President Obama would tighten tax rules governing gifts and inheritances, life insurance companies, cross-border securities transactions, and paper companies that burn a wood byproduct known as "black liquor," according to final budget documents released today, reports Nationaljournal.com this Monday 11th. AmCham had denounced this practice as perjudicial to chilean wood industry, competitiviness and free trade.
CONGRESSDAILY
TAXES
Treasury Dept. Announces New Tax 'Loophole Closers'
Monday, May 11, 2009
President Obama would tighten tax rules governing gifts and inheritances, life insurance companies, cross-border securities transactions, and paper companies that burn a wood byproduct known as "black liquor," according to final budget documents released today, reports Nationaljournal.com this Monday 11th.
Those are some of the new "loophole closers" included to help pay for his healthcare overhaul as well as a major initiative to go after revenues parked offshore that escape U.S. taxation. Some of the changes were necessitated by a new estimate of Obama's controversial proposal to cap itemized deductions at 28 percent for households earning more than $250,000. Because of declining revenue projections, the proposal is now expected to raise only $266.7 billion, $51 billion less than February's original projection. To replace those and other lost savings, Obama has included nearly $60 billion in revenue-raisers.
In a blog post, OMB Director Orszag highlighted a $24.2 billion proposal to target what he called "valuation games played by those facing estate and gift taxes that allow them to undervalue transferred property." The change would require consistent valuation for transfer and income tax purposes; modify rules on valuation discounts; and require a minimum term for grantor-retained annuity trusts; which are complex financial instruments used to bestow gifts on family members without triggering the gift tax. The second-biggest change would come from a $12.7 billion hit to life insurers. The money would be raised by tightening rules related to life insurance contracts, a dividends-received deduction for life insurance separate accounts, as well as some interest expense deductions. Additionally, Orszag discussed collecting $10.4 billion over the next decade from expanded information reporting -- including on life insurance contracts -- to "help the IRS catch tax cheats." The changes drew a testy response from American Council of Life Insurers President and CEO Frank Keating, who called it "absolutely the wrong time to make it more expensive for families to obtain the security and peace of mind our products provide."
Another Obama proposal would clamp down on a loophole "that is giving an unintended, multibillion-dollar windfall to paper companies," saving $1.2 billion over the next two years, Orszag said. Limiting the alternative fuels mixture credit to fuel sold for use in motor vehicles or motorboats, or other purposes than for use by a paper mill, would take effect this year. The estimated cost to extend the provision, expiring Dec. 31, ballooned to $3.3 billion from $61 million after firms began claiming the credit by mixing a dash of diesel with the "black liquor" byproduct they have produced for years. Environmentalists oppose the provision, as do competitors in other countries who argue it amounts to an unfair subsidy. Domestic paper companies and workers have mounted a furious lobbying campaign to preserve the credit, citing the dismal state of the industry and rampant job losses. In a statement, Treasury Secretary Geithner also highlighted proposals to deny deductions for punitive damages, and to treat as ordinary income gains derived from commodities transactions and day-trades, rather than capital gains.
The budget proposals include some new provisions to expand on the $198 billion in international tax reform efforts announced last week. Obama would raise another $11.5 billion through a variety of crackdowns on the shifting of income among firms' offshore subsidiaries and on cross-border investment transactions to avoid dividend withholding taxes. He would also repeal rules that allow companies deriving at least 80 percent of their income from foreign businesses to avoid tax on interest and dividends.
by Peter Cohn
President Obama would tighten tax rules governing gifts and inheritances, life insurance companies, cross-border securities transactions, and paper companies that burn a wood byproduct known as "black liquor," according to final budget documents released today, reports Nationaljournal.com this Monday 11th. AmCham had denounced this practice as perjudicial to chilean wood industry, competitiviness and free trade.
CONGRESSDAILY
TAXES
Treasury Dept. Announces New Tax 'Loophole Closers'
Monday, May 11, 2009
President Obama would tighten tax rules governing gifts and inheritances, life insurance companies, cross-border securities transactions, and paper companies that burn a wood byproduct known as "black liquor," according to final budget documents released today, reports Nationaljournal.com this Monday 11th.
Those are some of the new "loophole closers" included to help pay for his healthcare overhaul as well as a major initiative to go after revenues parked offshore that escape U.S. taxation. Some of the changes were necessitated by a new estimate of Obama's controversial proposal to cap itemized deductions at 28 percent for households earning more than $250,000. Because of declining revenue projections, the proposal is now expected to raise only $266.7 billion, $51 billion less than February's original projection. To replace those and other lost savings, Obama has included nearly $60 billion in revenue-raisers.
In a blog post, OMB Director Orszag highlighted a $24.2 billion proposal to target what he called "valuation games played by those facing estate and gift taxes that allow them to undervalue transferred property." The change would require consistent valuation for transfer and income tax purposes; modify rules on valuation discounts; and require a minimum term for grantor-retained annuity trusts; which are complex financial instruments used to bestow gifts on family members without triggering the gift tax. The second-biggest change would come from a $12.7 billion hit to life insurers. The money would be raised by tightening rules related to life insurance contracts, a dividends-received deduction for life insurance separate accounts, as well as some interest expense deductions. Additionally, Orszag discussed collecting $10.4 billion over the next decade from expanded information reporting -- including on life insurance contracts -- to "help the IRS catch tax cheats." The changes drew a testy response from American Council of Life Insurers President and CEO Frank Keating, who called it "absolutely the wrong time to make it more expensive for families to obtain the security and peace of mind our products provide."
Another Obama proposal would clamp down on a loophole "that is giving an unintended, multibillion-dollar windfall to paper companies," saving $1.2 billion over the next two years, Orszag said. Limiting the alternative fuels mixture credit to fuel sold for use in motor vehicles or motorboats, or other purposes than for use by a paper mill, would take effect this year. The estimated cost to extend the provision, expiring Dec. 31, ballooned to $3.3 billion from $61 million after firms began claiming the credit by mixing a dash of diesel with the "black liquor" byproduct they have produced for years. Environmentalists oppose the provision, as do competitors in other countries who argue it amounts to an unfair subsidy. Domestic paper companies and workers have mounted a furious lobbying campaign to preserve the credit, citing the dismal state of the industry and rampant job losses. In a statement, Treasury Secretary Geithner also highlighted proposals to deny deductions for punitive damages, and to treat as ordinary income gains derived from commodities transactions and day-trades, rather than capital gains.
The budget proposals include some new provisions to expand on the $198 billion in international tax reform efforts announced last week. Obama would raise another $11.5 billion through a variety of crackdowns on the shifting of income among firms' offshore subsidiaries and on cross-border investment transactions to avoid dividend withholding taxes. He would also repeal rules that allow companies deriving at least 80 percent of their income from foreign businesses to avoid tax on interest and dividends.
by Peter Cohn