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Housing Issues in the 113th Congress [July 8, 2014]
"The 113th Congress has been active in considering a number of housing-related issues. In general, the issues that have been of interest to Congress can be divided into two broad categories: (1) issues related to homeownership and financing home purchases, and (2) issues related to housing assistance programs for low-income households. Housing assistance for low-income households tends to be primarily, but not exclusively, related to rental housing. During the 113th Congress, housing and mortgage markets have been showing some signs of recovering after several years of distress. Nevertheless, several issues that Congress has been considering are related to addressing problems that arose from the turmoil in housing and mortgage markets in recent years. Congress has also been considering policy changes designed to address problems that are perceived to have contributed to the housing downturn in an attempt to avoid a similar situation in the future."
Library of Congress. Congressional Research Service
Jones, Kate; Carpenter, David Hatcher; Hoskins, Sean M. . . .
2014-07-08
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Pass-Throughs, Corporations, and Small Businesses: A Look at Firm Size [March 15, 2018]
"Small businesses have always been of interest to Congress when discussing tax policies to promote economic growth and job creation. Within these discussions it is common to equate, or at least associate, 'small' businesses with pass-through businesses (e.g., sole proprietorships, partnerships, limited liability companies, S corporations). An obvious question is then, are all small businesses also pass-throughs? Relatedly, are all large businesses also C corporations? Answering these questions may help to better target particular tax, and non-tax, policies. This report uses 2015 U.S. Census data to investigate how the size of businesses varies by legal form (corporate and pass-through), as well as the distribution of employment across firm types. Firm size is measured by using employment. The majority of both corporations and pass-throughs in 2011 had fewer than five employees (55% of C corporations and 64% of pass-throughs). Nearly 99% of both corporations and pass-throughs had fewer than 500 employees, the most common employment-based threshold used by the Small Business Administration (SBA).1 Thus, it appears that based on an employment-based measure of size most businesses were small, with the exact share depending on the definition chosen."
Library of Congress. Congressional Research Service
Keightley, Mark P.; Hughes, Joseph S.
2018-03-15
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Yield Curve and Predicting Recessions [April 11, 2019]
From the Document: "Economists and financial markets closely monitor interest rates in hopes of gleaning information about the path of the economy. One measure of particular interest is the 'yield curve.' Recently, the yield curve associated with U.S. Treasuries inverted. This Insight discusses possible explanations for the inversion, including whether the inversion is signaling that the economy will enter a recession."
Library of Congress. Congressional Research Service
Keightley, Mark P.; Labonte, Marc
2019-04-11
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Financial Transactions Taxes: In Brief [Updated March 27, 2019]
From the Document: "Since the financial crisis and the ensuing 2008-2009 Great Recession, the idea of imposing a tax on financial transactions has appeared somewhat frequently in policy debates. At its most basic level, a financial transaction tax (FTT) is a tax imposed on the buyer or seller of a security at the time a financial transaction occurs. An FTT can be applied across the board to all financial transactions, or only those involving specific types of securities (for example, stocks, options, and futures, but not bonds). Similarly, an FTT can be applied to the transactions of all traders, or selectively to only certain types, such as those made by institutional traders but not individual investors."
Library of Congress. Congressional Research Service
Keightley, Mark P.
