Biden Tax Plan - Potential Implications for Indian Businesses with US operations

 

Corporate:

1.       Increase in the Federal Corporate rate from 21% to 28%. It may be pointed out that the US has 3 tier tax structure – Federal, State & City taxes.

2.       Minimum tax of 15% for corporations with greater than $100 million of book income (analogous to Minimum Alternate Tax on book profits in India)

3.       Minimum GILTI tax increases from 10.5% to 21% (affects U.S. corporations that own controlled foreign corporations)

 

Individual and owners of pass-through entities:

1.       Highest personal federal tax rate to be increased from 37% to 39.6%. The US has 3 tier tax structure – Federal, State & City taxes.

2.       20% pass-through deduction (Sec 199A) to be eliminated for those with greater than $ 400,000 of taxable income

3.       Preferential 20% capital gains rates to be eliminated and replaced with ordinary tax rates of 39.6% (not including net investment tax of 3.8%) for high-income taxpayers with greater than $1 million of taxable income (effective increase in capital gains tax rate from 23.8% to 43.4%);

4.       Expand the estate and gift tax by reducing the exemption amount to $ 3.5 million and increasing the top rate for the estate tax from 40% to 45%. Biden would also consider eliminating step-up in basis for inherited property