In conjunction with the release of the budget proposal, the Department of the Treasury released the General Explanations of the Administration’s Fiscal Year 2015 Revenue Proposals.

Among other proposals, the Administration proposes to impose a new minimum tax, called the “Buffet Rule,” or the “Fair Share Tax” (FST). This FST would phase in at adjusted gross incomes above $1 million. Another proposal would reduce the value of certain deductions and exclusions to 28 percent, that would otherwise reduce taxable income in the 33-percent, 35-percent, or 39.6-percent tax brackets.

The proposal would also tax carried interest as ordinary income. Specifically, it would “tax as ordinary income a partner’s share of income on an ‘investment services partnership interest’ (ISPI) in an investment partnership, regardless of the character of the income at the partnership level. Accordingly, such income would not be eligible for the reduced rates that apply to long-term capital gains. In addition, the proposal would require the partner to pay self-employment taxes on such income. In order to prevent income derived from labor services from avoiding taxation at ordinary income rates, this proposal assumes that the gain recognized on the sale of an ISPI would generally be taxed as ordinary income, not as capital gain.”

Additional provisions include:

Permanently Extend Increased Refundability of the Child Tax Credit

Permanently Extend Earned Income Tax Credit (EITC) for Larger Families and Married Couples

Permanently Extend the American Opportunity Tax Credit (AOTC).

Upper-income tax provisions include:

Reduce the Value of Certain Tax Expenditures

Implement the Buffett Rule by Imposing a New “Fair Share Tax”

In the international area, the Administration proposals include:

Defer Deduction of Interest Expense Related to Deferred Income of Foreign Subsidiaries

Determine the Foreign Tax Credit on a Pooling Basis

Tax Currently Excess Returns Associated with Transfers of Intangibles Offshore

Limit Shifting of Income Through Intangible Property Transfers

Disallow the Deduction for Excess 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 Corporations to Avoid Dividend Treatment

Extend Section 338(h)(16) to Certain Asset Acquisitions

Remove Foreign Taxes From a Section 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

Other revenue changes and loophole closers include:

Repeal Last-In, First-Out (LIFO) Method of Accounting for Inventories

Repeal Lower-Of-Cost-or-Market (LCM) Inventory Accounting Method

Repeal Gain Limitation for Dividends Received in Reorganization Exchanges

Expand the Definition of Substantial Built-In Loss for Purposes of Partnership Loss Transfers

Extend Partnership Basis Limitation Rules to Nondeductible Expenditures

Limit the Importation of Losses under Related Party Loss Limitation Rules

Modify Like-Kind Exchange Rules for Real Property

Conform Corporate Ownership Standards

Prevent Elimination of Earnings and Profits Through Distributions of Certain Stock.

The Greenbook lists the following as “loophole closers”:

Tax Carried (Profits) Interests as Ordinary Income

Require Non-Spouse Beneficiaries of Deceased Individual Retirement Account or Annuity

(IRA) Owners and Retirement Plan Participants to Take Inherited Distributions Over No More than Five Years

Limit the Total Accrual of Tax-Favored Retirement Benefits 

Conform Self-Employment Contributions Act (SECA) Taxes For Professional Service Businesses

On the issue of tax reform, the Greenbook states, “The President is calling on the Congress to immediately begin work on individual and business tax reform that contributes to deficit reduction and increases the incentive to create and retain high-quality jobs in the United States. The President laid out a framework for business tax reform that contains the following five elements: (1) Eliminate loopholes and subsidies, broaden the base and cut the corporate tax rate; (2) Strengthen American manufacturing and innovation; (3) Strengthen the international tax system; (4) Simplify and cut taxes for small businesses; and (5) Restore fiscal responsibility and not add a dime to the deficit.” The Greenbook adds, “Consistent with this framework, the Administration is offering a detailed set of business proposals that close loopholes and provide incentives for growth in a fiscally responsible manner. The Administration proposes that these proposals be enacted as part of long-run revenue-neutral business tax reform that would also cut the corporate tax rate and fundamentally reform tax incentives. As a result, the net savings from these proposals … are not reflected in the budget estimates of receipts and are not counted toward meeting the Administration's deficit reduction goals. However, the transition to a reformed business tax system will generate temporary revenue, for example from addressing $1-$2 trillion of untaxed foreign earnings that U.S. companies have accumulated overseas, from repealing the LIFO inventory method, and from reforming accelerated depreciation. The Budget includes a $150 billion allowance for this one-time savings, which it proposes to use to pay for one-time investments in transportation infrastructure.”