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House Committee on Ways and Means Reconciliation Bill “Pay-Fors” Initial Draft

House Committee Reconcilation Bill at the US Capitol Building in Washington, D.C.

House Committee on Ways and Means and Chairman Richard Neal (D-MA) have released the initial draft of their portion of the reconciliation package that plans to fund $3.5 trillion in new spending. Many of the provisions will be effective in tax year 2022 (with some exceptions noted below). Here are some of the big-ticket items that will pay for the package:

Reconciliation Bill Funding Items

Corporate and Business Provisions

  • Starting 2022, Top Corporate tax rate will raise to 26.5% on income over 5,000,000 dollars. For income up to 400,000 dollars, tax will lower to an 18% rate; the current 21% rate will remain unchanged for income between 400,000 dollars and 5,000,000 dollars. [§138101]
  • Personal service corporation’s income will be subject to the 26.5% rate and will not be eligible for graduated rates. [§138101]
  • An additional 3% tax on corporate income will phase the benefits of the graduated corporate rate out above 10,000,000 dollars and up to a maximum additional tax of 287,000 dollars. (§138101)
  • Nonresident aliens are subject to 30% withholding tax for interest income received from a company where they own at least 10% of the interests. [§138145]
  • Effective September 13, 2021, limits taxpayers with an AGI greater than 400,000 dollars from qualifying for the 75% or 100% exclusions for gains on qualified small business stock under IRC §1202. [§138150]
  • Expansion of the constructive sale rules of IRC §1259 and the wash sale rules of IRC §1091 for digital assets and currencies such as cryptocurrencies [§138151, §138153]
  • Requires reporting of GILTI income and country-by-country operation of foreign tax credits. [§138124, §138126]
  • Effectively increases the rates on GILTI and FDII income through reduced exemptions and deductions. [§138121]
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