BG Tax Alert -- Biden’s Tax Framework: What’s In, What’s Out


On October 28, 2021, President Biden announced an outline and fact sheet for the “Build Back Better Framework” (Framework). The Framework: (1) increases federal spending on (a) universal preschool by offering free preschool to all children aged 3 and 4, and (b) childcare for low-income families; and (2) it expands affordable healthcare and clean energy investments. But the Framework also includes several other tax proposals, some of which are intended to fund the ambitious “investments” the Framework envisions, while others are better understood as an indirect means of promoting other social welfare and infrastructure improvement goals. The proposals include:

  • Expanding the Child Tax Credit so that it will not only continue to provide monthly payments for those earning less than $150,000 (as initiated under the American Rescue Plan), but also become permanently refundable (thereby ensuring that the neediest families will continue to receive the full Child Tax Credit over the long-term)

  • Providing $320 billion in clean energy tax credits over a ten-year period

  • Expanding the reach of premium tax credits under the Affordable Care Act (ACA) through 2025

  • Providing a one-year extension of the Earned Income Tax Credit for childless workers

  • Imposing a 15% minimum tax on large corporations and a 1% surcharge on corporate stock buybacks

  • Imposing a global minimum tax (consistent with OECD models) and modifying the base erosion and anti-abuse tax (BEAT) for multinational corporations

  • Imposing a surtax on ultra-high-net-worth individuals (Millionaires Surtax), broadening the net investment income tax for those earning more than $400,000 a year, and continuing the limitation on excess business losses

  • Repealing the Trump administration’s rebate rule, which was projected to increase drug premiums for senior citizens

  • Investing $400 billion in audit and collection efforts at the Internal Revenue Service (IRS)

The tax increases are expected to raise nearly $2 trillion in funds, which would completely cover all expenses envisioned by the Framework without causing anyone making under $400,000 a year to “pay a penny more in taxes.”[1] According to the Build Back Better Fact Sheet, the 15% minimum tax on large corporations will only apply to corporations with “over $1 billion in profits.” Stock buybacks have been receiving increased scrutiny in recent years, as they contribute to perceived market growth without actually increasing the overall value of a given company.

Indeed, many of America’s largest corporations—Bank of America, American Express, Morgan Stanley, and Facebook—all reported billions in stock buybacks throughout 2021.[2] One of the most contested proposals is the Millionaires Surtax, which imposes: (1) a 5% tax on incomes over $10 million a year; and (2) an additional 3% tax on incomes over $25 million (resulting in a total surtax of 8%). When combined with the expansion of the 3.8% net investment income tax ushered in under the ACA, this would result in a new highest marginal income tax rate of roughly 49%: the highest federal marginal income tax rate seen in America since 1986! [3]

Another piece of the Framework involves removing the limitations, or loopholes, on income subject to the ACA’s 3.8% Medicare surtax (net investment income tax). [4] Under the Bill from the House Ways and Means Committee (House Bill), the net investment income tax would now apply to S-corporation shareholders, LLC members, and limited partners, who typically do not pay FICA or SEC taxes on distributive share or partnership income. These income streams would now become subject to the 3.8% net investment income tax.[5]

As mentioned above, the Framework also pledges an additional $400 billion in resources to “shore up” the IRS and make long-needed improvements to technological and human capital. The President’s intent is for these funds to be devoted to renewed audit efforts targeting taxpayers making over $400,000.

But the Framework is equally notable with respect to what it omits; namely, tax proposals from October and September of this year that have suddenly been cast aside. Some of those are summarized below.

  • Billionaires Income Tax. A tax that was championed by Senate Finance Committee Chairman Ron Wyden was excluded from the Framework. If added to a Congressional bill, individuals with more than $100 million in annual income, or more than $1 billion in assets for three consecutive years, would be subject to this additional tax. On assets such as stock, billionaires would be taxed as though they’d sold the asset each year, paying income tax on any “paper gains” (or taking a deduction for any “paper losses”). For less marketable assets, like real estate, when a taxpayer sold those assets, they would have paid traditional taxes as well as a new “deferral recapture amount,” which would have been equal to a hypothetical sale in each year the realty was sold multiplied by the short-term applicable federal rate plus one percentage point. [6]

  • Estate & Gift Tax. Biden’s proposal did not include a single change of note to estate planners, who breathed a sigh of relief after nearly a month of panicked conference calls. However, one proposed change in the package released by the House Ways and Means Committee last September included halving the federal unified credit back to the pre-Trump era amount (or roughly $5.85 million per individual, after annual inflation adjustments). More controversial still were proposals that would’ve effectively eliminated grantor trusts and had far sweeping implications on the continued viability of insurance trusts, qualified personal resident trusts, grantor retained annuity trusts, and many other planning tools that have been in the estate planners’ toolkit for decades.

  • S-Corporations. There was a time when many tax attorneys thought this quirky entity had gone to the graveyard, but the 2017 Tax Cuts and Jobs Act (TJCA) breathed new life into this previously unpopular entity type in ways that have since been championed by accountants and attorneys alike. One of the proposals from the House Bill would allow S-corporations to convert to a partnership, tax-free.

  • Charitable Conservation Easements. The IRS and Department of Justice recently cracked down on allegedly abusive syndicated conservation easements and Congress supports them. Earlier proposals would have disallowed conservation contributions if in excess of two-and-a-half times that partner’s basis in the entity. However, the rule wouldn’t have applied to realty held by the partnership for more than three years.

  • Crypto—Is it a wash? Currently tax law prevents individuals from claiming a loss on the sale of stock if they subsequently re-acquired substantially identical stock within a 60-day window (known as the wash sale rule). The wash sale rule didn’t apply to cryptocurrencies, but earlier proposals tried to change that. For example, if you bought Bitcoin on March 1st, then sold it for a loss on March 15th, and then repurchased Bitcoin on March 16th while the price was still lower than the March 1st price, then you would’ve been disallowed from deducting that March 15th loss if this proposal was included in the Package. [7]

  • S-A-L-T (State and Local Tax). Democrats have been beating the SALT drum since key deductions were reduced under the TCJA. More specifically, the TCJA limited the SALT deduction to $10,000. Representatives from New York, New Jersey, and California have been pushing for an “extremely high” cap on the deduction and ensuring that it lasts thru 2025, but the Package didn’t address this despite its presence in some earlier proposals.

  • Potpourri. Finally, the Framework doesn’t include several other notable features of prior proposals, such as: (1) increases to capital gains taxes; (2) reversion of the corporate income tax to pre-TCJA rates; (3) elimination of the income tax basis step-up upon death; or (4) anything approaching an attempt to close the long-targeted carried interest rules (applicable to private equity transactions).

This leaves tax professionals and taxpayers in a state of tax and estate planning paralysis as all eyes look to Capitol Hill for further developments. While the tax world sits back and watches with popcorn in hand, if you have any questions about how this new potential Framework may impact you, please remember that the Tax Team at Bailey Glasser stands ready to assist.

[1] Build Back Better Framework | The White House

[2] Stock buybacks surge to likely record highs, but a tax from Congress poses a threat (

[3] But still nothing compared to the top marginal rate of 91% that was last seen in 1963!

[4] Here's what's in Biden's $3.5 trillion plan to tax the rich - CBS News

[5] See page 279 or 501 CRPT-117hrpt130_portion_3.pdf (


[7] Wash sale rules could apply to Bitcoin and Ethereum in spending bill (

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