President’s FY 2015 budget contains host of individual and business tax provisions
President’s FY 2015 budget contains host of individual and business tax provisions
March 5, 2014
On March 4, the President released his federal budget proposals for fiscal year 2015. The Treasury Department’s “General Explanations of the Administration’s Fiscal Year 2015 Revenue Proposals” (the so-called “Green Book”) was released later that day. Among other things, the tax proposals in the budget include the expansion and permanent extension of the earned income tax credit, the enhancement and permanent extension of the research tax credit, a number of new international tax proposals, and a renewed push for pairing infrastructure investments with business tax reform.
For the 2015 fiscal year, spending levels have already been set by the “Bipartisan Budget Act of 2013.” The President’s budget, and the anticipated Republican budget authored by House Budget Committee Chairman Paul Ryan (R-WI), are essentially methods of allocating the agreed-upon funds. The Senate has decided not to pass its own budget for the 2015 fiscal year.
However, despite the set spending levels, the President’s 2015 budget also includes a new “Opportunity, Growth, and Security Initiative,” comprised of $56 billion in additional discretionary investments, with suggested spending and tax changes to cover its costs. The 2015 Budget also includes the President’s tax reform proposals that he released last summer (the so-called “grand bargain”) that essentially coupled business tax reform with investment in infrastructure (see Weekly Alert ¶ 7 08/01/2013).
Except as otherwise noted, the proposals would generally apply for tax years beginning, property placed in service, and other triggering events occurring, after Dec. 31, 2014.
Business Tax Proposals
In his budget, the President called on Congress to immediately begin work on corporate tax reform that will close loopholes, lower the corporate tax rate, strengthen investment, and not add to the deficit. However, he also introduced a number of specific measures in the budget proposals, including proposals to:
- Permanently extend increased expensing of qualified property for small business under Code Sec. 179, with a $500,000 deduction limit and phase-out beginning at $2 million (indexed for inflation for tax years beginning after 2013). Qualifying property would permanently include off-the-shelf computer software, but would not include real property.
- Enhance and permanently extend the research tax credit, and increase the rate of the alternative simplified research credit (ASC) from 14% to 17%, effective after Dec. 31, 2014.
- Permanently extend the work opportunity tax credit (WOTC) to apply to wages paid to qualified individuals who begin work for the employer after Dec. 31, 2013, and expand the definition of “qualified veteran” for individuals who begin work for the employer after Dec. 31, 2014. Also, for tax years beginning after Dec. 31, 2014, modify the calculation of the credit to equal 20% of the excess of qualified wages and health insurance costs paid or incurred by an employer in the current tax year over the amount of such wages and costs paid or incurred by the employer in the base year. The proposal would also permanently extend the Indian employment tax credit to apply to wages paid to qualified employees in tax years beginning after Dec. 31, 2013.
- Exclude self-constructed assets of small taxpayers (i.e., with annual gross receipts of $10 million or less) from the uniform capitalization (UNICAP) rules.
- Effective after Dec. 31, 2015, require employers that have been in business for at least two years, have over 10 employees, and do not currently offer a retirement plan to offer an automatic IRA option to employees, under which regular contributions would be made to an IRA on a payroll-deduction basis.
- Invest $1.5 billion for a new round of the “State Small Business Credit Initiative,” which increases lending, investment, and technical assistance to small businesses and manufacturers.
- Reform the tax treatment of derivative contracts by requiring that all such contracts be “marked to market,” with resulting gains and losses taxed each year and treated as ordinary income.
- Repeal the exception from the pro rata interest expense disallowance rule for contracts covering employees, officers, or directors, other than 20% owners of a business that is the owner or beneficiary of the contracts.
- Eliminate special depreciation rules for airplanes not used in commercial or contract carrying of passengers or freight (e.g., corporate jets) by increasing the depreciation period from five to seven years, consistent with the treatment of commercial aircraft.
- Require all corporations and partnerships with $10 million or more in assets to file their tax returns electronically. In addition, regardless of asset size, corporations with more than ten shareholders and partnerships with more than ten partners would be required to file their tax returns electronically.
- Implement standards clarifying when employee leasing companies can be held liable for their clients’ federal employment taxes.
- Permanently extend and modify the New Markets Tax Credit (NMTC), with an allocation amount of $5 billion for each round.
