Archive for the ‘Business Taxation’ Category

Carried Interest Taxation

Thursday, May 27th, 2010

It comes as no surprise that provisions changing the tax characteristics of carried interests from long term capital gain to ordinary income will probably be passed, but Ways and Means Chair Sander Levin reinforced the possibility yesterday by noting that carried interests will probably be used as an offset in the extenders bill we expect to be deliberated in the next two weeks. Levin also noted that he expects the carried interest provisions to be expanded to include interests in all industries (most notably gas/oil and real estate) and not just financial management firms.  Timing about the introduction of the new extenders bill is still sketchy, and as the articles appended below show there is still some uncertainty about when the bill will be introduced. But we should probably expect it to be deliberated by the Memorial Day recess. The excerpt below details Levin’s expectations of this legislation.

Levin Expects Phased-In Carried Interest Change to Be Key Offset for Extenders

House Ways and Means Committee Chairman Sander Levin (D-Mich.) said May 11 that he expects a phased-in change to the tax treatment of carried interest to be a main offset for the tax extenders legislation moving toward the House floor.

Levin said the exact details of the carried interest provision are still being worked out, but the legislation (H.R. 4213) would not include any carve-outs to exempt particular industries and would ultimately match the tax rate paid on carried interest income to ordinary income tax rates.

The bill, which was renamed the Promoting American Jobs and Closing Tax Loopholes Act, will have a total of roughly $50 billion in fully offset tax provisions. It is expected to go to the House floor during the week of May 17, Levin said. He added that there will not be any full committee hearing or markup of the legislation because most of the provisions have already been vetted by the committee in prior bills.

The legislation will include a slightly scaled back version of the Build America Bonds provision originally in the small business tax bill (H.R. 4849). Levin said he and Senate Finance Committee Chairman Max Baucus (D-Mont.) opted to tailor bonds provision back because of its cost.

Levin also said lawmakers are still discussing whether to include a provision from the small business tax bill that would raise $7.7 billion by stopping companies from using subsidiaries to channel deductible payments through U.S. tax treaty countries before earnings are repatriated to a tax haven. Information provided by BNA.com – posted May 11, 2010

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Privately-held Businesses Tax Relief Provisions in the 2009 Stimulus Act for Businesses

Wednesday, June 10th, 2009

The recently enacted “American Recovery and Reinvestment Act of 2009” (the 2009 Economic Stimulus Act) contains a wide-ranging tax package that includes tax relief for businesses. However, there are certain calculations and deadlines that need to be met to take full advantage of the provisions.

  • The Stimulus Act temporarily extends the higher Section 179 expense amounts available in 2008 for an additional year. Under this provision, business owners can elect to immediately expense up to $250,000 of qualified equipment purchased during the 2009 tax year, rather than depreciate it over time. This benefit will continue to phase-out on a dollar-for-dollar basis once qualified equipment purchases exceed $800,000.
  • The Stimulus Act also extends availability of the 50% bonus depreciation provision for capital expenditures incurred in 2009 (2010 for aircraft and long-production-period property). This provision allows business owners to take 50% bonus depreciation in the year that the property is placed in service. In addition, the Stimulus Act extends the placed-in-service deadline for the $8,000 increase in first-year depreciation provision on qualified vehicles placed in service by December 31, 2009.
  • The current difficult economic situation has likely caused many businesses to incur a net operating loss (NOL) in 2008. Before the Stimulus Act, NOLs could generally be carried back only two years and, if there was a tax liability in those two years, taxes paid could be refunded to the taxpayer. For 2008 NOLs, the Stimulus Act extends the two-year carry-back to three, four, or five years increasing the likelihood, availability, and amount of the refund to enhance the business’s cash flow.
  • Other business provisions of the Stimulus Act include an increased exclusion amount for a gain from the sale of small business stock, easing of the built-in-gains rules, delayed recognition of certain cancellation of debt income, and incentives to hire unemployed veterans and disconnected youth.

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