As part of the administration’s FY 2015 Budget Request to Congress, the Department of the Treasury released the General Explanations of the administration’s FY 2015 Revenue Proposals, or “Greenbook.” President Obama’s budget maintains a focus on taxing the high-income earners, multinational companies, as well as the oil and gas industry. The budget would alter a number of tax provisions pertinent to the construction industry, including:
Business tax reform
The budget proposes a tax reform plan that would reduce the corporate tax rate to 28 percent (with a rate of no more than 25 percent for manufacturing), and extends and modifies certain employment tax credits, including:
- Incentives for hiring veterans - permanently extends the work opportunity tax credit (WOTC)
- The deduction for energy-efficient commercial building property (Section 179D)
- Renewable electricity production tax credits for electricity produced from qualified energy facilities (e.g. wind turbines, biomass)
- Increased expensing for small businesses – and permanently extends the 2013 Section 179 expensing and investment limitations (deduction limit of $500,000 and the $2 million level for beginning the phase-out would be indexed for inflation).
- Implements the Buffett Rule by imposing a new “Fair Share Tax” – 30 percent of AGI starting at $1 million (repeals Alternative Minimum Tax in process)
- Reduces the value of certain tax expenditures – 28 percent cap on exclusions and deductions for high-income earners (e.g. employee contributions to defined contribution retirement plans; income attributable to domestic production activities)
- Provides America Fast Forward Bonds and expands eligible uses – creates a new program that would be an optional alternative to traditional tax-exempt bonds & includes financing all qualified private activity bond categories
- Creates a National Infrastructure Bank – calls for the creation of an independent Government entity to invest through loans and loan guarantees in a broad range of infrastructure, including transportation, energy, and water projects
- Caps the value of the tax exemption for municipal bond interest at 28 percent
- Allows current refundings of state and local governmental bonds
- Eliminates the volume cap for private activity bonds for water infrastructure
- Repeals the government ownership requirement for certain types of exempt facility bonds
- Permanently extends and modifies the New Markets Tax Credit (NMTC)
- Tax carried (profits) interests as ordinary income – would apply ordinary income tax treatment to investment services partnership interest from an investment partnership, regardless of the characterization of income at the partnership level
- Conforms self-employment contributions act (SECA) taxes for professional service businesses (i.e. increase payroll taxes on S-corporations aka “John Edwards Loophole”)
- Restores the estate tax parameters in effect for 2009 (i.e. top tax rate 45 percent and exclusion amount of $3.5 million with no indexing for inflation)
- Modifies like-kind exchange rules for real property - limits deferrable amount to $1 million indexed for inflation
- Reforms financing for the Inland Waterways Trust Fund– Secretary of the Army would set the amount of the user fee each year to collect a total of $1.1 billion from the user fee over the first 10 years. The proposal would expand the list of waterways subject to the inland waterways excise tax.