2019-03-27
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Mortgage Interest and Property Tax Deductions: Analysis and Options [March 18, 2014]
"Concern has increased over the size and sustainability of the United States' recent budget deficits and the country's long-run budget outlook. This concern has brought the issues of the government's revenue needs and fundamental tax reform to the forefront of congressional debates. Congress may choose to address these issues by reforming the set of tax benefits for homeowners. According to the Joint Committee on Taxation, federally provided tax benefits for homeowners will cost approximately $136.3 billion annually between 2014 and 2017. Reducing, modifying, or eliminating all or some of the current tax benefits for homeowners could raise a substantial amount of revenue, while simultaneously simplifying the tax code, increasing equity among taxpayers, and promoting economic efficiency. This report focuses on the two largest federal tax benefits available to homeowners--the mortgage interest deduction and the deduction for state and local property taxes. While other tax benefits for homeowners exist, these two particular benefits are the most expensive in terms of forgone revenue to the federal government. Between 2014 and 2017 the mortgage interest deduction and property tax deduction are estimated to cost around $77.3 billion and $31.5 billion annually. Congress may therefore consider modifying these two tax benefits to raise revenue. The mortgage interest deduction and property tax deduction are also the two tax benefits proponents most often argue promote home ownership. Economists, however, have questioned this claim. "
Library of Congress. Congressional Research Service
Keightley, Mark P.
2014-03-18
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Yield Curve and Predicting Recessions [Updated August 21, 2019]
From the Document: "Economists and financial markets closely monitor interest rates in hopes of gleaning information about the path of the economy. One measure of particular interest is the 'yield curve.' Recently, the yield curve associated with U.S. Treasuries has been inverted. This Insight discusses possible explanations for the inversion, including whether the inversion is signaling that the economy will enter a recession."
Library of Congress. Congressional Research Service
Keightley, Mark P.; Labonte, Marc
2019-08-21
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Recently Expired Individual Tax Provisions ('Tax Extenders'): In Brief [March 30, 2018]
"In the past, Congress has regularly acted to extend expired or expiring temporary tax provisions. Collectively, these temporary tax provisions are often referred to as 'tax extenders.' Of the 33 temporary tax provisions that had expired at the end of 2016 and extended retroactively through 2017, three are individual income tax provisions. The three individual provisions that expired at the end of 2017 have been included in recent tax extenders packages. The above-the-line deduction for certain higher-education expenses, including qualified tuition and related expenses, was first added as a temporary provision in the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA; P.L. 107-16), but has regularly been extended since. The other two individual extender provisions are housing related. The provision allowing homeowners to deduct mortgage insurance premiums was first enacted in 2006 (effective for 2007). The provision allowing qualified canceled mortgage debt income associated with a primary residence to be excluded from income was first enacted in 2007. Both provisions were temporary when first enacted, but in recent years have been extended as part of the tax extenders."
Library of Congress. Congressional Research Service
Sherlock, Molly F.; Keightley, Mark P.; Gravelle, Jane . . .
2018-03-30
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Fiscal Policy Considerations for the Next Recession [June 20, 2019]
From the Introduction: "The United States is currently experiencing the longest economic expansion in its history. Although short-term forecasts are predicting continued economic expansion, some economists have expressed uncertainty over how long the expansion will continue. History has shown that economic expansions inevitably give way to economic slowdowns. If the next slowdown is significant, the economy could enter a recession, which is typically characterized by falling output and rising unemployment. [...] This report identifies and summarizes options Congress may consider in response to a recession. The analysis begins by reviewing the features effective countercyclical fiscal policies are commonly thought to have, and then distinguishes between countercyclical and growth-oriented policies. Next, the report summarizes and evaluates potential fiscal policy options that Congress could consider. The options presented are drawn from those policies considered during the Great Recession for which estimates of their potential economic impact exist. The report concludes with a brief discussion about enacting fiscal stimulus in the context of the country's long-run budget outlook."
Library of Congress. Congressional Research Service
Keightley, Mark P.
