By Cooper Melvin, JD

As discussed elsewhere in this Beyond the Bottom Line, the Infrastructure Investment and Jobs Act became law on Monday, November 15th. The other key component of the Biden Administration’s legislative agenda, the Build Back Better Act (the “Act”), however, still awaits Congressional action. The Act contains more of the significant tax and revenue-raising provisions that were part of the Administration’s original legislative proposals before those proposals were split into the two Acts mentioned. Many of these changes have been discussed in previous newsletters, but this edition addresses the most up-to-date provisions that Congress is expected to vote on before the end of the year.

The Act includes new social spending programs, like universal preschool, as well as expanded programs related to housing and health care. The Act also includes green energy incentives and extensions of tax credits designed to assist lower and middle-income taxpayers. As negotiations on the Act progressed over the last several months, the financial size of the programs was reduced to its current $1.75 trillion price tag. The price tag fell as possible funding options, such as increases in income taxes for some higher-income individuals and corporations, were taken out of consideration.

The Congressional Budget Office (CBO) anticipates publishing a complete cost estimate for the Act by the end of the day on Friday, November 19. The estimate will be published on CBO’s website. Several House and Senate Democrat moderates have said they want more information about the Act’s cost prior to voting.

As we stand currently, the tax and revenue-raising provisions include the following:

Income Tax Surcharge

In an effort to increase tax on the ultra-wealthy without increasing the top tax bracket, the Act proposes a five percent tax on modified adjusted gross income in excess of $10 million, regardless of filing status except that the threshold is lowered to $5 million for MFS filers. The Act also proposes an additional three percent tax on the modified adjusted gross income of more than $25 million ($12.5 million for MFS filers).

SALT Cap Increase

A component of the Act that is still very much in flux is an increase in the SALT cap. The SALT cap has divided Democrats in both chambers: the Act as currently drafted would temporarily raise the cap to $80,000 for all taxpayers, with a 2030 sunset. Senator Bernie Sanders said he is working on a proposal to set an income threshold for an unlimited state and local tax deduction while letting high earners continue to deduct $10,000 from their federal taxes as they can under current law. If the Act passes, taxpayers can expect some kind of increase from the current $10,000 cap, with final amounts and limitations to be determined.

Net Investment Income Tax

The Act proposes expanding the Net Investment Income Tax to cover S corporation shareholders, limited partners, and LLC members that materially participate in the business. However, this surtax only applies to joint filers with income over $500,000, head of household and single filers with income over $400,000, and $250,000 for MFS filers.

Corporate Tax Provisions

There are several proposed changes to corporate taxes:

  • With endorsement by all members of G20, the Act proposes a 15 percent global minimum tax rate on corporations. This is projected to increase revenue by $60 billion.
  • The Act proposes a one percent excise tax on stock repurchases after 2021.
  • The Act proposes a limit on net interest expense on specified domestic corporations.

Excess Business Losses

The Act proposes that excess business losses be permanently disallowed. The prohibition was currently set to expire in 2026.


Under current law, a domestic corporation can take a deduction on 37.5 percent of its foreign-derived intangible income and a 50 percent deduction for its global intangible low-taxed income. The Act reduces these deductions to 21.875 percent and 37.5 percent, respectively. However, the deductions are no longer limited to the corporation’s taxable income when calculating NOLs. Furthermore, the Act requires the inclusion of GILTI in the income of certain controlled foreign corporations.

Individual Tax Credits

The following items are the key proposed changes to individual tax credits:

  • The child tax credit remains fully refundable, and taxpayers can continue to receive advance payments in 2022.
  • The age limit is increased for the child tax credit and the credit is raised to $3,000 ($3,600 for children under six).
  • The child tax credit will remain refundable after 2022, but the advance payments are proposed to end after the 2022 tax year.
  • The health-covered tax credit becomes permanent and would be increased from 72.5 percent of qualified health insurance premiums to 80 percent.
  • The earned income tax credit is extended in scope under the Act; specifically, the Act extends the credit for childless taxpayers to 2022.

Energy Credits

Arguably the most important topic for Democrats is green energy. Nearly half a trillion dollars of the budget for the Act are dedicated to green energy including $320 million for tax credits alone. Many of the existing energy credits are extended through the early 2030s. Additionally, the Act creates several new energy-efficient credits that taxpayers can claim at the business entity and individual levels.

While the legislation is nearing a vote and these provisions are likely to remain close to what will be in the final bill, the Act is subject to change as has happened several times already. We will continue to monitor the legislation. As always if you have any questions or want to know more about the effect this could have on you or your business, please give your BMSS professional a call at (833) CPA-BMSS.

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