- Provide tax credits to New York State and New York City for expenditures relating to the construction or improvement of transportation infrastructure in or connecting to the New York Liberty Zone. The tax credit would be allowed in each year from 2015 to 2024, inclusive, subject to an annual limit of $200 million.
- Upon enactment, eliminate the deduction for dividends on stock of publicly-traded corporations held in employee stock ownership plans (ESOPs).
- Effective after the enactment date, reform and expand the low-income housing tax credit (LIHTC) by, among other things, providing two ways in which a private activity bond (PAB) volume cap could be converted into LIHTCs, allowing LIHTC-supported projects to elect a criterion employing a restriction on average income, and making the LIHTC beneficial to real estate investment trusts (REITs) and regulated investment companies (RICs).
- Provide short-term relief relating to the employer Federal Unemployment Tax Act (FUTA) tax by suspending interest payments on the state unemployment insurance (UI) debt, suspending the FUTA credit reduction for employers in borrowing states in 2014 and 2015. Also, the proposal would raise the FUTA wage base in 2017 to $15,000 per worker, index the wage base to wage growth for subsequent years, and reduce the net Federal UI tax from 0.8% (after the proposed permanent reenactment and extension of the FUTA surtax) to 0.37%.
- Repeal the last-in, first-out (LIFO) accounting method. Taxpayers required to change from the LIFO method also would be required to report their beginning-of-year inventory at its first-in, first-out (FIFO) value in the year of change, causing a one-time increase in taxable income that would be recognized ratably over ten years.
- Repeal the lower-of-cost-or market and subnormal goods methods of inventory accounting. Any resulting income inclusion would be recognized over a 4-year period beginning with the change year.
- Repeal the “boot-within-gain” limitation for dividends received in reorganization exchanges.
- Effective for sales and exchanges after the enactment date, expand the definition of “built-in loss” for purposes of partnership loss transfers.
- Effective for a partnership’s tax year beginning on or after the enactment date, amend Code Sec. 704(d) to allow a partner’s distributive share of expenditures not deductible in computing the partnership’s taxable income and not properly chargeable to capital account only to the extent of the partner’s adjusted basis in its partnership interest at the end of the partnership year in which such expenditure occurred.
- Effective for transfers made after the enactment date, limit the importation of losses under related party loss limitation rules.
- Effective for damages paid or incurred after Dec. 31, 2015, deny deductions for punitive damages.
- Modify like-kind exchange rules for real property to limit the amount of capital gain deferred under Code Sec. 1031 from the exchange of real property to $1 million (indexed for inflation) per taxpayer per tax year.
- Conform the control test under Code Sec. 368 with the affiliation test under Code Sec. 1504 such that “control” would be defined as the ownership of at least 80% of the total voting power and at least 80% of the total value of a corporation.
- Prevent the elimination of earnings and profits through distributions of certain stock by providing that a corporation’s distribution of stock of another corporation would reduce the distributing corporation’s earnings and profits in any taxable year by the greater of the stock’s fair market value or the corporation’s basis in the stock.
- Make the 100% exclusion for qualified small business stock (QSBS) permanent. The AMT preference item for gain excluded under Code Sec. 1202 would be repealed for all excluded small business stock gain. Also, the time for a taxpayer to reinvest the proceeds of sales of small business stock under Code Sec. 1045 would be increased to six months for qualified small business stock the taxpayer has held longer than three years.
- For tax years ending on or after the enactment date, permanently allow up to $20,000 of new business expenditures to be deducted in the tax year in which a trade or business begins and the remaining amount to be amortized ratably over the 180-month period beginning with the month in which the new business begins. The maximum amount of expensed start-up expenditures would be reduced (but not below zero) by the amount by which start-up expenditures with respect to the active trade or business exceed $120,000. (This would consolidate the existing provisions for start-up expenditures under Code Sec. 195 and organizational expenditures under Code Sec. 248 and Code Sec. 709.)
- For tax years beginning after Dec. 31, 2013, expand the group of employers who are eligible for, and simplify, the tax credit available to small employers providing health insurance to employees to include employers with up to 50 full-time equivalent employees, and begin the phase-out at 20 full-time equivalent employees.
- Tax certain “carried interest” (i.e., interest in future profits of a partnership) income as ordinary income instead of capital gains.
- Increase certainty with respect to worker classification by permitting IRS to require prospective reclassification of workers who are currently misclassified and whose reclassification has been prohibited under current law.
