan for Economic Growth and Deficit Reduction, dated September 19, 2011 </li></ul>
  21. 21. American Jobs Act of 2011: Details <ul><li>Maintaining Current and New Job Opportunities: </li></ul><ul><li>A “Returning Heroes” hiring tax credit for veterans ranging from $5,600 - $9,600. </li></ul><ul><li>Prevent up to 280,000 teacher layoffs, while keeping cops and firefighters on the job. </li></ul><ul><li>Immediate investments in infrastructure, school buildings, and neighborhoods as well as creation of a National Infrastructure Bank.  </li></ul><ul><li>* From the White House, Office of the Press Secretary – Fact Sheet: The American Jobs Act, dated September 8, 2011; Fact Sheet: The President’s Plan for Economic Growth and Deficit Reduction, dated September 19, 2011 </li></ul>
  22. 22. American Jobs Act of 2011: Details <ul><li>Assistance for Unemployed Currently Seeking Jobs </li></ul><ul><li>Reform the unemployment insurance program and extend emergency unemployment insurance to prevent  6 million unemployed looking for work from losing benefits </li></ul><ul><li>A $4,000 tax credit to employers for hiring the long-term unemployed. </li></ul><ul><li>Prohibit employers from discriminating against unemployed workers when hiring. </li></ul><ul><li>Expand job opportunities for low-income youth and adults.  </li></ul><ul><li>* From the White House, Office of the Press Secretary – Fact Sheet: The American Jobs Act, dated September 8, 2011; Fact Sheet: The President’s Plan for Economic Growth and Deficit Reduction, dated September 19, 2011 </li></ul>
  23. 23. American Jobs Act of 2011: Details <ul><li>Tax Relief for Families and Employees </li></ul><ul><li>Cut payroll taxes in half for 160 million workers next year. </li></ul><ul><li>Allow more Americans to refinance their mortgages at 4% interest rates.  </li></ul><ul><li>* From the White House, Office of the Press Secretary – Fact Sheet: The American Jobs Act, dated September 8, 2011; Fact Sheet: The President’s Plan for Economic Growth and Deficit Reduction, dated September 19, 2011 </li></ul>
  24. 24. American Jobs Act of 2011: Details <ul><li>Tax Offsets: </li></ul><ul><li>Subtitle A – 28% Limitation on Certain Deductions and Exclusions </li></ul><ul><li>Sec. 401.28 – Limitation on Certain Deductions and Exclusions </li></ul><ul><ul><li>Taxpayer adjusted gross income is above $250k joint, $225k “head of household”, $125k married filing separately, and $200k other cases  </li></ul></ul>
  25. 25. American Jobs Act of 2011: Details <ul><li>Tax Offsets: </li></ul><ul><li>Subtitle B – Tax Carried Interest in Investment Partnerships as Ordinary Income </li></ul><ul><li>Sec. 411 – Partnership Interests Transferred in Connection with Performance of Services </li></ul><ul><ul><li>FMV of interest treated as equal to the amount of distribution partner would’ve received had the partnership been sold at the time of the transfer and the assets liquidated  </li></ul></ul>
  26. 26. American Jobs Act of 2011: Details <ul><li>Tax Offsets: </li></ul><ul><li>Sec. 412 – Special Rules for Partners Providing Investment Management Services to Partnerships </li></ul>
  27. 27. American Jobs Act of 2011: Details <ul><li>Tax Offsets: </li></ul><ul><li>Subtitle C – Close Loophole for Corporate Jet Depreciation </li></ul><ul><li>Sec. 421 – General Aviation Aircraft Treated as 7-Year Property </li></ul>
  28. 28. American Jobs Act of 2011: Details <ul><li>Tax Offsets: </li></ul><ul><li>Subtitle D – Repeal Oil Subsidies </li></ul>
  29. 29. American Jobs Act of 2011: Details <ul><li>Tax Offsets: </li></ul><ul><li>Subtitle E – Dual Capacity Taxpayers </li></ul><ul><li>Sec. 441 – Modifications of Foreign Tax Credit Rules Applicable to Dual Capacity Taxpayers </li></ul><ul><li>Sec. 442 – Separate Basket Treatment Taxes Paid on Foreign Oil and Gas Income </li></ul>
  30. 30. Summary: Next Steps for Proposals <ul><li>The American Jobs Act of 2011 was introduced in the Senate by Sen. Reid on 9/13/11 at the President’s request </li></ul><ul><li>To-date there are no co-sponsors of record </li></ul><ul><li>On Monday, 9/19/11, the President presented his deficit reduction proposal to the Joint Select Committee </li></ul><ul><li>Initial reaction to the Jobs Act are negative on both sides of the “aisle.” </li></ul><ul><li>The Deficit Reduction Proposal, specifically the requested tax reform, will likely be broken out and introduced on a more piece-meal basis. </li></ul>
  31. 31. Parsing the President’s 2011 Jobs & Deficit Proposals: Impact on Businesses <ul><li>Paul M. Spizzirri, Esq., J.D., LL.M., M.B.A., M.A.F.M. </li></ul><ul><li>Hall, Booth, Smith & Slover, P.C. </li></ul><ul><li>Email: ps@hbss.net </li></ul><ul><li>Phone: 404-954-6930 </li></ul><ul><li>Website: www.hbss.net </li></ul><ul><li>www.linkedin.com/in/spizzirri </li></ul>

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