Exploring key 2024 tax bill proposals

As we step into a new year, the taxation realm is abuzz with discussions surrounding the Tax Relief for American Families and Workers Act of 2024.

However, amidst this spotlight, there are other tax proposals quietly gaining momentum.

In this blog, we will dive into the details of four notable tax laws that have been introduced into legislation and deserve our attention.

Jump to:

Tax Excessive CEO Pay Act

Death Tax Repeal Act

No Capital Gains Allowance for American Adversaries Act

The Barcode Efficiency Act

Exploring the impact of proposed legislation

Tax Excessive CEO Pay Act:

The Tax Excessive CEO Pay Act, introduced by lawmakers aims to address income inequality by imposing a corporate tax rate increase on companies with a high CEO-to-worker pay ratio.

Under this act, if a corporation’s CEO or highest-paid employee’s compensation exceeds 50 times the median worker’s pay, the corporate tax rate would be increased by a penalty determined by the legislation. The penalty would be expressed in percentage points and would vary based on the pay ratio.

For example, if the pay ratio is greater than 50 to 1 but not greater than 100 to 1, the tax rate would be increased by 0.5%. If the pay ratio is greater than 100 to 1 but not greater than 200 to 1, the tax rate would be increased by 1%, and so on. The penalty increases as the pay ratio widens.

It is important to note that this act is still in the proposal stage and would require further deliberation and potential amendments before becoming law. However, it highlights the ongoing discussions surrounding executive compensation and income disparity in the United States.

What does this mean for my firm?

• • Addressing income equality: The Tax Excessive CEO Pay Act targets corporations with high CEO-to-worker pay ratios to narrow income disparities. Firms must prepare for potential shifts in tax liabilities and advise clients accordingly.
  • Tax planning shifts: If passed, this legislation necessitates advising clients on restructuring executive compensation and exploring alternative tax strategies.
  • Societal concerns: The act underscores broader societal concerns about income inequality and corporate accountability, urging tax firms to engage in discussions aligned with financial goals and ethical responsibilities.

Death Tax Repeal Act:

The Death Tax Repeal Act, introduced by Representative Randy Feenstra, aims to repeal the estate and generation-skipping transfer taxes that are currently imposed under the Internal Revenue Code of 1986.

Under the current tax system, the estate tax applies to estates worth at least $13.61 million, with tax rates ranging from 18% to 40%. The generation-skipping transfer tax applies to certain transfers made to individuals who are two or more generations younger than the transferor, with a maximum tax rate of 40%.

The Death Tax Repeal Act seeks to eliminate these taxes entirely.

If passed, the act would terminate the application of the estate tax to the estates of decedents dying on or after the date of its enactment. It would also terminate the generation-skipping transfer tax for transfers made on or after the same date.

What does this mean for my firm?

• • Wealth transfer planning: If enacted, the repeal of estate taxes could significantly impact wealth transfer planning for family-owned farms, small businesses, and affluent individuals. Firms need to guide clients on restructuring estate plans to optimize asset distribution.
  • Client guidance: Firms must be prepared to address clients’ concerns and provide insights into the potential impacts of estate tax repeal on their financial goals and legacies.

No Capital Gains Allowance for American Adversaries Act:

The No Capital Gains Allowance for American Adversaries Act, introduced by Representative Brad Sherman, aims to amend the Internal Revenue Code of 1986 to treat certain gains and dividends derived from countries of concern as ordinary income.

Under this act, a new section would be added to the Internal Revenue Code, specifically Section 1261, which states that gains derived from the sale, exchange, or other disposition of specified country of concern property shall be treated as ordinary income. This means that any gains from such transactions would be subject to ordinary income tax rates rather than the lower capital gains tax rates.

The act defines “specified country of concern property” as any stock or other security of a corporation or entity incorporated or organized in a country of concern, as well as any property (excluding stock or securities) located or used in a country of concern. The term “country of concern” is defined in the act as the People’s Republic of China (including Hong Kong and Macao, but excluding Taiwan), Russia, Belarus, and Iran.

To ensure compliance, the act requires the Securities and Exchange Commission (SEC) to issue rules within 180 days of the enactment of the act, mandating that any person selling, exchanging, or disposing of security that qualifies as a specified country of concern property must notify the other party involved in the transaction that any gains related to such security will be treated as ordinary income under the Internal Revenue Code.

What does this mean for my firm?

• • Tax policy impact: The No Capital Gains Allowance for American Adversaries Act proposes significant changes to tax treatment for gains and dividends derived from specified countries of concern. Tax firms must stay informed about these potential amendments to advise clients effectively.
  • Compliance complexity: Enactment of the act introduces compliance challenges, requiring accurate identification and reporting of gains from transactions involving specified country of concern property.
  • Investment impact: Changes in tax treatment influence investment decisions, necessitating guidance on portfolio implications and strategies amidst geopolitical considerations.
  • Geopolitical considerations: The act reflects ongoing discussions regarding tax policy and international relations, urging firms to provide comprehensive guidance aligned with evolving landscapes.

The Barcode Efficiency Act:

The Barcode Automation for Revenue Collection to Organize Disbursement and Enhance Efficiency Act, also known as the BARCODE Efficiency Act, is a bill introduced by Senator Tom Carper and co-sponsored by Senator Todd Young.

The purpose of this act is to improve the efficiency and accuracy of tax return processing by requiring certain measures related to scannable codes and optical character recognition technology.

Also, the act addresses the use of optical character recognition (OCR) software. It states that for tax returns and correspondence that are not prepared electronically and are filed on paper, or for electronically prepared returns where the data cannot be accurately converted into electronic format, the IRS must use OCR technology (or any functionally similar technology) to transcribe the return or correspondence.

The effective date of this section is specified as applying to individual income tax returns received after December 31, 2023, and to other returns or correspondence received after December 31, 2025.

Overall, The BARCODE Efficiency Act aims to streamline tax return processing, reduce errors, and enhance the efficiency of the IRS by leveraging technology such as scannable codes and OCR.

By converting paper-based information into electronic format, the act seeks to improve the accuracy and speed of data processing, ultimately benefiting both taxpayers and the IRS.

What does this mean for my firm?

• • Tax processing efficiency: The BARCODE Efficiency Act introduces measures to enhance the efficiency and accuracy of tax return processing, aiming to streamline operations and reduce errors for both taxpayers and the IRS.
  • Technology integration: Mandating the use of scannable codes and OCR technology facilitates the conversion of paper-based information into electronic format, improving data processing speed and accuracy.
  • Compliance considerations: Tax firms need to understand and advise clients on compliance with new requirements, including the inclusion of scannable codes on paper returns and the use of OCR technology for accurate transcription. The act’s exception clause allows flexibility for the IRS to bypass technology requirements if deemed inefficient, underscoring the importance of monitoring compliance changes and potential exceptions.

It is important to note that all of the acts mentioned are currently in the proposal stage and would require further deliberation and potential amendments before becoming law. The acts reflect ongoing efforts to modernize tax administration and improve the effectiveness of tax-related processes.

Exploring the impact of proposed legislation

These four tax provisions introduced in the new year legislation have the potential to bring significant changes to the tax landscape. From addressing income inequality to improving tax return processing, these provisions reflect the ongoing efforts to create a fairer and more efficient tax system. As these proposals progress, it will be interesting to see how they shape the future of taxation in the United States. Stay tuned for further updates on these developments!