2019-06-20
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Corporate Income Tax System: Overview and Options for Reform [December 1, 2014]
"Many economists and policy makers believe that the U.S. corporate tax system is in need of reform. There is, however, disagreement over why the corporate tax system needs to be reformed, and what specific policy measures should be included in a reform. To assist policy makers in designing and evaluating corporate tax proposals, this report (1) briefly reviews the current U.S. corporate tax system; (2) discusses economic factors that may be considered in the corporate tax reform debate; and (3) presents corporate tax reform policy options, including a brief discussion of current corporate tax reform proposals. […] In 2014, the sum of all corporate tax expenditures was $154.4 billion. The significance of the corporate tax as a federal revenue source has declined over time. At its post-WWII peak in 1952, the corporate tax generated 32.1% of all federal tax revenue. In 2013, the corporate tax accounted for 9.9% of federal tax revenue. The decline in corporate revenues is a combination of decreasing effective tax rates, an increasing fraction of business activity that is being carried out by pass-through entities (particularly partnerships and S corporations, which are not subject to the corporate tax), and a decline in corporate sector profitability. […] This report discusses a number of economic considerations that may be made while evaluating various corporate tax reform proposals. These might include analyses of the likely effect on households of certain reforms (also known as incidence analysis). Policy makers might also want to consider how certain corporate tax provisions contribute to the allocation of economic resources, choosing policies that promote an efficient use of resources."
Library of Congress. Congressional Research Service
Keightley, Mark P.; Sherlock, Molly F.
2014-12-01
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Tax Reform in the 114th Congress: An Overview of Proposals [March 18, 2016]
"Many agree that the U.S. tax system is in need of reform. Congress continues to explore ways to make the U.S. tax system simpler, fairer, and more efficient. Identifying and enacting policies that will result in a simpler, fairer, and more efficient tax system remains a challenge. On December 10, 2014, the chairman of the House Committee on Ways and Means introduced a comprehensive tax reform proposal, the Tax Reform Act of 2014. The bill proposed substantial changes to both the individual and corporate income tax systems, reducing statutory tax rates for many taxpayers, while repealing dozens of credits, deductions, and other tax preferences. […] There are various policy options for achieving comprehensive tax reform. One option is a base-broadening, rate-reducing tax reform, in the spirit of the Tax Reform Act of 2014. An alternative approach would be to substantially revise or eliminate the current tax system, instead relying on an alternative tax base for revenues. Tax reform legislation introduced early in the 114th Congress has tended to take the latter approach, proposing a retail sales tax at the federal level or a flat tax. Similar proposals were introduced in the 112th and 113th Congresses, and did not advance. A cash flow tax for businesses has also been introduced in the 114th Congress. Both Congress and the Administration have indicated interest in tax reform through their respective budget processes. The budget resolution for FY2016 communicates congressional support for action on tax reform. The President's FY2017 budget proposes a number of tax policy changes, similar to the President's FY2016 budget, including substantial changes in the international tax system."
Library of Congress. Congressional Research Service
Sherlock, Molly F.; Keightley, Mark P.
2016-03-18
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Housing and Economic Recovery Act of 2008 [Updated September 30, 2008]
"The Housing and Economic Recovery Act of 2008, P.L. 110-289, changes many laws that affect both the housing and mortgage markets. Included in the act are provisions to strengthen and to unify oversight of the housing government-sponsored enterprises (GSEs - Fannie Mae, Freddie Mac and the Federal Home Loan Banks). The Treasury is authorized to lend or invest an unlimited amount of money in any of the regulated entities in the event of financial or mortgage market emergencies. Other provisions address mortgage licensing, revise Federal Housing Administration (FHA) operations, protect (for a limited time) service members against home foreclosures, promote redevelopment of abandoned and foreclosed homes, and assist disabled veterans with special housing needs. The act also contains housing related tax provisions. This report surveys the most important of these changes."
Library of Congress. Congressional Research Service
Jickling, Mark; Foote, B. Ellington; Weiss, N. Eric . . .
2008-09-30
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Introduction to the Low-Income Housing Tax Credit [March 28, 2018]
"The low-income housing tax credit (LIHTC) program is one of the federal government's primary policy tools for encouraging the development and rehabilitation of affordable rental housing. These nonrefundable federal housing tax credits are awarded to developers of qualified rental projects via a competitive application process administered by state housing finance authorities. Developers typically sell their tax credits to outside investors in exchange for equity. Selling the tax credits reduces the debt developers would otherwise have to incur and the equity they would otherwise have to contribute. With lower financing costs, tax credit properties can potentially offer lower, more affordable rents. The LIHTC is estimated to cost the government an average of approximately $9.0 billion annually."
