The US Department of the Treasury released the Fiscal Year 2025 Budget and the “General Explanations of the Administration’s Fiscal Year 2025 Revenue Proposals”, or the ‘Green Book’, today, 11 June, 2024.

In the fiscal year 2025 budget, several proposed reforms would raise revenues, expand tax credits for workers and families, and improve tax administration and compliance. For example, business and international taxation reforms would raise the corporate tax rate and the corporate alternative minimum tax rate, increase the excise tax rate on stock buybacks, end corporate tax deductions for employee compensation over USD 1 million, and close several business tax loopholes.

Similarly, reforms to the taxation of high-income taxpayers would raise additional revenue.  Income tax rates for those with the highest incomes would increase.

Capital gains and dividends would generally be taxed for those with high incomes at ordinary rates.

Business taxation proposals

  • Increase the corporate income tax rate from 21% to 28%.
  • Increase the corporate alternative minimum tax (CAMT) rate from 15% to 21%.
  • Increase the excise tax rate on corporate stock repurchase from 1% to 4%.
  • Proposal to tax certain corporate distributions as dividends.
  • Limit tax avoidance through inappropriate leveraging of parties to divisive reorganisations.
  • Proposal to limit losses recognised in liquidation transactions.
  • Prevent basis shifting by related parties through partnerships.
  • Strengthen limitation on losses for noncorporate taxpayers.
  • Accelerate and tighten rules on excess employee remuneration.

Individual taxation proposals

  • Increasing the minimum on taxpayers with net assets over USD 100 million to 25% from 20%.
  • Increase the NIIT and Medicare tax rates from 3.8% to 5% for taxpayers whose adjusted gross income exceeds USD 400,000.
  • Expanding the low-income housing tax credit.
  • Introduce a new tax credit for first-time homebuyers.

International tax reform proposals

  • Revise the global minimum tax regime, limit inversions, and make related reforms.
  • Limit foreign tax credits from the sale of hybrid entities.
  • Adopt the undertaxed profits rule.
  • Repeal the deduction for foreign-derived intangible income:
    • Repeal the deduction for foreign-derived intangible income;
    • Provide additional support for research and experimentation expenditures;
    • Repeal the deduction for foreign-derived intangible income.