Preparing for Potential Tax Increases Under the Biden Administration
The Biden Administration’s American Families Plan and other tax proposals may complicate the tax landscape for high-income earners. Many of the proposals target taxpayers earning more than $400,000 per year.
The American Families Plan proposals include:
- Increasing the top marginal income tax rate to 39.6% for households making over $400,000;
- Taxing long-term capital gains at 39.6% for households making over $1 million;
- Reducing the step-up in basis for gains in excess of $1 million at death and taxing the gains if the property is not donated to charity;
- Eliminating carried interest and taxing that income at ordinary income rates;
- Permanently extending excess business loss limitation rules; and
- Applying the 3.8% net investment income tax consistently for those making over $400,000.
To add significance to these proposals, President Biden also proposes earmarking $80 billion for IRS audit efforts that will target high-income individuals who have engaged in tax avoidance or other tactics to reduce their taxable income. The additional funding will be accompanied by increased IRS enforcement powers.
In addition, President Biden previously put forth the following proposals during his election campaign:
- Phasing out the 20% qualified business income tax deduction;
- Limiting the benefit of itemized deductions to 28% of their value and restoring the “Pease limitation” cap on itemized deductions;
- Reducing the lifetime estate tax exemption from $11.7 million to $3.5 million (back to 2009 levels) and increasing the estate and gift tax rate from 40% to 45%; and
- Imposing the 12.4% social security payroll tax on earned income above $400,000.
These proposals, although not specifically mentioned in the American Families Plan, continue to be part of the President’s tax agenda.
What Can Taxpayers Do Now?
Given the real possibility of targeted tax increases on the wealthy, as well as the uncertainty of when any increases might take effect, individuals, business owners and family offices should review their current situations to identify opportunities in which their overall federal and state tax liabilities could be minimized.
- Taxpayers should evaluate the extent to which they can time the recognition of income and deductions within a desired tax year. Planning should not only be driven by current and future tax rates but also by the taxpayer’s individual facts and circumstances, including income and cash goals.
- Due to the uncertainty of whether tax legislation will ultimately be passed, and to what extent, tax planning efforts should include multiple “what-if” scenarios to prepare for a range of possible legislative outcomes and effective dates.
- As the future tax landscape takes shape, taxpayers should consider strategies to minimize tax on their capital gains, such as:
- Accelerating capital gains to take advantage of lower rates;
- Managing levels of other taxable income to avoid higher rates on capital gains;
- Timing when tax is due by using or electing out of the installment method; and
- Using deferral strategies such as like-kind exchanges and investments in qualified opportunity zones.
Individuals and families should revisit their estate plans considering President Biden’s tax proposals. Individuals — especially those with large estates — should evaluate the benefits of multi-generational wealth transfers, the use of trusts and other estate planning opportunities, and be prepared to implement strategies in advance of proposals becoming law.
The House Ways and Means Committee recently offered a window into what the legislative body is working on when it comes to developing legislation to govern the taxation of digital assets, highlighting six bills and a discussion draft covering a range of topics.
The House Ways and Means Committee recently offered a window into what the legislative body is working on when it comes to developing legislation to govern the taxation of digital assets, highlighting six bills and a discussion draft covering a range of topics.
As part of the development, the committee held a June 9, 2026, hearing to solicit commentary from industry on the bills, during which committee Chairman Jason Smith (R-Mo.) called the “digital asset status quo is untenable. America needs clear tax rules of the road to remain the crypto capital of the world.”
Smith stated that cryptocurrency has “a market capitalization of over $2 trillion. That’s a massive industry by any measure, and nearly all other industries of a similar size enjoy clear tax policies.”
Chairman Smith noted that more and more people own cryptocurrency and “nearly a quarter of cryptocurrency holders earn less than $75,000 and the average crypto holder is nearly as likely to work in construction, manufacturing, or food service as tech or finance.”
