Fiscal year 2023 Treasury Tax Proposals

On March 29, 2022, the U.S. Treasury Department issued “General Explanations of the Administration’s Fiscal Year 2023 Revenue Proposals, ” otherwise known as the Greenbook. The paper outlines the details of the Biden Administration’s tax policy proposals for Fiscal Year 2023. The proposals coincide with the Biden Administration’s budget proposals.

Key business tax proposals outlined in the Greenbook are as follows:
1. Increase in the corporate tax rate from 21% to 28%.
• The increase in corporate tax rate from 21% to 28% would be effective for tax years beginning after December 31, 2022.

2. A new rule to limit basis shifting by partnerships.
• The new rule would generally apply to all partners who are related parties, and would preclude the partner from increasing his partnership basis due to an IRC sec. 754 election until the property was disposed of in a fully taxable transaction. This would be applicable to tax years beginning after December 31, 2022.

3. Taxing high-earner partners’ share of income on carried interest as ordinary income.
• High-earner partners would be required to pay self-employment taxes on investment services partnership interest. In addition, investment services partnership interest would be taxed at ordinary income rates rather than capital gain rates.
• This would be applicable if the partner’s taxable income from all sources exceeds $400,000.
• The partnership is an investment-type partnership if substantially all of its assets and one-half of its capital contributed from partners do not constitute property held in connection with a trade or business.

4. Repeal of fossil fuel related tax incentives.
• Repeal of the enhanced oil recovery credit of IRC sec. 43.
• Repeal of expensing of intangible drilling costs.
• Repeal of percentage depletion for oil and gas wells and hard mineral fossil fuels.
• Repeal of corporate income tax exemption for fossil fuel publicly traded partnership.
• Repeal of accelerated amortization for air pollution control facilities.

The foregoing is a highlight of some of the Administration proposed tax changes for Fiscal 2023. We will continue to follow these proposals as they are taken into consideration by Congress.

Should you have any questions, please call Stanfield + O’Dell.