17 Tax Proposals from the 2015 Federal Fiscal Budget.

On March 4, the President released his federal budget proposals for fiscal year 2015. As you know, tax planning is one of the most important financial actions for businesses and individuals. In an effort to keep our clients informed of all tax-related updates, we want to call-out 17 budget proposals that we think could be particularly relevant to our clients.

Except as otherwise noted, the following proposals would generally apply for tax years beginning after Dec. 31, 2014, and would include property placed in service and other triggering events.

Business Tax Proposals (2015 FEDERAL FISCAL BUDGET)

In his budget, the President called on Congress to immediately begin work on corporate tax reform in order to close loopholes, lower the corporate tax rate, strengthen investment, and not add to the deficit. He also introduced a number of specific measures in the budget proposals. These are the ones we believe most relevant to you:

1. Permanently extend increased expensing of qualified property for small business under Code Sec. 179 , with a $500,000 deduction limit and phase-out beginning at $2 million (indexed for inflation for tax years beginning after 2013). Qualifying property would permanently include off-the-shelf computer software, but would not include real property.

2. Enhance and permanently extend the research tax credit.

3. Effective after Dec. 31, 2015, require employers that have been in business for at least two years, have over 10 employees, and do not currently offer a retirement plan to offer an automatic IRA option to employees, under which regular contributions would be made to an IRA on a payroll-deduction basis.

4. Eliminate special depreciation rules for airplanes not used in commercial or contract carrying of passengers or freight (e.g., corporate jets) by increasing the depreciation period from five to seven years, consistent with the treatment of commercial aircraft.

5. Repeal the last-in, first-out (LIFO) accounting method. Taxpayers required to change from the LIFO method also would be required to report their beginning-of-year inventory at its first-in, first-out (FIFO) value in the year of change, causing a one-time increase in taxable income that would be recognized ratably over 10 years.

6. Repeal the lower-of-cost-or market and subnormal goods methods of inventory accounting.

7. Modify like-kind exchange rules for real property to limit the amount of capital gain deferred under Code Sec. 1031 from the exchange of real property to $1 million (indexed for inflation) per taxpayer per tax year.

8. Make the 100% exclusion for qualified small business stock (QSBS) permanent.

9. For tax years ending on or after the enactment date, permanently allow up to $20,000 of new business expenditures to be deducted in the tax year in which a trade or business begins and the remaining amount to be amortized ratably over the 180-month period beginning with the month in which the new business begins.

Tax Proposals for Individuals (2015 FEDERAL FISCAL BUDGET)

The President's plan calls for numerous changes to be made for individuals, including those who:

10. Reduce the value of itemized deductions and other tax preferences to 28% for families with income in the top three highest tax brackets (i.e., 33%, 35%, and 39.6%).

11. Observe the "Buffett rule" by requiring millionaires to pay no less than 30% of income (after chariTablecontributions) in taxes. This is also referred to as the "fair share tax."

12. Prevent additional tax-preferred retirement saving by individuals who have already accumulated tax-preferred retirement savings sufficient to finance an annual income of over $200,000 per year in retirement (i.e., more than $3 million per person).

Estate and Gift Tax Proposals (2015 FEDERAL FISCAL BUDGET)

The President's budget would also:

13. Beginning in 2018, return the estate, generation-skipping transfer (GST), and gift tax exemption and rates to 2009 levels. Thus, the top tax rate would be 45%, and the exclusion amount would be $3.5 million for estate and GST taxes, and $1 million for gift taxes.

Miscellaneous Tax Proposals (2015 FEDERAL FISCAL BUDGET)

The budget also includes proposals to:

14. Explicitly provide that the Treasury Department and IRS have authority to regulate all paid return preparers, effective upon enactment.

15. Increase base IRS funding to $12 billion (up from $11.3 billion for 2014).

16. Provide an additional $165 million to IRS to enhance customer service performance.

17. Conform Self-Employment Contributions Act (SECA) taxes for professional service businesses, effectively by subjecting individual owners of such businesses organized as S corporations, limited partnerships, general partnerships, and LLCs taxed as partnerships to SECA taxes in the same manner and to the same degree.

Read the full 2015 Fiscal Budget here

As your trusted financial advisor, we will continue to keep you informed on all relevant tax updates, changes, provisions and proposals.