Treasury releases ‘FY23 Green Book’ describing President Biden’s tax proposals for businesses

In brief

The White House released its Fiscal Year 2023 Budget (‘FY23 Budget’) on March 28. Also on March 28, the US Treasury released the General Explanations of the Administration’s Fiscal Year 2023 Revenue Proposals, commonly referred to as the ‘Green Book.’ The Green Book explains the revenue proposals in the President's budget and serves as a guidepost to Congress for tax legislation by describing current law (adjusted baseline), proposed changes, the rationale from a policy perspective, and Treasury’s revenue projection.

The White House summarizes the tax provisions of the FY23 Budget as outlining steps toward a fairer tax code that encourages investment in the United States, stops the shifting of jobs and profits abroad, and ensures that corporations and high-income individuals “pay their fair share.”

The FY23 Budget would raise the corporate tax rate to 28%, complemented by other changes to corporate tax provisions intended to incentivize job creation and investment in the United States. Additionally, the FY23 Budget asserts that it would prevent MNCs from using tax havens to “game the system,” reiterating the Biden administration’s commitment to the OECD’s Pillar Two proposal. The FY23 Budget also features individual tax increase proposals, including a new proposed 20% minimum tax on taxpayers with net wealth greater than $100 million. Finally, the FY23 Budget requests a total of $14.1 billion in funding for the IRS, including investments in IRS tax enforcement intended to increase tax compliance.

The FY23 Budget and Green Book generally assume the previously proposed tax provisions from the House-passed ‘Build Back Better’ reconciliation bill (H.R. 5376) as a baseline. That bill includes more than $1.5 trillion in business, international, and individual tax increase provisions, but certain Administration tax proposals such as a corporate rate increase, were not included in the bill due to opposition from moderate Congressional Democrats. The House-passed bill also included some taxpayer-favorable provisions, including a measure that would reinstate current deductibility for Section 174 research expenditures that became subject to amortization in 2022 under a provision of the 2017 tax reform act and relief from the current cap on individual itemized deductions for state and local taxes (SALT). The FY23 Budget baseline does not include the House SALT cap relief provision.

Observation: Senate action on the House-passed reconciliation bill has been stalled due to objections from Senator Joe Manchin (D-WV) overspending provisions in the House bill and other issues. A revised Senate version of the reconciliation legislation will need the support of all 50 Democratic Senators and nearly all House Democrats to be enacted over the expected objections of Congressional Republicans.

Action item: Companies should evaluate and model the potential effect of the corporate tax increase proposals set forth by President Biden and the pending reconciliation legislation. Companies also should engage with policy makers about how specific proposals may affect their employees, job creation, and investments in the United States.

This Insight covers the FY23 Budget proposals (and proposed effective dates) listed in the table below that are generally applicable to businesses. See our previous PwC Insight for additional coverage of President’s Biden’s FY23 Budget.

Below is a summary of (i) Fiscal Year 2022 Budget (‘FY22 Budget’) proposals also included in the FY23 Budget and (ii) newly proposed FY23 Budget tax proposals.