2. Presenter
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hereOverview
• In 2001, there were 1.4M words in the Internal
Revenue Code. In 2011, there were 3.7M words
• The Government is expected to collect $3.3
Trillion in 2015
• The US GDP will be approximately $17 Trillion in
2015
4. Presenter
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hereOverview (continued)
• Who Pays the Income Tax?
Tax Data after Refundable Credits
AGI under AGI AGI AGI AGI AGI over
$50K $50-100K $100-200K $200-500K $500K-1M $1M Total
Number of Returns Thousands
2011 95,039 30,876 14,756 3,802 598 301 140,671
2010 94,064 30,533 13,998 3,472 544 280 138,595
Increase 1.04% 1.12% 5.42% 9.50% 9.93% 7.50% 1.50%
2011 Percent of Total 67.56% 21.95% 10.49% 2.70% 0.43% 0.21% 100.00%
Number of Returns
10. Presenter
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Year End Tax Extender Legislation
for Individuals
• Sales Tax Deduction through 2014
• Higher Education Deduction through 2014 with
an AGI limit
• Exclusion of Mortgage Debt Cancellation through
2014 for up to $2M
11. Presenter
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Year End Tax Extender Legislation
for Individuals (continued)
• Mortgage Insurance Premium deductions
through 2014 with an AGI limit
• Exclusion of Charitable Distributions from IRA’s
through 2014 up to $100K
12. Presenter
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Year End Tax Extender Legislation
for Individuals (continued)
• The extender package did not address the Pease
Limitation that was brought back in 2013 that
reduces the value of itemized deductions by 3%
for every dollar above $305K up to 80%. The limit
does not impact medical expenses, investment
interest expenses, casualty losses, and gambling
losses.
13. Presenter
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Year End Tax Extender Legislation
for Businesses
• Good news on Bonus Depreciation since the 50
percent deduction was extended through 2014.
• Same for Section 179 with a $500K expensing
election with a $2M phase out investment
limitation. After 2015, the deduction reverts
again to $25K.
14. Presenter
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Year End Tax Extender Legislation
for Businesses (continued)
• Improvements to Qualified Leasehold Property
have beneficial recovery options that are often
overlooked
• The R&D credit was extended through 2014.
• 100% Exclusion for Gain on Qualified Small
Business Stock was extended through 2014 for
stock acquired after September 2010 and before
2015.
15. Presenter
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Year End Tax Extender Legislation
for Businesses (continued)
• The Work Opportunity Credit was extended through
2014. Generally, this is $2,400 tax credit against the
first year wages of a newly-hired veteran.
• The Built-in Gains Tax Reduced Recognition Period
for S Corporations was extended through 2014.
Generally, the recognition period is 10 years;
however, it is only 5 years for asset dispositions
occurring in 2011-2014.
17. Presenter
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hereThe President’s Proposals for Individuals
• Make permanent the Earned Income and related
credits based on AGI limitations – cost is $154B
• Expand the Earned Income Credit to childless
workers – cost is $60B
• IRA Auto Enrollment – cost is $15B
18. Presenter
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The President’s Proposals for Individuals
(continued)
• Limit the benefit from itemized deductions to 28
percent – increased revenue is $598B
• Reform Estate Tax by reducing the exclusions,
increasing the tax rates, and reforming some tax
strategies that have been utilized in the past –
increased revenue is $131B
19. Presenter
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The President’s Proposals for Individuals
(continued)
• Increased IRS enforcement funding – increased
revenue is $75B
• Ensure that the tax rate of any household earning
more than $1M is at least 30 percent – increased
revenue of $53B
20. Presenter
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The President’s Proposals for Individuals
(continued)
• Restrict the benefit that can be deferred in
retirement plans (i.e., limit not just the
contribution, but also the earnings of the
accounts) – increased revenue is $34B
• Tax a Carried Interest as compensation for
investment partnerships – increased revenue is
$14B
21. Presenter
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hereThe President’s Proposals for Businesses
• Lower the corporate tax rate to 28 percent for
most corporations and 25 percent for
manufacturing – unfortunately this is just a goal
as the revenue reduction must be offset by tax
increases related to the reduction of “loopholes”.
• Make the Research Credit permanent – cost is
$108B
22. Presenter
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The President’s Proposals for Businesses
(continued)
• Make permanent the exclusion for investments in
Small Business Stocks – cost is $9B
• Increase employer’s FUTA wage base from $7K to
$15K – increased revenue is $74B
23. Presenter
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The President’s Proposals for Businesses
(continued)
• Change the revenue recognition of derivatives
investments to mark-to-market and characterize
gains as ordinary income – increased revenue is
$19B
• Impose self-employment tax on professional
service income generated by S corporations –
increased revenue is $38B
24. Presenter
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The President’s Proposals for Businesses
(continued)
• Make permanent the Section 179 expensing
election – cost is $57B
• Defer interest on foreign investments in offshore
businesses until profits are repatriated –
increased revenue is $43B
25. Presenter
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The President’s Proposals for Businesses
(continued)
• Change the computational method for realizing a
Foreign Tax Credit as well as the definition of
creditable taxes (the latter would mainly impact
E&P companies) – increased revenue is $85B
• Expand the definition of subpart F to include
excess profits obtained from IP migrations to low
tax jurisdictions – increased revenue is $26B
26. Presenter
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The President’s Proposals for Businesses
(continued)
• Restrict deductions related to debt financing of
US subsidiaries (earnings stripping) – increased
revenue is $49B
• Expand the definition of subpart F to include
sales of digital goods and services – increased
revenue is $12B
27. Presenter
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The President’s Proposals for Businesses
(continued)
• Expand the definition of subpart F by narrowing
the application of the manufacturing exception to
those foreign subsidiaries that actually make the
product (i.e., contract and toll manufacturing
arrangement would no longer qualify for the
exception) – increased revenue of $25B
28. Presenter
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The President’s Proposals for Businesses
(continued)
• Strengthen the anti-inversion provisions of
Section 7874 – increased revenue of $17B
• Repeal the LIFO election for inventory – increased
revenue of $83B
• Limit the Like-Kind exchange deferral to $1M –
increased revenue of $18B
29. Presenter
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The President’s Proposals for Businesses
(continued)
• Require the amortization of intangible drilling
costs, eliminate percentage depletion, and
exclude use of the DPAD for the extraction
industry
• There is an expansion and extension of a number
of green energy incentives.
