On September 13, 2021, the House Ways and Means Committee released draft legislation proposing various tax increases and cuts, which will undergo markups by the committee over the next few days. While most tax proposals were anticipated, the House introduced a few surprises.

Income Tax Provisions

Section 1202 – Qualified Small Business Stock

Taxpayers are currently eligible for 75% and 100% exclusions for sales of qualified small business stock (QSBS). The proposed legislation would eliminate these exclusions for sales of QSBS acquired after February 17, 2009, and sold after September 13, 2021, unless the sale was made pursuant to a written binding contract already in place and not materially modified thereafter. This provision would apply to taxpayers whose adjusted gross income equals or exceeds $400,000 and to trusts and estates.

Under the current 50% exclusion rules, the remaining 50% QSBS gain is taxed at 28%. The excluded QSBS gain is considered an alternative minimum tax (AMT) preference item, which, when combined with the net investment income tax on the taxable half of the gain, results in an effective rate of 16.88% for QSBS acquired after September 27, 2010, and sold after September 13, 2021.

Capital Gains

The current maximum tax rate on capital gains is 20%. The proposed legislation would increase the capital gains rate to 25% for taxable years ending after September 13, 2021. Transitional rules are proposed for taxable years that include September 13, 2021, taxing net gains realized before that date at 20%. Gains arising from a transaction pursuant to a binding written contract in effect before September 13, 2021, and not materially modified thereafter, would remain eligible for the 20% rate.

Planning opportunity: Consider deferring realization of some capital losses until 2022 to offset capital gains that would otherwise be taxed at 25%.

Top Marginal Individual Income Tax Rate

The top marginal individual income tax rate is currently 37%. The draft legislation would raise it to 39.6% for taxable income over $450,000 for married individuals filing jointly and surviving spouses, $425,000 for heads of households, $400,000 for single individuals, $225,000 for married individuals filing separately, and $12,500 for estates and trusts. This proposal would be effective for taxable years beginning after December 31, 2021.

Planning opportunity: Consider accelerating ordinary income to 2021.

Net Investment Income Tax

Currently, net investment income does not include income derived in the ordinary course of a trade or business or income attributable to the disposition of property earned outside of a passive activity. The proposed legislation would eliminate these carveouts, broadening the type of income subject to the net investment income tax (NIIT). NIIT would apply to the greater of “specified net income” or net investment income for high-income individuals, estates, and trusts. “Specified net income” includes net investment income even if derived in the ordinary course of a trade or business and other gross income and net gains attributable to the disposition of property, even if earned outside of a passive activity or the trade or business of trading financial instruments or commodities. Certain foreign income is includible in the definition of net investment income.

This provision would apply to taxpayers whose modified adjusted gross income exceeds $500,000 for married individuals filing jointly and surviving spouses, $250,000 for married individuals filing separately, $12,500 for estates and trusts, and $400,000 for all other tax filers. It would be effective for taxable years beginning after December 31, 2021.

Carried Interests

The holding period to obtain long-term capital gains treatment for gain allocated to carried interest partners is currently three years. The proposal would extend this to five years. The three-year holding period would remain in effect for income attributable to real property trades or businesses and for taxpayers (other than estates or trusts) with adjusted gross income of less than $400,000. The proposal also includes provisions to encompass all items treated as capital gain (e.g., Section 1231 gain) and prevent avoidance of the holding period rules. This would be effective for taxable years beginning after December 31, 2021.

Qualified Business Income

The qualified business income deduction currently has no maximum allowable deduction. The proposal would introduce a cap, limiting the maximum allowable deduction to $500,000 for married individuals filing jointly and surviving spouses, $250,000 for married individuals filing separately, $10,000 for estates and trusts, and $400,000 for all other taxpayers. This would be effective for taxable years beginning after December 31, 2021.

Excess Business Loss Limitation

Under a temporary provision, excess business losses of non-corporate taxpayers exceeding $500,000 for joint filers ($250,000 for all other taxpayers) are disallowed and treated as net operating losses in the following year; however, this provision is set to expire on December 31, 2025. The proposal would make this provision permanent and modify how a disallowed excess business loss (EBL) is treated. Instead of treating the disallowed loss as a net operating loss in the following year, the EBL would be treated as a deduction attributable to a taxpayer’s trades or businesses when computing the EBL in the subsequent year. This would be effective for taxable years beginning after December 31, 2020.