- For distributions made in tax years beginning after the enactment date, repeal the preferential dividend rule for publicly offered REITs.
- Repeal “technical terminations” of partnerships under Code Sec. 708(b)(1)(B).
- Repeal the anti-churning rules for amortization of intangibles under Code Sec. 197, effective for acquisitions after Dec. 31, 2014.
- Require current inclusion in income of accrued market discount and limit the accrual amount for distressed debt.
- Require that the cost basis of stock that is a covered security must be determined using an average basis method.
Proposals to Boost U.S. Manufacturing and Insourcing of Jobs
To encourage businesses to locate jobs and business activity in the U.S., the President’s budget proposes to make these changes, among others:
- …Effective as of the enactment date, provide additional tax credits ($2.5 billion) for investment in qualified property used in a qualified advanced energy manufacturing project.
- …Establish an additional 15 “promise zones” (i.e., in addition to the first five Promise Zone communities announced earlier this year) to promote job creation and investment in economically distressed areas. A number of tax incentives apply to businesses within the promise zone.
- …Effective for expenses paid or incurred after the enactment date, create a new general business credit against income tax equal to 20% of the eligible expenses paid or incurred in connection with insourcing a U.S. trade or business. Insourcing a U.S. trade or business would mean reducing or eliminating a trade or business (or line of business) currently conducted outside the U.S. and starting up, expanding, or otherwise moving the same trade or business within the U.S., to the extent that this action results in an increase in U.S. jobs.
- …Effective for expenses paid or incurred after the enactment date, disallow deductions for expenses paid or incurred in connection with outsourcing a U.S. trade or business. Outsourcing a U.S. trade or business would mean reducing or eliminating a trade or business or line of business currently conducted inside the U.S. and starting up, expanding, or otherwise moving the same trade or business outside the U.S., to the extent that this action results in a loss of U.S. jobs.
- …Create a new allocated tax credit (“manufacturing communities tax credit”) to support investments in communities that have suffered a major job loss event (i.e., when a military base closes or a major employer closes or substantially reduces a facility or operating unit, resulting in a long-term mass layoff). About $2 billion in credits would be provided for qualified investments approved in each of the three years, 2015 through 2017.
International Tax System
The President’s budget also contained several proposals for reforming the U.S. international tax system. They proposed to:
- Defer the deduction of interest expense properly allocated and apportioned to a taxpayer’s foreign-source income that is not currently subject to U.S. tax until such income is subject to U.S. tax.
- Require a U.S. taxpayer to determine its deemed paid foreign tax credit on a consolidated basis taking into account the aggregate foreign taxes and earnings and profits of all of the foreign subsidiaries with respect to which the U.S. taxpayer can claim a deemed paid foreign tax credit (including lower tier subsidiaries described in Code Sec. 902(b)).
- Provide that if a U.S person transfers an intangible to a controlled foreign corporation (CFC), then certain excess income from transactions connected with or benefitting from the covered intangible would be treated as subpart F income if the income is subject to a low foreign effective tax rate.
- Clarify the definition of intangible property for purposes of the special rules relating to transfers of intangibles by a U.S. person to a foreign corporation (Code Sec. 367(d)) and the allocation of income and deductions among taxpayers (Code Sec. 482).
- Disallow the deduction for non-taxed reinsurance premiums paid to affiliates.
- Restrict deductions for excessive interest of members of financial reporting groups.
- Modify tax rules for dual capacity taxpayers.
- Tax gain from the sale of a partnership interest on look-through basis.
- Prevent use of leveraged distributions from related foreign corporations to avoid dividend treatment.
- Extend Code Sec. 338(h)(16), which provides that (subject to certain exceptions) the deemed asset sale resulting from a Code Sec. 338 election is not treated as occurring for purposes of determining the source or character of any item for purpose of applying the foreign tax credit rules to the seller, to certain asset acquisitions.
- Remove foreign taxes from a Code Sec. 902 corporation’s foreign tax pool when earnings are eliminated.
- Create a new category of subpart F income for transactions involving digital goods or services.
- Prevent avoidance of foreign base company sales income through manufacturing services arrangements.
- Restrict the use of hybrid arrangements that create “stateless” income.
- Limit the application of exceptions under subpart F for certain transactions that use reverse hybrids to create stateless income.
