After an extended period of negotiations, the Senate Democratic leadership publicly released the text of the reconciliation bill (also know as the Build Back Better plan). Though some of the most notable tax policies have been dropped (
including a CEO Pay Ratio tax), the bill includes a number of corporate tax increases as well as income taxes on high earners, including:
- A 15% minimum tax on corporate profits by large corporations
- A 5% surtax rate on individual income above $10 million and an additional 3% on income above $25 million
- A 1% surcharge on corporate stock buybacks
The buybacks provision appears targeted at executive compensation, as the Biden administration has stated it believes “corporate executives too often use [buybacks] to enrich themselves rather than investing workers and growing their businesses.” There are some provisions for companies to reduce the buyback charge if they offer new shares to the public in the same year or if they issue shares to employees.
The legislation also clarified several definitions under 162(m), including that “employee remuneration” includes performance-based compensation, commissions, post-termination compensation, and beneficiary payments, whether or not paid directly by the publicly held corporation. While such compensation was presumably covered by previous text, it appears the new language is designed to remove as much ambiguity as possible for both companies and the IRS.
The bill still has several hurdles to overcome. Members of the House Progressive Caucus are frustrated several of their priorities were removed and have indicated they would like to see the package voted on by the Senate prior to finalization in the House, and Senators Sinema (D-AZ) and Manchin (D-WV) have not publicly announced that they will ultimately support the bill.