Library of Congress. Congressional Research Service
Keightley, Mark P.
2018-03-28
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Public Disclosure of Corporate Tax Returns [July 16, 2018]
"Federal corporate tax returns are confidential and protected from public disclosure under Section 6103 of the Internal Revenue Code (IRC), as enacted by the Tax Reform Act of 1976 (P.L. 94-455). Before 1976, corporate tax returns where classified as part of the 'public record' to varying degrees. Since 1976, there have been occasional calls for the privacy veil to be lifted in response to aggressive tax planning and evasion. This Insight examines several issues surrounding public disclosure of corporate tax returns; however, the discussion below does not address important legal and constitutional issues related to tax return disclosure. When considering the issues discussed below, it is important to note that tax disclosure is not all or nothing. Policymakers may seek a balance between corporate confidentiality and the public's desire to review certain corporate tax information it believes would be informative."
Library of Congress. Congressional Research Service
Keightley, Mark P.
2018-07-16
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Overview of Recent Tax Reform Proposals [February 28, 2017]
"Many agree that the U.S. tax system is in need of reform. Congress continues to explore ways to make the U.S. tax system simpler, fairer, and more efficient. In doing so, lawmakers confront challenges in identifying and enacting policies, including consideration of competing proposals and differing priorities. To assist Congress as it continues to debate the intricacies of tax reform, this report provides a review of legislative tax reform proposals introduced since the 113th Congress. Although no comprehensive tax reforms have been introduced into legislation yet in the 115th Congress, two 2016 reform proposals appear to be at the forefront of current congressional debates--the House GOP's 'A Better Way' tax reform proposal, released in June 2016, and President Trump's campaign reform proposal, released in September 2016. As with most recent tax reform proposals, both of these plans call for lower tax rates coupled with a broader tax base. In either case, numerous technical details would need to be addressed before either plan could be formulated into legislation."
Library of Congress. Congressional Research Service
Keightley, Mark P.
2017-02-28
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Slow Growth in the Current U.S. Economic Expansion [June 24, 2016]
"Between 2008 and 2015, economic growth has been, depending on the indicator, one-quarter to one-half the long-term average since World War II. Economic performance has been variable throughout the post-war period, but recent growth is markedly weaker than previous low growth periods, such as 1974 to 1995. Initially, slow growth was attributed to the financial crisis and its aftermath. But even after the recession ended and financial conditions normalized, growth has remained below average in the current economic expansion. The current expansion has already lasted longer than average, but growth has not picked up at any point during the expansion. By some indicators, growth began to slow during the 2001 to 2007 period, while other indicators suggest that the slowdown is more recent and abrupt. Although this report focuses on the U.S. economy, the same pattern has occurred across other advanced economies. Economists have offered a number of explanations at various points for the relatively slow recovery. These explanations are not necessarily mutually exclusive, and some economists combine elements from more than one in their diagnoses. […] As the duration of the slowdown persists, explanations based on temporary factors become less compelling and permanent factors become more compelling--particularly as the labor market approaches full employment."
Library of Congress. Congressional Research Service
Keightley, Mark P.; Labonte, Marc; Stupak, Jeffrey M.
2016-06-24
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U.S. International Corporate Taxation: Basic Concepts and Policy Issues [December 21, 2016]
"This report provides a general introduction to the basic concepts and issues relevant to the U.S. international corporate tax system. The explanations provided in this report emphasize the underlying concepts of the international tax system and are intended to be as simplified as possible. There are of course important and complex technical details that would need to be considered carefully if reform of the current system were to be implemented effectively and efficiently. These important technical details, however, are beyond the scope of this report. Where appropriate, references to other CRS [Congressional Research Service] products are provided within the report. A list of related CRS [Congressional Research Service] products and other suggested readings on international corporate taxation may also be found at the end of the report."
