April 11, 2024 | TaxConnections

11 Apr 2024

Where Do U.S. Presidential Candidates Stand On Taxes?

Where Do Presidential Candidates Stand On Taxes?

The research on Presidential candidates and where they stand is a must read provided by the Tax Foundation. TaxConnections highly recommends you take the time to read the research provided by this non profit comprised of researchers and the best of the tax profession. According to the Tax Foundation, Tax policy has become a significant focus of the U.S. 2024 presidential election. The Tax Foundation has created this tool to keep track of the tax policies proposed by presidential candidates during their campaigns. It is smart to pay attention to the Tax Foundation site.

Joe Biden, under his proposed budget for fiscal year 2024, would increase tax rates on corporate, individual, and capital gains income; expand tax credits for workers and families; and expand tax bases to include more types of income.

Business Taxes:

Increase the corporate income tax rate to 28 percent. Read more
Increase the global intangible low-taxed income (GILTI) tax rate from 10.5 percent to 21 percent and repeal the reduced tax rate on foreign-derived intangible income (FDII). Read more
Repeal the base erosion and anti-abuse tax (BEAT) and replace it with an undertaxed profits rule (UTPR) consistent with the OECD/G20 global minimum tax model rules. Read more
Expand the net investment income tax to non-passive business income. Read more
Raise taxes on the fossil fuel industry. Read more

Capital Gains and Dividend Taxes:

Tax long-term capital gains and qualified dividends at ordinary income tax rates for taxable income above $1 million and tax unrealized capital gains at death above a $5 million exemption ($10 million for joint filers). Read more
Tax carried interest as ordinary income. Read more
Impose a minimum effective tax rate of 20 percent on an expanded measure of income including unrealized capital gains for households with net wealth above $100 million. Read more

Credits, Deductions, and Exemptions:

Make the Child Tax Credit fully refundable on a permanent basis. Read more
Increase the Child Tax Credit to $3,600 for young children and $3,000 for older children, make it fully refundable, and make other changes, on a temporary basis. Read more
Increase the Earned Income Tax Credit for workers without qualifying children on a permanent basis. Read more
Expand premium tax credits on a permanent basis. Read more

Written by TaxConnections Admin | Posted in TaxConnections

11 Apr 2024

Offsetting Section 174 R&E Software Development Tax Liability With R&D Tax Credits

Section 174 Changes Impact R&D Tax Credits for Software

The new changes to Section 174 have a significant impact on software development costs. For tax year 2022, any cost that has been paid or incurred related to software development is now considered a Section 174 R&E expenditure. This means it must be capitalized and amortized over 5 years (15 years for foreign software development).

Many favorable provisions are made temporary due to the budgeting constraints of Congress, making yearly extensions normal and expected. It is important to note that the research expenses being addressed by this provision in the TCJA are not just the same as those provided for in the R&D tax credit rules. These general research costs are much broader.

If the current unfavorable tax treatment of research expenses does not get fixed, companies could see larger tax bills and therefore need the benefits of R&D tax credits even more.

Which Software Development Costs fall under the new Section 174 R&E Amortization rules?

While guidance related to what costs constitute Section 174 Expenditures is still vague, potential expenditures can include:

Written by Deborah Roth | Posted in R&D Tax Credits • Section 174

11 Apr 2024

Citizens Against Government Waste: The Prime Cut Series (#4)

Eliminate Federal Subsidies for Amtrak
1-Year Savings: $2.5 billion
5-Year Savings: $12.3 billion

Since Amtrak was created in 1971, it has cost taxpayers more than $40 billion. The railroad was supposed to earn a profit but has continuously failed to do so. In some cases, it is less expensive to use other forms of transportation. A 2009 study found that taxpayers paid $32 in subsidies per Amtrak passenger. By booking a month or more in advance, it is possible to buy a round-trip plane ticket from New Orleans to Los Angeles for less than the $437.82 that Amtrak loses per passenger on a one-way trip between those same locations.

A January 2018 Ernst and Young audit found that “the Company has a history of operating losses and is dependent upon substantial Federal Government subsidies to sustain its operations and maintain its underlying infrastructure.” An August 2012 New York Times article reported that Amtrak had lost $834 million on food service alone since 2002, largely due to employee theft.

Unfortunately, the waste and abuse does not end with food sales. The Amtrak Office of Inspector General (IG) has issued several reports detailing inadequate supervision, including a September 2012 report that investigated two employees who received fraudulent pay for hours they never worked. One employee was paid $5,600 in regular and overtime pay “when he was actually off Amtrak property officiating at high school sporting events.” Another employee was observed for 84 days, and it was discovered that “$16,500 of the $27,000, or 61 percent of the overtime wages he was paid
were fraudulent.” The IG concluded that, since it is likely that this employee had a history of fraudulent overtime pay, the amount of fraudulent pay “would be approximately $143,300 of the $234,928 that he was paid.”

Amtrak has also failed to control costs on key expansion projects. The overhaul of Union Station in Washington, D.C., “faces significant risks of coming in over budget and behind schedule,” according to an August 1, 2018 IG report. Projects in Virginia were cited for poor staff communications and project delays.

Written by TaxConnections Admin | Posted in THE PIG BOOK