- Limit the ability of domestic entities to expatriate by broadening the definition of an “inversion transaction” by reducing the 80% test to a greater-than-50% test, and eliminating the 60% test.
- Exempt gains of foreign pension funds from the disposition of U.S. real property interests, from the application of the Foreign Investment in Real Property Tax Act (FIRPTA) .
Environmental and Energy-Related Provisions
The President’s budget would:
- Make the tax credit for the production of renewable energy permanent and refundable.
- Reform and make permanent the deduction for energy-efficient commercial property.
- Modify and extend the tax credit for the construction of energy-efficient new homes.
- Replace the credit for plug-in electric drive motor vehicles with a credit for the production of qualifying “advanced technology vehicles.” The credit would be allowed for vehicles placed in service after Dec. 31, 2014 and before Jan. 1, 2022. The credit would be limited to 75% of the otherwise allowable amount for vehicles placed in service in 2019, 50% of such amount for vehicles placed in service in 2020, and 25% of such amount for vehicles placed in service in 2021.
- Provide a tax credit for qualifying medium and heavy-duty alternative-fuel commercial vehicles of $25,000 for dedicated alternative-fuel vehicles weighing up to 26,000 pounds and $40,000 for dedicated alternative-fuel vehicles weighing more than 26,000 pounds. The credit would be allowed for vehicles placed in service after Dec. 31, 2014, and before Jan. 1, 2021. For vehicles placed in service in calendar year 2020, the credit would be limited to 50% of the otherwise allowable amount.
- Permanently extend and make refundable the renewable electricity production tax credit.
- Eliminate fossil fuel tax preferences by repealing the enhanced oil recovery credit, the credit for oil and gas produced from marginal wells, expensing of intangible drilling costs, the deduction for tertiary injectants, the exception to passive loss limitation for working interests in oil and natural gas properties, percentage depletion for oil and natural gas wells, and the domestic manufacturing deduction for oil and natural gas production. Additionally, increase the geological and geophysical amortization period for independent producers to seven years.
- Eliminate coal preferences by repealing expensing of exploration and development costs, percentage depletion for hard mineral fossil fuels, capital gains treatment for royalties, and the domestic manufacturing deduction for the production of coal and other hard mineral fossil fuels.
- Extend the credit for cellulosic biofuels retroactively at $1.01 per gallon through Dec. 31, 2020, then reduce the amount of the credit by 20.2¢ per gallon in each subsequent year so that it phases out after Dec. 31, 2024.
- Reduce excise taxes on liquefied natural gas to bring into parity with diesel (i.e., lower the 24.3¢ per gallon excise tax to 14.1¢ per gallon beginning after Dec. 31, 2014).
- Increase the oil spill liability trust fund financing rate to 9¢ per barrel for periods after Dec. 31, 2014, and 10¢ per barrel for periods after Dec. 31, 2016, and extend the tax to crudes such as those produced from bituminous deposits as well as kerogen-rich rock.
- Reinstate and extend Superfund excise taxes for periods after Dec. 31, 2014 and before Jan. 1, 2025.
- Reinstate the corporate Superfund environmental income tax for tax years beginning after Dec. 31, 2014 and before Jan. 1, 2025.
Tax Changes for Individuals
The President’s plan calls for numerous changes to be made for individuals, including those that:
- …Reduce the value of itemized deductions and other tax preferences to 28% for families with income in the top three highest tax brackets (i.e., 33%, 35%, and 39.6%).
- …Observe the “Buffett rule” by requiring millionaires to pay no less than 30% of income (after charitable contributions) in taxes. This is also referred to as the “fair share tax.”
- …Make the earned income tax credit (EITC) permanent, and significantly increase it for workers without children, including non-custodial parents. Specifically, the maximum credit for childless workers would be doubled to $1,000, the income level at which the credit is fully phased out would be increased to $18,070 ($23,570 for joint filers), the credit would be made available to “young adult workers age 21-24, to provide added support and reward for work during the crucial years at the beginning of a young person’s career,” and the upper age limit of the EITC would be raised from 65 to 67 in order to harmonize it with “recent and scheduled increases in the Social Security full retirement age.” The 2015 budget also calls for making permanent the expansion of the EITC under the American Recovery and Reinvestment Act of 2009 and the American Taxpayer Relief Act of 2012 by permanently extending EITC marriage penalty relief and permanently extending the 45% phase-in rate of the EITC for workers with three or more qualifying children.