Library of Congress. Congressional Research Service
Keightley, Mark P.
2016-12-21
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Who Earns Pass-Through Business Income? An Analysis of Individual Tax Return Data [October 24, 2017]
"Pass-through businesses--sole proprietorships, partnerships, and S corporations--generate more than half of all business income in the United States. Pass-through income is, in general, taxed only once at the individual income tax rates when it is distributed to its owners. In contrast, the income of C corporations is taxed twice; once at the corporate level according to corporate tax rates, and then a second time at the individual tax rates when shareholders receive dividend payments or realize capital gains. This leads to the so-called 'double taxation' of corporate profits. This report analyzes individual tax return data to determine who earns pass-through business income."
Library of Congress. Congressional Research Service
Keightley, Mark P.
2017-10-24
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Tax Reform in the 114th Congress: An Overview of Proposals [July 9, 2015]
"Many agree that the U.S. tax system is in need of reform. Congress continues to explore ways to make the U.S. tax system simpler, fairer, and more efficient. Identifying and enacting policies that will result in a simpler, fairer, and more efficient tax system remains a challenge. On December 10, 2014, the Chairman of the House Committee on Ways and Means introduced a comprehensive tax reform proposal, the Tax Reform Act of 2014 (H.R. 1). The bill proposed substantial changes to both the individual and corporate income tax systems, reducing statutory tax rates for many taxpayers, while repealing dozens of credits, deductions, and other tax preferences. While no further action was taken on H.R. 1 in the 113th Congress, the proposal continues to inform the ongoing tax reform debate. There are various policy options for achieving comprehensive tax reform. One option is a base-broadening, rate-reducing tax reform, in the spirit of the Tax Reform Act of 2014. An alternative approach would be to substantially revise or eliminate the current tax system, instead relying on an alternative tax base for revenues. Tax reform legislation introduced early in the 114th Congress has tended to take the latter approach, proposing a retail sales tax at the federal level or a flat tax. Similar proposals were introduced in the 112th and 113th Congresses, and did not advance."
Library of Congress. Congressional Research Service
Sherlock, Molly F.; Keightley, Mark P.
2015-07-09
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U.S. International Corporate Taxation: Basic Concepts and Policy Issues [December 2, 2014]
"Recent deficit reduction and tax reform plans have included broad proposals to reform the U.S. international corporate tax system. These proposals have raised concerns over how changing the way American multi-national corporations are taxed could impact the deficit and debt, domestic job markets, competitiveness, and the use of corporate tax havens, among other things. An informed debate about how to reform the system governing the taxation of U.S. multi-national corporations requires careful consideration of these issues, as well as a basic understanding of several features of the current system. This report provides a general introduction to the basic concepts and issues relevant to the U.S. international corporate tax system. The explanations provided in this report emphasize the underlying concepts of the international tax system and are intended to be as simplified as possible. There are of course important and complex technical details that would need to be considered carefully if reform of the current system were to be implemented effectively and efficiently. These important technical details, however, are beyond the scope of this report."
Library of Congress. Congressional Research Service
Keightley, Mark P.; Stupak, Jeffrey M.
2014-12-02
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Securities Transactions Tax: Brief Analytic Overview with Revenue Estimates [June 1, 2012]
"Policymakers are currently considering taxing certain financial securities transactions. There are two justifications commonly offered for imposing such a tax: (1) it would reduce financial market volatility, and (2) it would be a significant source of revenue. Existing empirical research, however, suggests that volatility could actually increase in response to a securities transactions tax (STT), although the existing research may not be directly applicable to today's environment. Estimates do indicate that an STT could be a significant revenue source if designed properly. […] At its most basic level, an STT is a tax imposed on the buyer or seller of a security at the time a securities transaction occurs. An STT can be applied across the board to all financial transactions, or only those involving specific types of securities (for example, stocks, options, and futures, but not bonds). An STT can be applied to all security traders, or selectively to only certain types, such as intuitional traders but not individual investors. This report briefly discusses recent STT proposals, summarizes the possible effects on financial market volatility and speculation, and provides estimates of the potential revenue effects. This report is a condensed version of CRS Report R41192, 'A Securities Transaction Tax: Financial Markets and Revenue Effects', by Mark P. Keightley. Contained in that report is an in-depth economic analysis of an STT, a detailed discussion of revenue estimates, STT design options, and a summary of historical and international STT examples."
