Internal Revenue Code Changes of Widespread Interest in the House Passed Version of President Biden’s Build Back Better Act

internal revenue

By Robert S. Schwartz, Esq. 

Build Back Better Act Legislative Process

On November 19, 2021, the House of Representatives passed a version of President Biden’s Build Back Better Act (“BBB”). Unfortunately, the Office of the Clerk of the House does not update legislative text as neatly as one would like. Consequently, since the passed House bill was never placed on the Senate  calendar to be considered by the Senate, the closest version of what was passed in the House is Rules  Committee Print 117-18, a text of 2135 pages (published on November 3, 2021). Using that as a base, the  only changes that were made after November 3 are two Manager’s Amendments: Amendment to the Rules  Committee Print 117-18, a text of 9 pages (November 4, 2021) and Amendment to the Rules Committee  Print 117-18, a text of 6 pages (November 18, 2021). We focus you on BBB federal tax changes with  widespread application, because they passed the House, albeit not becoming law (emphasis added). We  believe they will reappear in one or more future tax bills, along with many of the other tax changes in the  BBB.  

New Gross Income Tax

Beginning 2022, with complex, limited exceptions, BBB imposes a new gross income tax on Form 1040 and Form 1041 tax return filers whose “modified adjusted gross income,” as specially defined,  exceeds stated thresholds. 

Filing Status


All individual filing status except married filing separately


Married filing separately


Trusts and Estates

Modified Adjusted Gross Income Threshold

MAGI exceeding $10,000,000

MAGI exceeding $25,000,000

MAGI exceeding $5,000,000

MAGI exceeding $12,500,000

MAGI exceeding $200,000

MAGI exceeding $500,000

Income Tax


5% of excess

Additional 3%

5% of excess

Additional 3%

5% of excess

Additional 3%

Medicare 3.8% Excise Tax, Tax Increase

Beginning 2022, BBB broadens the tax base of the Internal Revenue Code Section 1411 3.8% of  “net investment income” Medicare excise tax by adding to it the ordinary net income of a person actively  involved in a trade or business conducted as a sole proprietorship or through a pass-through entity such as a limited liability company or general partnership. BBB also increases the “modified adjusted gross  income,” as specially defined, threshold amounts that are necessary to exceed for imposition of the tax. 

Filing Status

Single

Head of Household

Married Filing Jointly and Surviving Spouse

Married Filing Separately

Trusts and Estates

Modified Adjusted Gross Income Threshold

$400,000 

$400,000 

$500,000 

$250,000 

$13,050 

Itemized Deduction for State and Local Taxes  

Beginning 2021 and through 2030, BBB increases the itemized deduction to $80,000 for all  individual filing statuses except married filing separately which is increased to $40,000. $40,000 is the  maximum deduction for trusts and estates as well. 

Business Net Operating Loss Carryover Deduction

The 2017 Tax Cuts and Jobs Act had included a limitation on the amount of business net operating  losses that can be carried forward to offset business taxable income in later years. The deduction limitation  as enacted was 80% of a non-corporate taxpayer’s taxable income in a carryforward year. Owing to the  outbreak of COVID, Congress suspended the 80% limitation. BBB eliminates the suspension beginning  with 2021. 

New Excise Tax on Stock Repurchases

Beginning 2022 corporations with publicly traded stock pay an excise tax equal to 1% of the fair  market value of stock redeemed from shareholders during any year unless the value of stock redeemed  during the year is less than one million.

Please don’t hesitate to contact Robert S. Schwartz, Esq., at 908-679-5011, or contact him at  [email protected] for further information or assistance. 

This writing is not and should not be interpreted as the rendering of legal advice or performance of legal  services to any person by Herold Law, P.A. In accordance with professional ethical rules, Herold Law,  P.A., renders legal advice and performs legal services only in the context of an attorney-client  relationship entered into before rendering advice or performing services.