President proposes increased stock repurchase excise tax; calls for billionaire minimum tax: PwC

President Biden proposes increased stock repurchase excise tax; renews call for billionaire minimum tax, other proposals

February 2023

In brief

In a February 7 State of the Union address to a joint session of Congress, President Biden called on Congress to support his economic policy agenda that includes reforming the tax code to “reward work and not just wealth.” The President also called for “responsible” action by Congress to increase the federal statutory debt limit, while stating that he is ready to work with Republicans and Democrats in separate efforts to reduce federal budget deficits.

The President said that he is proposing to increase from 1% to 4% the excise tax on corporate stock repurchases that was enacted in 2022 as part of the Inflation Reduction Act (IRA). He also called on Congress to enact a “billionaire” minimum tax and other corporate and individual tax proposals. The President’s tax proposals will be submitted to Congress as part of his FY 2024 budget. The President’s budget and a Treasury Department “Green Book” general explanation of revenue proposals will be released on March 9, according to White House officials.

Action item: Stakeholders should communicate with policy makers on the potential effects of President Biden’s tax proposals and other Administration economic policy proposals on their employees, job creation, and investments in the United States.

In detail

In his State of the Union address, President Biden cited the IRA’s 15% corporate alternative minimum tax and other tax provisions enacted during his first two years in office with the support of a Democratic-controlled House and Senate as helping to “make the wealthy and large corporations pay their fair share.” He highlighted the IRA’s numerous new energy tax credits and incentives that are intended to address climate change, as well as the legislation’s $80 billion in increased funding for the IRS.

Observation: Republican control of the House of Representatives is expected to block action on President Biden’s tax increase proposals. President Biden and Congressional Democrats no longer will be able to use privileged ‘budget reconciliation’ procedures to enact with only Democratic votes tax bills, like the IRA, that were universally opposed by Congressional Republicans. However, President Biden’s FY 2024 budget still is expected to include certain tax increase proposals that did not attract sufficient support from House and Senate Democrats to be enacted last year.

While President Biden renewed his call for a billionaire minimum tax, the proposal that was included in his FY 2023 budget called for a 20% minimum tax that would apply on total income -- including unrealized capital gains income -- for all taxpayers with net wealth greater than $100 million. Other tax proposals featured in the President’s budget last year that may be re-proposed in March include a 28% corporate income tax rate and an “undertaxed profits rule” that would replace the current base erosion anti-abuse tax (BEAT). Last year's budget also assumed enactment of certain provisions in the House-passed “Build Back Better Act,” such as a per-country global intangible low-taxed income (GILTI) regime; the GILTI tax rate also would increase with the proposed 28% corporate rate.

Observation: Republican control of the House and Democratic control of the Senate means that any tax legislation will require bipartisan support to clear both chambers of Congress. While debates over the federal debt limit and government funding are expected to be a primary focus of Congress for most of this year, opportunities may arise to address some tax proposals that have had ongoing bipartisan support, such as legislation that would reinstate the current deductibility of Section 174 research expenditures.

In a January 19 letter, Treasury Secretary Janet Yellen informed House and Senate leaders that the United States had reached the current $31.4 trillion debt limit on that date. The Secretary’s letter stated that the period of time that “extraordinary measures” to prevent the United States from defaulting on its obligations may last is subject to considerable uncertainty due to a variety of factors (e.g., the difficulty of forecasting federal payments and receipts). An earlier January 13 Treasury letter stated that “it is unlikely that extraordinary measures will be exhausted before early June.”

Treasury and the IRS are working to issue guidance on recently enacted legislation, including guidance on the corporate stock repurchase excise tax, the corporate alternative minimum tax, and other IRA tax provisions.