The Office of Management and Budget released the President’s Budget for Fiscal Year 2016 on Monday. The proposal is very detailed in its suggestions for changes to the tax code for individuals, businesses, international taxation, and gift/estate taxation. Below is a specific list of notable items:
Implement the Fair Share Tax
The Warren Buffet Rule that seeks to tax high net worth households at a minimum of 30% is a bad idea based on bad policy. We already have the NIIT and additional Obamacare tax. What’s next? A minimum tax for middle class individuals or low income taxpayers? Let’s not even get started on the amount.
Extend the exclusion from income for cancellation of debt income for certain qualified personal residence indebtedness (QPRI)
This exclusion was started by George W. Bush before leaving office and has been extended many times. This was a great exclusion for its time, but based on the uptick in the economy it may be time to let this one go.
Extend and make permanent section 179 expensing for qualifying depreciable property
“..[l]et small businesses write off up to $1 million of investments in equipment up front, so that the vast majority of firms would not have to deal with depreciation rules.” This is a great policy for small businesses and will be a big win, if passed.
Implement new business expenditure expensing (up to $20,000)
This is the same as making permanent section 179 and will be a big win, if passed.
Subject pass through distributions subjected to SECA
This would apply to distributions from entities such as partnerships and S-Corps. In effect, these entities pay only FICA and would now be subject to SECA (treated like a Schedule C) or a variation of SECA. This policy would hurt a lot of small business owners.
Improving the whistleblower program
To have a solid opinion, we need to see the proposed improvements, and how they work, but it sounds good on paper.
Increasing regulation of tax preparers
The IRS has tried this in different formats for the last several years and lost each time.
Move up filing deadlines for certain information returns
The deadlines for informational returns are all over the place and inconsistent. How about starting with consistency and transparency for the deadlines and the taxpayers subject to informational reporting? People are just now starting to figure out that FBAR reports are due in June.
Change rules for Offers In Compromise
To have a solid opinion, we need to see what the proposed changes would be. If they remove some of the barriers to acceptance, such as dissipated assets while providing more flexibility for examiners, this would be a huge win for the IRS and the taxpaying public that has issues in this area. One area of suggested offset would be to tighten up the post acceptance period (5 year compliance period).
Make repeated failures to file a felony
Failure to file a tax return already has a criminal statute that is rarely enforced. If this passes, the IRS should consider a corresponding domestic voluntary disclosure program aimed at this problem.
Add civil penalties for identity theft
Agreed. Add criminal penalties as well. This is a huge problem that rarely gets attention yet causes a lot of havoc.
Explore the full budget here
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