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The President’s Budget at a Glance

The Work Opportunity Tax Credit (WOTC) is included in President Obama’s proposed budget, released by the Office of Management and Budget and the US Treasury Department for fiscal year 2014 (beginning October 1, 2013). This budget would make WOTC permanent (page 14) and includes a number of other tax proposals.

While the tax proposals set forth in the budget are not final, many are noteworthy. The President’s budget for FY 2014 comes amidst a concerted effort by the President to reach out to Republican Leaders in Congress for a budget deal, and the early stages of consideration of tax reform on the Hill.

Sometime before the Congressional recess in August, the President and Congress will try to find common ground on spending and tax policy in order to reach agreement on borrowing limits by the Federal Government and on spending levels for the coming fiscal year. Although some of the President’s revenue proposals are unlikely to gain traction and Republicans remain wary of new stimulus proposals, there are some proposals that could generate support on both sides of the aisle in Congress–particularly as part of tax reform or a budget deal.

The President states in the budget that he intends to engage Congress in tax reform with the intent of lowering corporate rates while closing loopholes and encouraging investment in the U.S., without increasing the deficit. Some of the most prominent proposals are:

  • Make permanent the research credit, with improvements, as well as the work opportunity and Indian employment credits.
  • International reforms – Reflecting proposals made previously, the President hopes to:
    1. Defer the deduction of interest expense allocable to stock of foreign subsidiaries to the extent the taxpayer’s share of the foreign income is deferred.
    2. Determine the foreign tax credit on a pooling basis.
    3. Tax excess income attributable to the transfers of intangibles from a U.S. person to a related CFC.
    4. Deny the deduction for non-taxed reinsurance premiums paid to foreign affiliates.
    5. Provide tax benefits to U.S. companies that bring overseas facilities back to the U.S.
  • Require derivative contracts to be marked to market with the resulting gain or loss treated as ordinary income.
  • Repeal the LIFO method of accounting for inventories.
  • Deny the deduction for punitive damages.
  • Provide a new 10% tax credit for small employers that create new jobs or increase wages.
  • Provide new bonds for infrastructure development.
  • Extend for two years beyond 2013 the exclusion from gross income for mortgage forgiveness indebtedness.
  • Reduce the value of all itemized deductions and certain other tax preferences, including tax-exempt bond interest, the exclusion for employer-provided health insurance and retirement plan contributions, and some above the line deductions, to the 28% bracket.
  • Apply the so-called “Buffet rule” under which certain high-income taxpayers are subject to a minimum 30% tax rate.
  • Restore the 2009 estate and gift taxes rates (45% maximum tax rate, a $3.5 million exclusion for estate, and a $1 million lifetime exclusion for gift).
  • Impose a financial crisis fee on financial institutions to reimburse the U.S. for costs related to the financial support programs during the recession.
  • Tax carried interest as ordinary income.
  • Repeal tax preferences for oil and gas producers

Learn more about leveraging tax credits and incentives with help from ADP.


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