Surcharge on High-Income Individuals

Currently, there is no surcharge imposed on high-income individuals. The proposal would impose a 3% surcharge on modified adjusted gross income exceeding $2,500,000 for married individuals filing separately, $100,000 for estates and trusts, and $5,000,000 for all other individuals. This would be effective for taxable years beginning after December 31, 2021.

Transfers Between Deemed Owner and Irrevocable Grantor Trust

Transfers between a deemed owner and their irrevocable grantor trust are currently nontaxable events. The proposal would disregard grantor trust status when determining whether a transfer between a deemed owner and their grantor trust is a sale or an exchange, possibly resulting in a taxable event. Additionally, the proposal would expand the definition of related party under Internal Revenue Code Section 267(b) to include grantor trusts and their deemed owners. This would apply to trusts created on or after the enactment date and to any portion of a trust established before the enactment date that is attributable to a contribution made on or after such date.

Planning opportunity: Consider sales to intentionally defective grantor trusts.

Estate and Gift Tax Provisions

Estate Tax Basic Exclusion Amount

The estate tax basic exclusion amount is $11,700,000 for 2021. The proposal would terminate the temporary increase in the basic exclusion amount, returning it to $5,000,000, indexed for inflation. Under this proposal, the basic exclusion amount in 2022 is anticipated to be $6,030,000. This would apply to estates of decedents dying and gifts made after December 31, 2021.

Planning opportunity: Consider making gifts up to the 2021 estate tax basic exclusion amount of $11,700,000.

Grantor Trusts

When a deemed owner of a grantor trust dies, the assets of that grantor trust (other than a fully revocable trust) are generally not included in the deemed owner’s estate. The proposal would require that assets in a grantor trust be included in the gross estate of the deceased deemed owner. Additionally, the proposal would treat distributions (other than to the deemed owner or spouse) during the life of the deemed owner and the termination of grantor trust status during the life of the deemed owner as completed gifts.

This would apply to trusts created on or after the enactment date and to any portion of a trust established before the enactment date that is attributable to a contribution made on or after such date.

Planning opportunity: Consider terminating grantor trust status or making a gift to a grantor retained annuity trust (GRAT) or spousal lifetime access trust (SLAT).

Valuation Discounts

Valuation discounts, such as marketability discounts and minority interest discounts, are currently allowed for transfers of nonbusiness assets for estate and gift tax purposes. The proposal would eliminate valuation discounts for certain transfers of nonbusiness assets. Nonbusiness assets are defined as passive assets held for the production or collection of income and not used in the active conduct of a trade or business. This would apply to transfers after the enactment date.

Planning opportunity: Consider making gifts that will be eligible for valuation discounts.

Retirement Plans

Annual Contributions to Plans

Annual contributions to retirement plans are not currently limited by the value of the retirement plans owned by a taxpayer. The proposal would prohibit annual contributions by “applicable taxpayers” to “applicable retirement plans” (including tax-qualified defined contribution plans, IRC Section 403(b) and 457(b) plans, and traditional and Roth IRAs) if the total value of all the taxpayer’s applicable retirement accounts exceeds $10 million as of the end of the prior year. Applicable taxpayers are head of household filers with adjusted taxable income over $425,000, married individuals filing jointly and surviving spouses over $450,000, and all other taxpayers over $400,000. Both the $10 million cap and income limitations are indexed for inflation beginning after 2022. This would be effective for taxable years beginning after December 31, 2021.

Minimum Required Distributions from Plans

Taxpayers are not currently required to take additional distributions if the total value of their retirement plan accounts exceeds $10 million. The proposal would require applicable taxpayers (as defined above) of any age to take a minimum required distribution equal to 50% of the aggregate vested balances in applicable retirement plans exceeding $10 million. If an applicable taxpayer’s combined retirement plan account balances exceed $20 million, the taxpayer would be required to take distributions equal to the lesser of (i) the aggregate plan balances in excess of $20 million or (ii) the aggregate balances in Roth IRAs and designated Roth accounts in defined contribution plans. Once the taxpayer distributes the amount of any excess required under this rule, they would then be allowed to determine the retirement accounts from which to make distributions in satisfaction of the 50% distribution rule.

This would be effective for tax years beginning after December 31, 2021.

