Corporate Tax Hike on the Horizon?
In a move that could redefine the fiscal landscape for America’s corporate giants, the Biden Administration has put forth a bold proposal to hike corporate taxes. The IRS, with its gaze firmly fixed on the tax dealings of large corporations, limited partnerships, and affluent individual taxpayers, is at the forefront of this initiative. The question on many minds is whether this signals an uptick in the cost of doing business.
Under the administration’s plan, the corporate alternative minimum tax would jump from 15% to 21%, ensuring “every big corporation finally begins to pay their fair share.” The proposal doesn’t stop there; it also calls for a corporate tax rate increase to 28%, up 7% from the current rate, alongside a 25% “minimum tax” targeting high-income individuals.
International business is also under scrutiny, with proposed tax rates for offshore earnings by multinational companies set to double from 10.5% to 21%. The Undertaxed Profits Rule (UTPR) could further tighten the noose, potentially raising US corporate taxes for entities under large multinationals that pay less than the suggested 15% minimum tax rate in other jurisdictions.
Will Proposed Changes to Corporate Aircraft Taxes Fly?
The administration’s agenda extends to the skies with an aim to eliminate tax breaks for corporate aircraft. A staggering 500% tax increase on jet fuel—from $0.22 to $1.06 per gallon—is on the table, marking the first significant hike in over three decades. This move contrasts sharply with the current scenario where airline passengers pay over 7% in airfare taxes plus a Passenger Facility Charge, while corporate aircraft contribute a mere fraction of FAA’s tax revenue despite accounting for 7% of US air traffic.
IRS Recently Announced Audits of Corporate Aircraft Expenses
Corporate aircraft owners are bracing for an IRS audit storm, with the agency zeroing in on deductions linked to business aircraft usage by large corporations and high-net-worth individuals. The audits will dissect expenses to determine if flights were for business or personal use, with personal travel expected to incur “income inclusion” costs akin to first-class commercial airfare.
IRS Commissioner Danny Werfel emphasizes the agency’s commitment to ensuring that the wealthiest pay their due, reversing what he describes as historically low audit rates and limited scrutiny. This aligns with the agency’s broader efforts under the Inflation Reduction Act to bolster tax law compliance among America’s financial elite.
