On April 10, 2013, the Obama administration submitted a budget proposal that asks for $1 trillion in new revenue and hundreds of tax changes. While the overwhelming majority of proposed tax provisions are recycled from previous proposals, there are several new proposals that could affect retailers. In particular, retailers should be aware of the following items in the President's proposed budget that could most affect them:
- The repeal of the last-in, first-out (LIFO) method of accounting, effective for tax years beginning after 2013. Taxpayers would be required to include any LIFO reserve in income ratably over 10 years.
- The requirement that derivatives be reported on a mark-to-market basis annually, and all resulting mark-to-market gain or loss would be ordinary. In effect, the requirement would expand the mark-to-market treatment under Sections 475 and 1256 to nearly all derivatives, while denying the 60–40 split of capital gains and losses available for Section 1256 contracts.
- Enactment of a permanent research credit and an increase in the alternative simplified credit rate from 14% to 17%, effective for research costs paid or incurred after 2012.
- Several significant changes to the Federal Unemployment Tax Act
tax system, which would:
- reinstate and make permanent the federal 0.2% unemployment surtax effective for wages paid related to employment,
- raise the FUTA wage base from $7,000 to $15,000 in 2016 and index that amount to inflation for subsequent years, and
- reduce the net federal unemployment income tax to 0.37% effective in 2015.
- The budget would propose to make the work opportunity tax credit permanent.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
