Funding Proposals in the American Jobs Act of 2011: Proposals Relating to Business and Individual TaxationSullivan & Cromwell LLP - September 14, 2011
On September 12, 2011, President Obama released the proposed text of the American Jobs Act of 2011 (the “Bill”), which includes six principal funding proposals. These proposals are similar to those in the President’s Fiscal Year 2012 Revenue Proposals (the “Green Book”) and prior congressional proposals contained in the American Jobs Act of 2010 and the Jobs Creation and Tax Cuts Act of 2010 (together, the “Congressional Proposals”), but would be broader in certain key respects. The first proposal would broaden the Green Book’s proposal to cap the value of certain tax deductions and exclusions for taxpayers with adjusted gross income above $250,000 in the case of joint filers and $200,000 in the case of individual filers. For example, this proposal would, in effect, impose income tax at a rate equal to the excess of the taxpayer’s marginal rate over 28% on municipal bond interest earned by affected taxpayers. Similarly, the value of certain employer-sponsored health insurance coverage that is currently excluded from an employee’s taxable income would be subject to this tax. The second proposal would alter the taxation of carried interests. The third proposal would repeal certain tax preferences for oil and gas companies, and the fourth proposal would limit depreciation deductions for corporate jets. The fifth proposal would modify the foreign tax credit rules applicable to dual capacity taxpayers, and the sixth proposal would create a separate basket under the foreign tax credit limitation rules for foreign oil and gas income.