Roth Rollovers and Conversions

Currently, the definition of a qualified rollover or conversion does not exclude any portion of the rollover or contribution that is not includible in gross income. The proposed legislation would amend the definition of qualified rollovers and conversions to Roth IRAs to include only amounts that would be includible in gross income and subject to tax. This would be effective for rollovers and conversions made after December 31, 2021.

“Back Door” Roth IRAs

“Back door” Roth IRA strategies currently allow taxpayers who exceed existing Roth income limits to make nondeductible contributions to a traditional IRA and shortly thereafter

Currently, U.S. citizens and non-U.S. citizens domiciled in the U.S. are entitled to an $11.7 million gift and estate tax exemption and are subject to a maximum marginal tax rate of 40%. While this exemption is set to decrease by half on January 1, 2026, several legislative proposals could impact the laws even sooner.

What Are the Proposals?

President Biden’s campaign and the Treasury’s Green Book proposed:

• Reducing the exemption to $3.5 million

• Increasing the top rate to 45%

• Triggering capital gains tax upon various transfers, including:

  • Gifts

  • Death

  • Transfers to/from trusts

  • Contributions to/distributions from partnerships

  • Deemed sales of assets held for 90+ years in a trust or partnership

These proposals—combined with other pending bills—would significantly shift the estate planning landscape. Notably, some propose retroactive tax law changes, which Congress has the power to enact.

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What Can You Do Now?

Many high-net-worth individuals made substantial gifts in 2020, anticipating changes. For those who haven’t, the concern is whether future changes may apply retroactively.

Example

A taxpayer makes an $11.7 million gift on August 1, 2021. If the exemption is reduced to $3.5 million and the rate raised to 45% (effective retroactively), the gift would generate $3.69 million in tax. If both spouses made similar gifts, the total tax would be $7.38 million.

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Gifting to the Next Generation – Trust or Outright?

Under current rules, a married couple with no prior taxable gifts can give up to $23.4 million tax-free. These gifts often include cash, stocks, or business interests.
Gifting via trust is generally preferred over outright gifts, as trusts can offer:

• Creditor protection

• Divorce protection

• Estate and generation-skipping tax sheltering

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Spousal Lifetime Access Trust (SLAT)

A SLAT allows one spouse to create a trust benefiting the other spouse (and potentially children/grandchildren) while retaining indirect access to the assets.
Key features:

• The donor spouse funds an irrevocable trust

• The donee spouse is a discretionary beneficiary

• The trust is taxed to the donor spouse (grantor trust rules)

Important considerations:

• Jointly owned assets can’t fund a SLAT

• Trusts for each spouse must not mirror each other to avoid the reciprocal trust doctrine

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Grantor Retained Annuity Trust (GRAT)

A GRAT allows the donor to transfer future appreciation with minimal gift tax. It’s ideal when the return on trust assets is expected to exceed the IRS Section 7520 rate.

Example

• $10 million funded in July 2021

• 8% return over 5 years

• IRS rate: 1.2%

• Result: ~$2.5 million passed to heirs tax-free

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Bottom Line

With potential changes looming—and possibly retroactively—now is the time to:

• Review your estate plan

• Consult with your tax and legal advisors

• Consider using planning tools like SLATs or GRATs

A well-structured estate plan will help secure your legacy and mitigate tax risk, regardless of what changes lie ahead.

On August 24, the U.S. House of Representatives voted 220-212 in favor of a $3.5 trillion budget resolution, setting the stage for Congressional committees to draft legislation that would:

• Expand Medicare

• Invest in education

• Combat climate change

• Advance other key spending priorities of the Biden administration

This legislation is also expected to include tax increases to help fund the spending package.

The Senate passed the same resolution on August 11 with a 50-49 party-line vote. The resolution does not require President Biden’s signature—it instead activates the reconciliation process, which allows Democrats to move forward with a tax-and-spending package without Republican support.

Next Steps in the Legislative Process

The resolution now moves to congressional committees that will craft specific legislation to advance the President’s “Build Back Better” agenda. Notably, Senate Finance Committee Chair Ron Wyden (D-Ore.), along with Senators Sherrod Brown (D-Ohio) and Mark Warner (D-Va.), released a draft of proposed reforms to the U.S. international tax regime for inclusion in the final bill.

This draft is expected to closely follow the administration’s Green Book, a 114-page Treasury document issued on May 28, outlining major tax proposals.

