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The House Ways and Means Committee has introduced the tax proposal connected to the budget reconciliation bill, the Build Back Better Act. While we are still digging through the almost 900 pages of legislation, here are some highlights of what is included and notably what is not included in this bill introduced on September 13th.
Increase in corporate tax rate. This provision replaces the flat corporate income tax with a graduated rate structure. The rate structure provides for a rate of 18 percent on the first $400,000 of income; 21 percent on income up to $5 million, and a rate of 26.5% on income thereafter.
Limitation on certain special rules for Section 1202 gains. The special 75% and 100% exclusion rates for gains realized from certain qualified small business stock will not apply to taxpayers with adjusted gross income equal or exceeding $400,000. The baseline 50% exclusion in 1202(a)(1) remains available for all taxpayers. The amendments made by this section apply to sales and exchanges after September 13, 2021, subject to a binding contract exception.
Increase in top marginal individual income tax rate to 39.6%. This marginal rate applies to married individuals filing jointly with taxable income over $450,000, to heads of households with taxable income over $425,000, to unmarried individuals with taxable income over $400,000, to married individuals filing separate returns with taxable income over $225,000, and to estates and trusts with taxable income over $12,500. Applicable to taxable years beginning after December 31, 2021.
Increase in capital gains rate for certain high income individuals to 25%. Applicable to gains recognized after September 13, 2021. There is an exception for gain recognized after this date subject to a binding contract prior to September 13th.
Surcharge on high income individuals, trusts, and estates of a tax equal to 3% of a taxpayer’s modified adjusted gross income in excess of $5,000,000 (or in excess of $2,500,000 for a married individual filing separately). Applicable to taxable years beginning after December 31, 2021
Reduction in the amount of the unified credit against estate and gift tax to the 2010 level of $5m adjusted for inflation. Applicable beginning January 1, 2022.
There is no mention of the elimination of Section 1031 deferred exchanges for real estate.
There is no mention of the elimination of the step up in the basis of assets at death.
There is no elimination of the SALT cap, but there is pressure to include relief on the deduction of state and local taxes.
This is a big step in the legislative process, there will be more to follow. You can read the Ways and Means press release here. 
Please contact your L&B advisor for more information.
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