The bills and discussion draft include:
- The Applying Existing Tax Anti-Abuse Rules to Digital Assets Act (H.R. 9172)
- The Charitable Deductions for Digital Donations Act (H.R. 9173)
- The Digital Assets Voluntary Disclosure Program Act (H.R. 9174)
- The Tax Clarity for Mining and Staking Act (H.R. 9175)
- The Providing Analogous Rules for Digital Assets Act (H.R. 9176)
- The Less Tax Paperwork for Digital Asset Owners Act (H.R. 9178)
- The End Digital Assets Tax Shelters Act (Discussion Draft)
The proposed legislation address “three key gaps in the current tax regime that make it harder for Americans to fully participate in the digital asset ecosystem,”
First, he said, “common digital transactions like mining and staking do not fit clearly into existing tax law. In other places, the tax code is silent as to the treatment of digital assets. The ambiguity creates an opening for taxpayers to exploit the law and avoid paying taxes in some circumstances and creates unfair tax burdens on others.
Second, Smith stated that “digital assets do not receive the tax benefit nor the protection from anti-abuse rules long granted to traditional financial assets. The imbalance between digital assets and traditional financial assets creates a two-tier system that unintentionally favor certain assets over others.”
Third, “crypto owners face burdensome tax compliance that makes using digital assets in ordinary commerce almost impossible.” Smith noted that “31 percent of crypto owners would like to buy a cup of coffee at the local shop, yet each $5 cup of coffee bought with a digital asset generates two new pieces of tax paperwork,” which adds a significant burden to both the IRS and the taxpayer.
Ranking Member Richard Neal (R-Mass.) had mixed reviews on the bills. He described his initial observation as some of the bills being “quite sensible, providing clear rules of the road for taxpayers looking to comply with the law. Other provisions sought the common sense goal of alleviating burdensome paperwork requirements, especially in situations where it’s highly unlikely that there would be any tax associated with those transactions, and indeed there are provisions that would close loopholes that are specific to the digital asset industry.”
However, Neal also noted that “it appears there are some provisions that deviate substantially from general tax principles, providing a distinct advantage that are beyond some other investments. We want to be careful about putting a thumb on the scale, and as we all know, it’s much easier to put something into the tax code than it is to take it out.”
Lawrence Zlatkin, Coinbase vice president of tax, testified during the hearing that the bills “represent the most comprehensive effort to modernize digital asset taxation that we have seen to date. Most importantly, this legislation recognized a fundamental reality: market structure and tax policy go hand-in-hand.”
In particular, Zlatkin highlighted H.R. 9178, which he testified “is an important step forward towards making stablecoin payments practical while reducing unnecessary reporting noise,” as well as H.R. 9173, which “provides long-needed clarity for mining and staking rewards, helping ensure taxpayers are not forced into tax obligations before they’ve generated liquidity though an actual sale.”
Mike Kaercher, deputy director of the Tax Law Center at New York University, cautioned that as the bills move through the process, “I encourage policymakers to consider three tax policy principles most closely: parity, administrability, and guardrails to prevent abuse. Some of the provisions in these bills would make improvements consistent with these principles.”
Among those, Kaercher testified that for example, “one of the bills would extend anti-abuse regimes, like wash sale rules and constructive sale rules, to digital assets. That’s a good idea. Another example is the de minimis provision on qualifying stablecoins – a targeted approach with guardrails can reduce paperwork and compliance burdens without creating substantial hidden tax subsidies for digital assets, but the rule should remain targeted because a broader de minimis provision risks abuse and would favor investments in digital assets over those in traditional finance.”
On the provision of deferring tax on mining and staking rewards, Kaercher testified that deferral “isn’t just the distortive subsidy, it could also undermine administrability. Deferral increases complexity for taxpayers and makes it harder for the IRS to do its job.”
He also warned about the possibility of government bailouts if guardrails and policy are not correctly developed.
“I think one thing for policymakers to consider on this is that if digital assets become a larger part of retirement accounts and the assets remain highly volatile, or in a worst-case scenario, crash, that would have an enormous impact on households’ retirement savings, and if that were to happen, I think policymakers would have to think about whether to respond with something like a bailout.”
The Treasury Department, Department of Labor, and Department of Health and Human Services finalized regulations implementing the independent dispute resolution (IDR) process established under the No Surprises Act (P.L. 116-260). The regulations provide new disclosure and administration requirements for group health plans and health insurance issuers related to surprise billing protections. Although the final rules are generally effective August 3, 2026, several provisions have delayed applicability dates.
The Treasury Department, Department of Labor, and Department of Health and Human Services finalized regulations implementing the independent dispute resolution (IDR) process established under the No Surprises Act (P.L. 116-260). The regulations provide new disclosure and administration requirements for group health plans and health insurance issuers related to surprise billing protections. Although the final rules are generally effective August 3, 2026, several provisions have delayed applicability dates.