Proposed Tax Increases May Include:

• Raising the corporate tax rate from 21% to 28%

• Increasing the top marginal individual tax rate from 37% to 39.6% for:

  • Married filing jointly: Over $509,300

  • Married filing separately: Over $254,650

  • Head of household: Over $481,000

  • Single filers: Over $452,700

• Taxing long-term capital gains and qualified dividends at ordinary income tax rates for taxpayers with AGI over $1 million

International Tax Reforms May Include:

• Reforming and increasing the GILTI (Global Intangible Low-Taxed Income) tax

• Repealing FDII (Foreign-Derived Intangible Income)

• Replacing BEAT (Base Erosion and Anti-Abuse Tax) with SHIELD (Stopping Harmful Inversions and Ending Low-Taxed Developments)

Infrastructure Package & Legislative Timing

As part of the administration’s two-track strategy, House Speaker Nancy Pelosi committed to passing the Senate-approved $1 trillion infrastructure package by September 27.

Timing remains a major challenge:

• Progressive Democrats want to prioritize the broader $3.5 trillion budget

• Moderate Democrats prefer to first pass the infrastructure bill

This standoff nearly derailed the agenda, but the final vote preserved momentum.

Republican Opposition

Republicans opposed the resolution, arguing that the spending could drive inflation and significantly increase the federal deficit.

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Cryptocurrency—referred to by the IRS as “virtual currency”—has seen rapid growth in both investing and financial transactions. While the IRS and other federal agencies are increasingly focused on regulation and oversight, guidance in several areas remains unclear.

This article outlines U.S. federal tax implications for both individuals and businesses engaged in cryptocurrency activity, including those involved in foreign crypto-related investments. It also highlights emerging information reporting requirements.

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Taxation of Cryptocurrency

According to IRS Notice 2014-21, virtual currency is classified as “property,” not currency, for federal tax purposes. This means traditional tax rules for property apply.

Common Taxable Events Include:

• Mining or staking cryptocurrency

• Receiving crypto as payment for goods or services

• Using crypto to buy goods or services

• Trading one crypto for another

• Converting crypto to/from fiat currency (e.g., U.S. dollars)

General Tax Rules:

• Crypto received through mining, staking, or as compensation is taxable income measured by its fair market value (FMV) in USD at the time received.

• When using crypto for purchases or exchanging it, capital gain/loss is recognized based on the difference between FMV at the time of the transaction and the taxpayer’s basis.

• Most individuals report capital gains/losses on Form 8949. Dealers or those in the business may report ordinary income.

• Purchasing crypto with fiat does not trigger a tax event.

Example:

• You buy 1 BTC for $30,000.

• Later, you trade it for another crypto when BTC is worth $35,000.

• You recognize a $5,000 capital gain.

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International Tax Considerations

1. Controlled Foreign Corporations (CFCs)

U.S. shareholders of CFCs may be taxed on “Subpart F income,” which includes foreign personal holding company income (FPHCI). Gains from trading crypto may be categorized as FPHCI unless exemptions apply.

2. Passive Foreign Investment Companies (PFICs)

Foreign funds or companies dealing heavily in crypto could be PFICs, triggering adverse U.S. tax consequences and reporting requirements for investors.

3. Foreign Currency Gains

As of now, the IRS does not consider cryptocurrency a foreign currency under Section 988, meaning crypto transactions do not generate foreign currency gains or losses—though this could change.

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Other Tax Considerations

• Capital losses from crypto may offset other capital gains.

• Donating appreciated crypto can yield a fair market value deduction if held over a year.

• Wash sale rules currently may not apply to crypto, but this is a gray area—consult a tax advisor before relying on that position.

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Reporting Requirements

Inconsistent Reporting by Exchanges:

• Some issue Form 1099-B

• Others use Form 1099-K

• Some issue no forms at all

Due to this inconsistency, the IRS has issued John Doe summonses to crypto platforms since 2016 to obtain user data.

Form 1040 Requirement:

Since 2020, all taxpayers must answer yes or no on Form 1040 if they engaged in any virtual currency transaction during the year.

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Upcoming Reporting Proposals

The Infrastructure Investment and Jobs Act, passed by the Senate in August 2021, proposes:

• New broker reporting rules for digital asset transactions

• Mandatory reporting of crypto payments over $10,000

• Effective for filings after December 31, 2023

Additionally, the Biden Administration has proposed $80 billion in IRS funding to strengthen crypto-related enforcement. Higher-income individuals (over $400,000/year) are expected to face increased audit scrutiny.