- …For tax years beginning after Dec. 31, 2017, permanently extend the American Opportunity Tax Credit (AOTC).
- …For tax years beginning after Dec. 31, 2017, permanently extend the increased refundability of the child tax credit (CTC) by permanently reducing the earned income threshold to $3,000.
- …Effective after Dec. 31, 2015, provide for automatic enrollment in IRAs (see above).
- …Provide for limited exclusions from income relating to student loan forgiveness.
- …Make Pell Grants excludable from gross income without regard to which expenses they are applied, so long as the proceeds are spent in accordance with the Pell Grant program.
- …Increase the standard mileage rate for automobile use by volunteers.
- …Increase the child and dependent care credit available to working families with incomes between $15,000 and $119,000.
- …Extend the exclusion for income from the discharge of qualified principal residence indebtedness to amounts that are discharged before Jan. 1, 2017, and to amounts that are discharged pursuant to an agreement entered before that date.
- …Make permanent the temporary enhanced incentives for conservation easements.
- …Amend certain conservation easement deduction rules by eliminating the deduction for easements on golf courses and disallowing deductions for any value of a historic preservation easement associated with forgone upward development above a historic building.
- …Prevent additional tax-preferred retirement saving by individuals who have already accumulated tax-preferred retirement savings sufficient to finance an annual income of over $200,000 per year in retirement (i.e., more than $3 million per person).
- …Support the President’s earlier proposal to create MyRA “starter” retirement savings accounts (see Weekly Alert ¶ 2 02/06/2014).
- …Require non-spouse beneficiaries of deceased IRA or annuity (IRA) owners and retirement plan participants to take inherited distributions over no more than five years.
- …Allow all inherited plan and IRA or annuity (IRA) balances to be rolled over within 60 days.
- …Effective for taxpayers who attain age 70— by Dec. 31, 2014, and for taxpayers who die on or after that date before attaining age 70—, eliminate the required minimum distribution (RMD) rules for IRA or annuity (IRA) plan balances of $100,000 or less.
Estate and Gift Tax Proposals
The President’s budget would also:
- Beginning in 2018, return the estate, generation-skipping transfer (GST), and gift tax exemption and rates to 2009 levels. Thus, the top tax rate would be 45%, and the exclusion amount would be $3.5 million for estate and GST taxes, and $1 million for gift taxes.
- Effective for transfers after the year of enactment, require that the basis of property in the hands of the recipient of a gift or devise could be no greater than the value of that property as determined for estate or gift tax purposes (subject to subsequent adjustments). A reporting requirement would be imposed on executors and donors to provide the necessary valuation and basis information to both the recipient and IRS.
- Effective for trusts created after the enactment date, require a grantor retained annuity trust (GRAT) to have a minimum term of ten years and a maximum term of the life expectancy of the annuitant plus ten years. Also, the remainder interest would have to have a value greater than zero at the time the interest is created, and any decrease in the annuity during the GRAT term would be prohibited.
- Effective for trusts created after the enactment date (and to the portion of a preexisting trust attributable to additions to such a trust made after that date), limit the duration of GST tax exemption by, on the 90th anniversary of the creation of a trust, providing that the GST exclusion allocated to the trust would terminate.
- Effective with regard to trusts that engage in certain described transactions on or after the enactment date, coordinate income and transfer tax rules applicable to grantor trusts.
- Effective for estates of decedents dying on or after the effective date and for estates of decedents dying before the enactment date as to which the current law Code Sec. 6324(a)(1) lien period had not expired on the effective date, extend an estate tax lien under Code Sec. 6324(a)(1) to apply throughout the Code Sec. 6166 deferral period.
- Clarify that the exclusion from the definition of a GST under Code Sec. 2611(b)(1) applies only to a payment by a donor directly to the provider of medical care or to the school in payment of tuition and not to trust distributions, even if for those same purposes. The proposal would apply to trusts created after the introduction of the bill proposing this change, and to transfers after that date made to preexisting trusts.
- Simplify gift tax exclusion for annual gifts by eliminating the present interest requirement for gifts that qualify for the gift tax annual exclusion. Instead, the budget proposal would define a new category of transfers (without regard to the existence of any withdrawal or put rights) and would impose an annual limit of $50,000 per donor on the donor’s transfers of property within this new category that will qualify for the gift tax annual exclusion.
