Obama Administration Announces Revenue Proposals
The Obama Administration has recently announced its Fiscal Year 2016 Revenue Proposals in its annual "Greenbook." The Greenbook sets forth the Administration's proposals for changes in the tax law for the fiscal year. Although these proposals are not proposed legislation, they give us some insight into the Administration's legislative agenda for the coming year. Here is a summary of the relevant proposals:
Retirement Plans
Require "required minimum distributions" from Roth IRAs Require non-spouse beneficiaries to take distributions over 5 years, rather than their life expectancy Limit accrual of retirement benefits in traditional IRAs (no more contributions after $3.4 million in value) Prohibit after-tax amounts attributable to basis from being converted from a traditional IRA to a Roth IRA (in other words, the conversion would be permitted only to the extent taxable) Estate, Gift and GST Taxes
Return to 2009 exemption amount ($3.5 million estate and GST tax exemption; $1 million gift tax exemption) Maintain 40 percent tax rate and "portability" Impose gift tax on distribution from "intentionally defective grantor trusts" to the extent the distribution is from trust appreciation or income; termination of "grantor trust" status would be deemed a distribution Require same valuation for income tax purposes as used for estate, gift and GST tax purposes "Grantor retained annuity trusts" ("GRATs") Require minimum term of 10 years and maximum term of life expectancy plus 10 years Require that the remainder must be at least equal to greater of 25% of contribution or $500,000 Prohibit a decrease in the annuity over the GRAT term Prohibit income tax free exchanges between grantor and GRAT (no sales or "swaps") Other Provisions
Increase capital gain / qualified dividend rate to 24.2% (28% when including 3.8% net investment income tax) Treat gifts and death as a deemed sale for income tax purposes, with certain exemptions Enact the "Fair Share Tax," which would impose a 30% tax rate phased in between $1 million and $2 million (less whatever amount is paid in regular tax and alternative minimum tax) Tax "carried interest" as ordinary income and subject to self-employment tax Estate Denied Income Tax Charitable Deduction
In Belmont v. Commissioner, 144 TC 6, the Tax Court denied an estate an income tax charitable deduction because funds were not "permanently" set aside for charity. The decedent had owned a...