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Bottom Line:
Cryptocurrency taxation is evolving quickly. Investors and businesses should maintain detailed records, consult tax advisors, and prepare for stricter reporting rules in the coming years.

The Treasury Department’s Green Book outlines proposals by the Biden Administration to raise federal tax rates for corporations and high-income individuals. If enacted, these changes would generally take effect for tax years beginning after December 31, 2021.

Key Proposed Changes:

• Corporate tax rate increase: from 21% to 28%

• GILTI (Global Intangible Low-Taxed Income) effective rate: from 10.5% to 21%

• Top marginal individual tax rate: from 37% to 39.6%

• Long-term capital gains rate for high earners: from 20% to 39.6% (or 43.4% with the Net Investment Income Tax)

⚠️ Note: The increase in long-term capital gains rate is proposed to apply retroactively to gains recognized after April 28, 2021.

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Why Timing Matters

If tax rates increase, strategic timing of income recognition and deductions can lead to permanent tax savings. The idea is simple:

• Accelerate income into lower-tax years

• Defer deductions into higher-tax years

This approach can reduce overall tax liability for corporations and individuals—including flow-through income from partnerships, LLCs, and S corporations.

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Income Acceleration Strategies

• Advance Payments:
  Switch to the full-inclusion method to recognize income when received, not deferred.

• Installment Sales:
  Elect out of the installment method to recognize the full gain in the current year.

• Sale-Leaseback Transactions:
  Recognize gain now and take future deductions on lease payments (if not recharacterized as financing).

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Deferring Deductions

For accrual-method taxpayers, consider delaying certain payments so deductions fall into a higher-rate year:

• Accrued Liabilities:
  Items like warranties or rebates are deductible when paid.

• Accrued Compensation:
  Bonuses are deductible when paid within 2.5 months of year-end; delay further to push deductions forward.

• Related-Party Payments:
  Interest or fees owed to related cash-method or foreign entities are only deductible when paid or recognized by the recipient.

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Additional Tactics for Future Deductions

• Expense Capitalization:
  Capitalize and amortize qualifying costs (e.g., R&E expenses, software development, patents).

• Depreciation:
  Elect out of bonus depreciation or Section 179 to spread deductions over asset life.

Note: Starting in 2022, U.S. and non-U.S. R&E expenses must be capitalized over 5 and 15 years, respectively.

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Net Operating Loss (NOL) Preservation

NOLs will be more valuable under a higher corporate rate. But beware of triggering a Section 382 ownership change, which can limit NOL utilization. This can occur through:

• Stock redemptions

• Equity financing

• Transfers among 5% shareholders

Monitor shareholder activity to protect NOLs and strategically time their use for maximum benefit.

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When Deferring Income Makes Sense

Not all taxpayers benefit from accelerating income. Some may:

• Qualify for CARES Act NOL carrybacks (at 35% or 39.6% rates)

• Be pass-through owners who can offset income in earlier years

• Expect a drop in future income, making deferred income less costly

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Act Now: Review, Model, and Execute

Whether or not tax rates rise, the time to plan is now. Taxpayers should:

• Model the impact of timing shifts

• Consult with advisors on method changes or elections

• Make necessary moves before year-end or by extended filing deadlines

On August 25, Senate Finance Committee Chair Ron Wyden (D-Ore), along with Senators Sherrod Brown (D-Ohio) and Mark Warner (D-Va), released a draft proposal aimed at overhauling the U.S. international tax system.

This new proposal builds on the previously introduced Overhauling International Taxation framework released in April and adds more details about significant potential changes to international tax provisions enacted under the 2017 Tax Cuts and Jobs Act (TCJA). Key provisions addressed include:

• Global Intangible Low-Taxed Income (GILTI)

• Base Erosion and Anti-Abuse Tax (BEAT)

• Foreign Derived Intangible Income (FDII)

• Foreign Tax Credit (FTC) rules

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Key Differences: Wyden Proposal vs. Biden Administration’s Green Book

Below is a summary of how the Wyden plan compares to the Biden Administration’s tax proposals:

Global Intangible Low-Taxed Income (GILTI)

Nearly three years after the U.S. Supreme Court’s Wayfair decision, 45 states have enacted economic nexus rules, requiring remote sellers to register and remit sales tax if they meet certain thresholds (e.g., $100,000 in sales or 200 transactions per year). Many inbound companies are now realizing that they have unknowingly triggered nexus and failed to collect sales tax in states where they do business.

