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This past week, several worrying details emerged on potential tax increases that may be included in any upcoming Reconciliation Agreement that could affect family businesses. One such proposal that has received significant coverage is an expansion of the Net Investment Income Tax (NIIT), which has the potential to increase taxes on thousands of family-owned businesses across the country!
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The news is primarily attributed to a statement from Sam Runyon, a spokesperson for Senator Joe Manchin (D-WV), who was quoted as expressing the Senator’s support for Medicare solvency. A similar NIIT proposal had previously been included in the House-passed Build Back Better Act.
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This tax, often referred to as the “unearned income Medicare contribution surtax,” was originally enacted as a revenue-raising provision of the Affordable Care Act. For applicable taxpayers, the 3.8 percent surtax applies to the lesser of (i) their total net investment income, or (ii) the amount by which their adjusted gross income (AGI) exceeds $200,000 ($250,000 for joint filers). Net investment income is exclusively composed of any “passive investment income,” such as interest, dividends, and capital gains.
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The proposed modification to NIIT would expand the 3.8 percent surtax to apply to nonpassive business income for taxpayers that report an AGI greater than $400,000 ($500,000 for joint filers, trusts, and estates). In practice, this would primarily apply to the previously exempt net-passthrough income of partnerships, LLCs, S-corporations, and sole proprietorships.
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This NIIT expansion would significantly raise taxes on thousands of small, medium, and large businesses operating as passthrough entities, (which 79% of family businesses do), as an additional 3.8% income tax!
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Stay safe and healthy,
Pat Soldano
President
[email protected]
712 H Street NE Suite 1091
Washington DC 20002
(202) 681-8365
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Upcoming Events
- July 15: Board of Advisors Meeting- Goering Center-U of Cincinnati
- August 11: BNY Mellon; Newport Beach, CA
- August 23: Tolleson Presentation, Dallas, TX
- September 8: University Business Center, Fresno, CA
- September 13: Goering Center Annual Awards Dinner, Cincinnati, OH
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About Policy and Taxation Group
Policy and Taxation Group is your voice in Washington on economic freedom. We advocate for policies that allow American families to fully enjoy the economic liberties and benefits of a robust free market unique to our nation. For over 25 years, we have been the loudest voice in the nation’s capital on eliminating the death tax. This ill-conceived tax has a destructive impact on families, family businesses, job creation, and the national economy.
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Have questions or would like more information about becoming a Supporter or donating? Please contact John Marino at [email protected].
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