Library of Congress. Congressional Research Service
Keightley, Mark P.
2012-06-01
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Overview of Major Tax Proposals in the President's FY2012 Budget [May 4, 2012]
"The Obama Administration released the President's FY2012 budget proposal on February 14, 2011. According to the Administration's estimates, the tax proposals in the budget would increase revenues $280 billion over the next 10 years. The Administration's estimates were made relative to a current policy budget baseline, which assumes certain polices that are scheduled to change in the future by law will not. In contrast, the Congressional Budget Office (CBO) and Joint Committee on Taxation (JCT) make their projections relative to a current law budget baseline, which assumes future policy changes will occur as prescribed by current laws. This difference in baselines may result in the Administration's estimates being different than future CBO and JCT estimates. This report provides a broad overview of the provisions included in the President's budget request. The budget groups proposed tax provisions into several general categories."
Library of Congress. Congressional Research Service
Keightley, Mark P.; Bickley, James M.; Guenther, Gary L.
2012-05-04
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Securities Transaction Tax: Financial Markets and Revenue Effects [June 12, 2012]
"A securities transactions tax (STT) is a tax imposed on the buyer and/or seller of a security at the time a securities transaction occurs. An STT can be applied to all security traders or selectively to only certain types. An STT can be applied across the board to all securities transactions, or only those involving specific types of securities, for example, stocks, options, and futures, but not bonds. While an STT can come in many different forms, there are two justifications commonly offered for imposing a tax of some sort on financial transactions: it would improve financial market operations and/or it would be a significant source of revenue. […] This report analyzes the general effects of an STT on financial markets and its ability to raise revenue. The analysis examines how the tax could impact the important functions of financial markets--the determination of security prices, the spreading of risk, and the allocation of resources. The analysis of the financial markets then turns to examining how the tax may have an impact on security price volatility and the level of security prices."
Library of Congress. Congressional Research Service
Keightley, Mark P.
2012-06-12
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Behavioral Economics, IRS Letter Campaigns, and Tax Compliance [August 1, 2019]
From the Document: "Research from the fields of behavioral economics and behavioral science suggests there may be costeffective ways for the Internal Revenue Service (IRS) to increase tax compliance and collections. This Insight discusses one relatively simple approach to potentially increase compliance: carefully crafted letters to taxpayers. The discussion below is also intended to introduce the reader to a small portion of the vocabulary used by behavioral economists."
Library of Congress. Congressional Research Service
Keightley, Mark P.
2019-08-01
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Corporate Income Tax System: Overview and Options for Reform [September 13, 2012]
"Many economists and policymakers believe that the U.S. corporate tax system is in need of reform. There is, however, disagreement over why the corporate tax system needs to be reformed, and what specific policy measures should be included in a reform. To assist policymakers in designing and evaluating corporate tax proposals, this report (1) briefly reviews the current U.S. corporate tax system; (2) discusses economic factors that may be considered in the corporate tax reform debate; and (3) presents corporate tax reform policy options, including a brief discussion of current corporate tax reform proposals. […] This report discusses a number of economic considerations that may be made while evaluating various corporate tax reform proposals. These might include analyses of the likely effect on households of certain reforms (also known as incidence analysis). Policymakers might also want to consider how certain corporate tax provisions contribute to the allocation of economic resources, choosing policies that promote an efficient use of resources. Other goals of corporate tax reform may include designing a system that is simple to comply with and administer, while also promoting competitiveness of U.S. corporations."