In addition to economic nexus, some companies may have already created physical nexus before Wayfair by:

• Employing personnel or agents in the U.S.

• Soliciting sales at tradeshows

• Storing inventory in U.S. warehouses (e.g., Fulfillment by Amazon)

Failing to comply with these obligations can lead to significant liabilities and penalties.

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Why Use a Voluntary Disclosure Agreement (VDA)?

Before registering and collecting sales tax going forward, companies should assess past exposure and consider Voluntary Disclosure Agreements (VDAs) to limit liability. VDAs are designed to:

• Encourage compliance

• Limit retroactive tax liability

• Reduce or abate penalties and interest

Most states offer look-back periods of 3–4 years and allow anonymous applications—though some (e.g., California, Illinois, New York) require identity disclosure upfront.

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VDA Disqualification Triggers

A company may be ineligible for a VDA if:

• The Department of Revenue (DOR) has already contacted the company

• The company is already registered for the tax in question

• The company collected but failed to remit the tax

• In some states, if one company in a group receives a nexus questionnaire, it can disqualify the entire group

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Information Required in a VDA

The disclosure typically includes:

• Company background (state of incorporation, products, etc.)

• Nexus creation date and how nexus was established

• Sales volume and estimated liability

• Whether sales tax was collected but not remitted

• Corporate registration status with the state

States may audit disclosures and void VDAs for misstatements or omissions.

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Additional Considerations for Inbound Companies

• FEIN Requirement: Companies without a Federal Employer Identification Number (FEIN) usually cannot register with a DOR, which may hinder VDA completion.

• Other Tax Obligations: Some states (e.g., PA, OH, TX, WA) may require income or gross receipts tax filings in addition to sales tax.

• Deadline Sensitivity: VDAs are often time-sensitive, with tight deadlines (30 days). Missing one may void the agreement and expose the taxpayer.

• No Refunds Within Look-Back Period: Most VDAs don’t allow amended returns or refunds for overpaid taxes in prior years—even if nexus didn’t exist or the product was tax-exempt.

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Why Act Now?

With post-pandemic revenue shortfalls and aggressive enforcement, states are increasingly targeting non-compliant companies. Companies operating in multiple states may need to pursue several VDAs simultaneously.

Success depends on:

• Deep familiarity with each state’s process

• Accurate disclosure and quantification

• Ability to manage related tax obligations

• Meeting deadlines without error

Working with professionals experienced in state and local tax matters—not just sales tax—can be critical to completing the VDA process successfully.

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On May 28, the U.S. Treasury released its Green Book, a 114-page document explaining the Biden Administration’s fiscal year 2022 tax proposals. The Green Book provides detailed insights into plans originally outlined in the American Jobs Plan and American Families Plan, including significant changes for corporations, high-income individuals, and multinational businesses.

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Corporate and International Tax Proposals

Corporate Income Tax

• Increase in corporate rate: From 21% to 28%, effective for tax years beginning after December 31, 2021.

• Blended rate for fiscal-year corporations crossing 2021 and 2022.

• Applies to entities tied to corporate rates (REITs, insurance companies, etc.).

• New 15% minimum tax on book income for corporations with $2B+ in global income.

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International Tax Reforms

GILTI and FTC Changes

• Repeal exemption for foreign oil & gas extraction income.

• Repeal high-tax exemption for GILTI and Subpart F.

• Country-by-country calculation of GILTI and FTC (replacing aggregate method).

• FTC limitation expanded to “branch” baskets.

• Adopt an OECD-consistent minimum tax inclusion rule for foreign-parented U.S. groups.

• Repeal IRC §904(b)(4) and expand §265 to disallow deductions tied to exempt income.

Effective Date: Tax years beginning after December 31, 2021.

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BEAT Replaced by SHIELD

• New regime: Stopping Harmful Inversions and Ending Low-Taxed Developments (SHIELD).

• Denies deductions for payments to “low-taxed members” based on global group income ratios.

• Applies to both direct and indirect payments, including cost of goods sold.

