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Archive for Build Back Better Plan

The Build Back Better Act – Tax Implications For Cryptocurrencies

The Build Back Better Act – Tax Implications For Cryptocurrencies

Free Attendee Ticket – Freeman Law International Tax Symposium

On November 3, 2021, the U.S. House Budget Committee introduced the latest version of the Build Back Better legislation (the “BBB Legislation” or “BBB Act”), which makes historical investments in education, climate change, and the economy. Although much has been written on the surcharge for certain high-net-worth individuals and a global minimum tax on corporations, other proposed changes in the legislation to the tax code stand to create ripple effects throughout the crypto ecosystem. We discuss the direct and indirect tax impact of the BBB Legislation for crypto investors, miners/validators, and other players further below.

Direct Tax Impact on Cryptocurrency – Wash Sale and Constructive Sales

The BBB legislation takes further steps to treat cryptocurrencies like traditional securities by subjecting all digital assets to the (A) wash sale rules under Section 1091 and (B) constructive sale rules under Section 1295 of the Code. The new wash sale rules would be effective after December 31, 2021, and the amended constructive sale rules would apply as of the date of enactment.

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House Ways And Means Markup Of Build Back Better

Let's Avoid Unnecessary Costs And Complexities

Let’s Avoid Unnecessary Costs And Complexities

The House Ways and Means markup of the Build Back Better Act (H.R. 5376) has over 120 tax changes included. This includes a lot of energy credits. Subtitle G on Green Energy is laid out in 257 or the 2466 pages of legislative text. The cost estimate over ten years from the Joint Committee on Taxation is $235 billion. In comparison, the social safety net provisions in Subtitle H cost almost four times as much, but will likely provide benefits to those more than in need than for the energy credits.

For example, there is a new refundable credit proposed at new IRC §36E for the purchase of an electric bicycle costing up to $5,000 (for a $750 credit) but the bike can’t cost more than $8,000. My Google search indicates that these bikes cost under $2,000. While there likely are ones costing more, if the buyer needs the $750 credit to buy it, why not skip the credit and the complexity it will add to our tax law and the buyer can instead buy one that costs $750 less.

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# Let’s Fix This: Build Back Better Plan And Observations On Small Business Provisions

# Let's Fix This: Build Back Better Plan And Observations On Small Business Provisions
Tax items in President Biden’s Build Back Better plan were modified a bit by the markup that passed in the House Ways and Means Committee on 9/15/21 (24-19 with one Democrat voting no). I just want to comment now on a few relevant to “small business” including a reminder of the need to apply critical thinking to understand changes and commentary on them including from elected officials.
1. Corporate Rate Change: President Biden proposed to increase the TCJA rate of a flat 21% to 28%. The Ways and Means markup doesn’t go that high and brings back a graduated rate structure which includes a rate cut for corporations with taxable income of $400,000 or less. The markup rate structure is:
$1 to $400,000             18%
$401,000 to $5 million   21%
$5,000,001 and above   26.5%
$10,000,001 and above a surtax applies at 3% to phaseout the benefit of the graduated rates. At almost $20 million or more of taxable income, the corporation has a flat rate of 26.5%.

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