Library of Congress. Congressional Research Service
Keightley, Mark P.; Sherlock, Molly F.
2012-09-13
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Brief Overview of Business Types and Their Tax Treatment [June 12, 2013]
"In the United States, how a business is taxed at the federal level is partly dependent on how it is organized. The income of subchapter C corporations, also known as 'regular' corporations, is taxed once at the corporate level according to the corporate tax system, and then a second time at the individual-shareholder level according to the individual tax rates when corporate dividend payments are made or capital gains are recognized. This leads to the so-called 'double taxation' of corporate income. Businesses that choose any other form of organization are, in general, not subject to the corporate income tax. Instead, the income of these businesses passes through to their owners and is taxed according to individual income tax rates. Examples of these alternative 'pass-through' forms of organization include sole proprietorships, partnerships, subchapter S corporations, and limited liability companies. This report summarizes the general tax treatment of corporate and pass-through businesses. The intent is to introduce those who are unfamiliar with the current U.S. business tax environment to the basics of corporate and pass-through taxation. Understanding how various businesses are taxed provides a starting point from which one can evaluate current and future proposals to change the taxation of corporations and pass-throughs. Additionally, since pass-through income is typically taxed only at individual income tax rates, this report is also a useful starting point for understanding the effects on pass-through businesses from a change to individual income tax rates. A list of related CRS products on business taxation may be found at the end of the report."
Library of Congress. Congressional Research Service
Keightley, Mark P.
2013-06-12
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Analysis of Where American Companies Report Profits: Indications of Profit Shifting [January 18, 2013]
From the Summary: "This report uses data on the operations of U.S. multinational companies (MNCs) to examine the extent to which, if any, MNCs are moving profits out of high-tax countries (or out of the U.S.) and into low-tax countries with little corresponding change in business operations, a practice known as 'profit shifting.' To do this, the profits reported by American firms in two groups of countries are compared with measures of real economic activity in those locations. The first group consists of the five countries commonly identified as being 'tax preferred' or 'tax haven' countries, and includes Bermuda, Ireland, Luxembourg, the Netherlands, and Switzerland. The second group, which provides a baseline for comparison, consists of five more traditional economies. This group includes Australia, Canada, Germany, Mexico, and the United Kingdom. […] This report may be of interest to Members of Congress for at least four reasons. First, profit shifting has been the specific target of recent Congressional action, including a September 2012 hearing held by the Senate Permanent Subcommittee on Investigations, as well as several bills introduced in the 112th Congress. Second, anti-abuse provisions have been included in general tax reform proposals in the 112th Congress. Third, most general tax reform proposals would lower the top corporate rate which would diminish the incentive to shift profits. And fourth, to the extent that profit shifting is reduced, federal tax revenues would increase, although the net effect on federal tax revenues would depend on the existence and magnitude of offsetting revenue changes, which, in turn, would depend on the approach taken to curb profit shifting."
Library of Congress. Congressional Research Service
Keightley, Mark P.
2013-01-18
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Analysis of the Geographic Distribution of the Mortgage Interest Deduction [January 30, 2014]
From the Summary: "This report analyzes variation in the mortgage interest deduction tax expenditure across states. Tax expenditures, such as the mortgage interest deduction, can generally be viewed as government spending administered via the tax code, or as tax incentives that are intended to achieve particular policy objectives. Regardless of the interpretation, tax expenditures provide a benefit to qualifying taxpayers by lowering their federal tax liabilities. Recent proposals to change the mortgage interest deduction could affect how its benefits are distributed. Understanding how the deduction's benefits are currently distributed across taxpayers in different states may help Congress in assessing the potential impact on constituents from a particular policy change. Currently, a homeowner may deduct the interest they pay on a mortgage that finances a primary or secondary residence as long as they itemize their tax deductions. The amount of interest that may be deducted is limited to the interest incurred on the first $1 million of combined mortgage debt and the first $100,000 of home equity debt ($1.1 million total). If a taxpayer has a mortgage exceeding $1 million they may still claim the deduction, but they must allocate their interest payments appropriately to ensure that only the interest associated with the first $1 million of debt is deducted. The Joint Committee on Taxation (JCT) has consistently estimated the mortgage interest deduction to be one of the largest tax expenditures."