- Expand the applicability of the definition of an “executor” to expressly make the Code’s definition applicable for all tax purposes, and authorize such executor to do anything on behalf of the decedent in connection with the decedent’s pre-death tax liabilities or obligations that the decedent could have done if still living.
Miscellaneous Tax Proposals
The budget also includes proposals to:
- …Explicitly provide that the Treasury Department and IRS have authority to regulate all paid return preparers, effective upon enactment.
- …Increase base IRS funding to $12 billion (up from $11.3 billion for 2014). The budget notes that IRS investment pays for itself “several times over” given the revenue return from strong tax enforcement.
- …Establish a “multi-year program integrity cap adjustment” for IRS, including $480 million in 2015, to deliver additional resources to critical tax enforcement and compliance functions that reduce the deficit and narrow the tax gap by nearly $6 for every $1 spent once fully implemented.
- …Provide an addition $165 million to IRS to enhance customer service performance.
- …Support implementation of the Affordable Care Act (ACA) and build on the ACA by “including $402 billion in additional health savings that will strengthen Medicare and Medicaid and other Federal health programs by implementing payment innovations and other reforms that encourage high quality and efficient care.”
- …Effective Jan. 1, 2016, impose a “financial crisis responsibility fee” on certain liabilities of the largest firms in the financial sector.
- …Conform Self-Employment Contributions Act (SECA) taxes for professional service businesses, effectively by subjecting individual owners of such businesses organized as S corporations, limited partnerships, general partnerships, and LLCs taxed as partnerships to SECA taxes in the same manner and to the same degree.
- …Increase levy authority for payments to Medicare providers (to allow up to 100%) with delinquent tax debt.
- …Impose liability on shareholders to collect unpaid income taxes of applicable corporations.
- …Increase tobacco taxes and index them for inflation.
- …Reinstate and permanently extend the 0.2% FUTA surtax, effective for wages paid on or after Jan. 1, 2015.
- …Effective upon enactment, modify tax-exempt bonds for Indian tribal governments.
- …Put in place the President’s new America Fast Forward (AFF) Bonds program aimed at attracting new sources of capital for infrastructure investment 2015.
- …Streamline audit and adjustment procedures for large partnerships, applicable for a partnership’s tax year ending on or after the date that is two years from the enactment date.
- …Effective upon enactment, increase whistleblower protections by, among other things, amending Code Sec. 7623 to explicitly protect whistleblowers from retaliatory actions, consistent with the protections currently available to whistleblowers under the False Claims Act.
- …Modify certain reporting requirements.
- …Effective for returns required to be filed after Dec. 31, 2015, provide for reciprocal reporting of information in connection with the implementation of the Foreign Account Tax Compliance Act (FATCA).
- …Effective upon enactment, index all fixed-amount penalties to inflation and round the indexed amount to the next hundred dollars.
- …Strengthen tax administration by, among other things, revising the offer-in-compromise application rules to eliminate the requirement that the initial offer include a nonrefundable payment (effective for offers submitted after the enactment date), making the repeated willful failure to file a tax return a felony, modifying IRS’s math error authority and add a new category of “correctable errors,” and extending the due diligence requirements that currently apply to paid preparers who prepare returns involving an EITC to also cover returns claiming the child tax credit.
- …Extend the statute of limitations where a state adjustment adjusts federal tax liability.
- …Require taxpayers who prepare their returns electronically but file on paper to print their returns with a scannable code, effective for tax returns filed after Dec. 31, 2014.
- …Allow IRS to absorb credit and debit card processing fees for certain tax payments, effective upon enactment.
- …Mandate e-filing for exempt organizations for tax years beginning after the enactment date, with transition relief.
- …Repeal the telephone excise tax.
Switch to Chained CPI Dropped
Last year’s budget included a proposal to change the measure of inflation used by the federal government for most programs (and for the Internal Revenue Code) from the standard Consumer Price Index (CPI) to the alternative chained CPI—which generally grows at a slower pace by fully accounting for a consumer’s ability to substitute between goods in response to changes in relative prices and also adjusts for small sample bias. However, the President’s 2015 budget dropped this provision.
In addition, the 2015 budget proposes modifying the inflation adjustment provisions so as to prevent tax parameters from declining from the previous year’s levels if the underlying index falls.