Select Proposals to Increase Taxes from the Build Back Better Act

Recently, the text for the Build Back Better Act (BBBA) was released by the House Budget Committee. Included are numerous proposed tax changes that would impact individuals, pass-through entities and corporations, among other things. It is worth noting that the text is not final and accordingly will be changing as negotiations continue.

Below is a summary of select topics from Subtitle I – Responsibly Funding Our Priorities of the Act of the BBBA.

Corporate tax:
  • Increased corporate tax rate – Graduated tax rate between 18.0 percent and 26.5 percent.
Individual and pass-through tax:
  • Increase to individual tax rate – Top individual tax rate increased back to 39.6 percent.
  • Increase to capital gain rate – Top capital gain tax rate increased to 25 percent.
  • Expansion of net investment income tax (NIIT) – High income individuals, trusts and estates would have nonpassive income from a trade or business included in the income subject to the NIIT.
  • Additional limitation of the qualified business income deduction – A third limit would be added to potentially further limit the maximum amount of qualified business income deduction allowed in any tax year.
  • Limitation on excess business losses – Limitation would be made permanent, and losses would no longer be treated as net operating losses in future years. This would cause prior year excess business losses to be considered alongside current year business losses instead of separately.
  • Additional surcharge on high income individuals, trusts, and estates – Three percent surcharge added to income over certain thresholds.
  • Modification to business interest expense limitation – Applied at the partner or shareholder level. Carryforward of disallowed business interest expense limited to five years.
  • Adjustment to treatment of worthless partnership indebtedness and partnership interest – Treated as a sale or exchange as of the date determined to be worthless.
  • Modification to the holding period requirement of partnership interests held in connection with performance of services (carried interest) – Generally increased from three years to five years.
  • Limitation to the amount of gain qualified for exclusion on Section 1202 – Gain exclusion percent reduced for individuals over certain income thresholds, and estates and trusts.
  • Modification to wash sale rules – New asset classes now subject to the rules. Certain related party acquisitions would now be included. Expanded time frame during which the rules would apply.
  • Early termination of increased unified credit – The basic exclusion would revert to $5,000,000 per individual subject to inflation from 2012.
  • Modification to treatment of grantor trusts for gift and estate purposes – Potential treatment as a current gift if grantor status revoked or inclusion in future estate if grantor status retained during lifetime.
  • Changes to valuation utilized in connection with certain transfers – Valuation discounts would no longer apply to transfers of nonbusiness assets.
  • Limitation on qualified conservation easement deduction – Deduction generally limited to 2.5 times the basis of the real property donated.
Retirement plans:
  • Introduction of contribution limits for IRAs – High income individuals would no longer be able to contribute to an IRA if the combined value in certain retirement accounts exceeds a threshold at the end of the prior year and their income is above a certain amount. This would be a yearly determination.
  • Increase to required minimum distributions (RMD) – If certain retirement accounts exceed a threshold, distributions in addition to the normal RMD would be required.
  • Roth conversions and rollovers – The ability for high income individuals to be able to contribute to a Roth IRA by first making a nondeductible contribution to a traditional IRA and then converting the IRA would no longer be allowed. In addition, rollovers of prior contributions would no longer be allowed beginning in 2032.
  • Prohibited investments by IRAs in certain assets – Certain investments would no longer be allowed, including investments requiring minimum income, asset or education levels, or certain licenses or credentials as well as investments in which the IRA owner has more than the allowed ownership percentage.

DHG will continue to monitor this legislation as it progresses, as members of Congress have indicated their goal is to have legislation passed in time to allow the President to sign it into law prior to the end of the calendar year. For questions, reach out to us at



© Dixon Hughes Goodman LLP. All rights reserved.
DHG is registered in the U.S. Patent and Trademark Office to Dixon Hughes Goodman LLP.