Library of Congress. Congressional Research Service
Keightley, Mark P.
2014-01-30
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Cash Versus Accrual Accounting: Tax Policy Considerations [April 24, 2015]
"Two methods of accounting are generally available to businesses: cash basis and accrual basis accounting. Under cash basis accounting, revenue and expenses are recognized and recorded when cash is actually paid or received. Under accrual basis accounting, revenue is recorded when it is earned and expenses are reported when they are incurred, regardless of when payment is actually made or received. On the one hand, the cash basis method is simpler and arguably less administratively burdensome on businesses. On the other hand, cash accounting may result in a less accurate measure of economic income and allow for a deferral of tax liability. The Joint Committee on Taxation (JCT) considers cash accounting a departure from 'normal income tax law' and thus classifies it as a tax expenditure. Current tax law requires that most companies with average gross receipts in excess of $5 million use the accrual basis of accounting. Some companies are allowed to use either the cash or accrual basis methods of accounting for tax purposes. […] This report provides a brief explanation of cash and accrual accounting. It then examines the legislative history surrounding the Tax Reform Act of 1986 (P.L. 99-514), which set most of the current policies related to cash accounting for tax purposes. It also discusses recent policy proposals to change accounting requirements for tax purposes. The report concludes by discussing a number of policy considerations Congress may find useful."
Library of Congress. Congressional Research Service
Gnanarajah, Raj; Keightley, Mark P.
2015-04-24
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Analysis of the Geographic Distribution of the Mortgage Interest Deduction [July 19, 2017]
From the Introduction: "This report presents data on the geographic distribution of the mortgage interest deduction (MID) tax expenditure. Tax expenditures can generally be viewed as either government spending administered via the tax code, or tax incentives that are intended to achieve particular policy objectives. Regardless of the interpretation, tax expenditures such as the mortgage interest deduction provide a benefit to qualifying taxpayers by lowering their federal tax liabilities. For this reason, and because policymakers have expressed interest in increasing equity (fairness) in the tax code, it is important to understand how the benefits of the mortgage interest deduction are distributed. Additionally, understanding how the benefits of the deduction are currently distributed across taxpayers in different states may help Congress in assessing the potential impact on constituents from a particular policy change."
Library of Congress. Congressional Research Service
Keightley, Mark P.
2017-07-19
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COVID-19: Potential Role of Net Operating Loss (NOL) Carrybacks in Addressing the Economic Effects [March 16, 2020]
From the Document: "A number of industries may suffer losses in 2020 as a result of the coronavirus disease 2019 (COVID-19) outbreak. The travel and tourism industry, and restaurant industry, appear particularly susceptible at the moment due to an uptick in canceled reservations and a reduction in bookings. Other industries are likely to be impacted as well by a drop-off in consumer spending and a resulting reduction in profits, with the impacts likely increasing if COVID-19 continues to spread. Before 2018, businesses with losses could 'carry back' net operating losses (NOL) and use them to receive a refund for past taxes paid. On several occasions, Congress temporarily extended or enhanced the carryback rules to assist businesses in times of general economic weakness, or in response to natural disasters. Recent changes enacted in the 2017 tax revision (P.L. 115-97), commonly referred to as the Tax Cuts and Jobs Act (TCJA), however, eliminated the ability to carry back losses. This Insight discusses how allowing NOL carrybacks could potentially assist businesses impacted by economic weakness associated with COVID-19."
Library of Congress. Congressional Research Service
Keightley, Mark P.
2020-03-16