• Minimum tax rate tied to OECD agreement; defaults to 21% if no agreement is reached.

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Foreign Tax Credit for Hybrids and CTB Elections

• Applies Section 338(h)(16) to hybrid entity sales and check-the-box (CTB) elections.

• Aligns character and source rules with stock sale treatment.

• Aims to prevent FTC abuse and misclassification of income across baskets.

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Inversion Rule Expansion

• Eliminates 60% ownership threshold.

• New test: Inversion occurs if post-acquisition group is managed and controlled in the U.S., lacks substantial foreign activity, and domestic entity’s FMV exceeds the foreign acquirer.

• Broadens “acquisition” to include asset transfers from partnerships and businesses.

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FDII Repealed

• Repeals Foreign-Derived Intangible Income (FDII).

• Introduces 10% business credit for onshoring activities.

• Denies deductions for offshoring-related expenses.

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Individual, Estate, and Gift Tax Proposals

Top Marginal Rate

• Raised from 37% to 39.6%

  • Applies to incomes over:

    • $509,300 (married filing jointly)

    • $452,700 (single)

    • $254,650 (married filing separately)

Capital Gains

• Ordinary income rates on long-term gains for AGI over $1M.

• Retroactive to April 28, 2021.

• Top effective rate: 43.4% (39.6% + 3.8% NIIT)

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Realization on Transfers

• Transfers of appreciated property (e.g., gifts, death, trust transfers) trigger deemed sale.

• $1M exclusion per person, portable to surviving spouse.

• Family-owned businesses may defer tax until sale.

• 15-year payment plan available for certain non-publicly traded assets.

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Carried Interest

• Treated as ordinary income if taxpayer’s total income > $400,000.

• Self-employment taxes apply.

• Effective for tax years after December 31, 2021.

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Like-Kind Exchanges

• Tax deferral capped at $500,000 per taxpayer (or $1M per couple).

• Excess gain is taxable.

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Excess Business Losses

• Current limitation made permanent.

• Applies after December 31, 2026.

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Insights and Legislative Outlook

• Estate planning strategies (e.g., GRATs, defective grantor trusts) may trigger gain under new rules.

• The Green Book does not include:

  • Repeal of SALT cap

  • QBI deduction changes

  • Estate tax exemption rollback

These omissions don’t mean they’re off the table—they may re-emerge in negotiations.

Legislative Path:

• With slim Democratic majorities, all Senate votes matter.

• Budget reconciliation is likely needed to bypass the filibuster.

• However, moderate Senate Democrats may resist using reconciliation again in 2021.

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Conclusion:
The proposals in the Green Book could dramatically reshape the U.S. tax system. Multinational companies and high-net-worth individuals should begin modeling now and consult their tax advisors to plan for the potential impact.

Let me know if you want this version turned into a newsletter, formatted into a downloadable PDF, or summarized for executive briefings.

On April 19, 2021, Florida Governor Ron DeSantis signed S.B. 50 into law, officially making Florida one of the last states to adopt economic nexus and marketplace facilitator rules following the U.S. Supreme Court’s South Dakota v. Wayfair decision.

Under Wayfair, states can require remote sellers to collect and remit sales tax if their sales exceed a specific economic threshold—regardless of physical presence. Florida’s law aligns with this standard by setting a $100,000 sales threshold, but does not include a transaction count threshold like some other states.

Effective Date: July 1, 2021
Relief Deadline: October 1, 2021 (for remote sellers to register and receive relief from prior liability)

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Economic Nexus Threshold

Beginning July 1, 2021, remote sellers and marketplace facilitators with over $100,000 in taxable Florida sales in the prior calendar year are considered dealers, and must:

• Register with the Florida Department of Revenue

• Collect and remit Florida sales tax

• File returns for applicable periods

Definition of Remote Sales:
Retail sales of tangible personal property ordered from outside Florida (via internet, phone, or mail) and delivered into the state.

Note: Marketplace sellers only count direct (non-marketplace) sales when calculating the $100,000 threshold.

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Marketplace Facilitator Provisions

A marketplace provider is required to collect and remit tax on behalf of marketplace sellers for sales made through the platform. The law excludes certain service providers, including:

• Travel agencies

• Specific delivery network companies

• Payment processors whose only function is processing payments

Key Rules:

• Marketplace sellers do not collect sales tax on transactions when the provider certifies it will.

• Marketplace sellers must register and collect tax on direct (non-marketplace) sales.

• Starting April 1, 2022, large sellers ($1B+ U.S. sales) may contract with platforms to collect tax directly, if they’re registered.

Additional Fees (effective April 1, 2022):

Marketplace providers must also collect fees such as:

• Prepaid Wireless E911 Fee

• Waste Tire Fee

• Lead-Acid Battery Fee

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Audit and Liability Provisions

• The Department of Revenue (DOR) audits marketplace providers, not sellers.

• Providers can be relieved of liability if failures were due to incorrect seller data (not applicable for related parties).

• The DOR cannot double-assess sales tax to both the provider and seller for the same transaction.

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Relief for Prior Sales

Florida offers relief for tax, penalty, and interest on remote sales made before July 1, 2021 if:

• The business registers by October 1, 2021

• The seller was not under audit or formal collection action as of July 1, 2021

This relief also applies to:

• Marketplace sellers for pre-July 1 sales through facilitators

• Marketplace providers with physical presence, but only for sales made on behalf of others

Important: Data obtained during registration cannot be used to identify prior use tax liabilities for otherwise non-filing purchasers.

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County Surtax

Remote sellers and marketplace providers must collect county surtax based on the delivery location of taxable items.

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Insights

• The law aims to replenish Florida’s unemployment compensation trust fund and, once restored, reduce the business rental tax rate from 5.5% to 2%.

• The Florida Department of Revenue is authorized to adopt emergency rules to implement the law.

• Businesses should evaluate prior nexus exposure before registering and consider whether a Voluntary Disclosure Agreement (VDA) is appropriate.

The Biden Administration’s American Families Plan and other tax proposals may significantly reshape the tax landscape for high-income earners, particularly those making over $400,000 annually.

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Key Tax Proposals from the American Families Plan

• Increase the top marginal income tax rate to 39.6% for households earning over $400,000

• Tax long-term capital gains at 39.6% for households earning over $1 million

• Eliminate step-up in basis for gains above $1 million at death (unless donated to charity)

• Tax carried interest as ordinary income

• Permanently extend excess business loss limitation rules

• Apply the 3.8% net investment income tax uniformly to those earning over $400,000

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IRS Enforcement Expansion

To reinforce compliance, President Biden also proposes $80 billion in funding for IRS audits, targeting high-income taxpayers and those suspected of tax avoidance. This effort would be paired with expanded IRS enforcement authority.

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Additional Campaign Proposals Still on the Table

Although not part of the American Families Plan, these proposals remain under consideration:

• Phase out the 20% QBI deduction

• Limit itemized deductions to a 28% benefit and reinstate the Pease limitation

• Reduce the estate tax exemption from $11.7 million to $3.5 million and raise the estate/gift tax rate to 45%

• Impose the 12.4% Social Security tax on wages over $400,000

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What Should Taxpayers Do Now?

1. Review Your Current Tax Profile

High-net-worth individuals, business owners, and family offices should assess:

• Current income and deductions

• Estate structure and multi-generational planning needs

• Business interests and succession goals

2. Plan with Flexibility

Due to the uncertainty around the final scope or timing of new legislation:

• Use “what-if” modeling and scenario planning

• Consider the impact of retroactive provisions (e.g., capital gains tax changes effective April 28, 2021)

3. Capital Gains Strategy

• Accelerate gains before rate increases

• Coordinate capital gains with other income to avoid higher thresholds

• Use or opt out of installment sales based on timing

• Consider deferral tools: like-kind exchanges, opportunity zones, and ESOP rollovers

4. Revisit Your Estate Plan

• Consider gifting now before exemption limits change

• Explore trust strategies for multi-generational planning

• Prepare to act quickly if legislative changes gain momentum

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How We Can Help

We offer full-service planning for wealthy individuals and families, including:

• Tax consulting and compliance for estate, income, gift, and trusts

• Charitable giving and foundation strategies

• Executive compensation and retirement planning

• Cross-border tax analysis and compliance

• IRS audit support and representation

Our experienced professionals can help you:

• Monitor and interpret legislative developments

• Model tax scenarios

• Implement preemptive strategies to minimize liabilities

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Let us guide you through the complexities of today’s tax environment—with clarity, foresight, and customized planning tailored to your financial goals.
Contact us to schedule a confidential consultation.