The final rules require plans and issuers to use claim adjustment reason codes (CARCs) and remittance advice remark codes (RARCs), as specified in guidance, when providing any paper or electronic remittance advice to an entity that does not have a contractual relationship with the plan or issuer. These disclosures must be included along with the initial payment or notice of denial of payment for certain items and services subject to the surprise billing protections in the No Surprises Act.
The regulations also make several procedural updates to the federal IDR process. These include refinements to the open negotiation period, the formal initiation of the IDR process, and the dispute eligibility review procedures. Further, the rules address the payment and collection of administrative fees as well as certified IDR entity fees.
The agencies also finalized the definition of bundled payment arrangements, amended requirements related to batched items and services, and amended the rules for extensions of timeframes due to extenuating circumstances. Additionally, the regulation finalizes provisions that require plans and issuers to register in the federal IDR portal.
T.D. 10049
The IRS has published the inflation adjustment factor and reference prices for determining the credit for renewable electricity production for calendar year 2026 sales of kilowatt hours of electricity produced in the U.S. or a U.S. possession from qualified energy resources.
The IRS has published the inflation adjustment factor and reference prices for determining the credit for renewable electricity production for calendar year 2026 sales of kilowatt hours of electricity produced in the U.S. or a U.S. possession from qualified energy resources.
The inflation adjustment factor for qualified energy resources is 2.0570. The reference price for facilities producing electricity from wind is 3.17 cents per kilowatt hour. The reference prices for facilities producing electricity from closed-loop biomass, open-loop biomass, geothermal energy, solar energy, municipal solid waste, qualified hydropower production and marine and hydrokinetic renewable energy have not been determined for calendar year 2026.
Phaseout Limits
For electricity sold during the calendar year 2026, the renewable electricity production credit is not subject to a phaseout under Code Sec. 45(b)(1) for electricity produced from wind. This is because the 2026 reference price for electricity produced from wind, 3.17 cents per kilowatt hour, does not exceed 8 cents multiplied by the inflation adjustment factor (2.0570). The phase-out of the credit also does not apply to electricity sold in 2026 and produced from closed-loop biomass, open-loop biomass, geothermal energy, solar energy, municipal solid waste, qualified hydropower production and marine and hydrokinetic renewable energy.
Credit Amount Adjustments
The credit for renewable electricity production for calendar year 2026 under Code Sec. 45(a) is 3.1 cents per kilowatt hour on the sale of electricity produced from the qualified energy resources of wind, closed-loop biomass and geothermal energy. The credit is 1.5 cents per kilowatt hour on the sale of electricity produced in open-loop biomass facilities, landfill gas facilities, trash facilities, qualified hydropower facilities and marine and hydrokinetic renewable energy facilities.
Notice 2026-37
The IRS updated guidance relating to the energy community provisions in:
- Code Sec. 45 production tax credit for electricity produced from certain resources;
- — the resource-neutral Code Sec. 45Y clean electricity production credit that largely replaces the Code Sec. 45 credit for property placed in service after 2024;
- — the Code Sec. 48 business energy investment credit for investments in property that produces electricity from certain resources; and
- — the resource-neutral Code Sec. 48E clean energy investment credit that largely replaces the Code Sec. 48 credit for property placed in service after 2024.
The IRS updated guidance relating to the energy community provisions in:
- — the Code Sec. 45 production tax credit for electricity produced from certain resources;
- — the resource-neutral Code Sec. 45Y clean electricity production credit that largely replaces the Code Sec. 45 credit for property placed in service after 2024;
- — the Code Sec. 48 business energy investment credit for investments in property that produces electricity from certain resources; and
- — the resource-neutral Code Sec. 48E clean energy investment credit that largely replaces the Code Sec. 48 credit for property placed in service after 2024.
Annual Statistical Area Category and Coal Closure Category Update
Notice 2026-39 publishes information taxpayers may use to determine whether they meet certain requirements under the Statistical Area Category or the Coal Closure Category for purposes of qualifying for energy community bonus credit amounts or rates.
- (1) Appendix 1 lists counties and county-equivalents that qualify as energy communities because they meet the Fossil Fuel Employment threshold and the unemployment rate requirement for calendar year 2025.
- (2) Appendix 2 lists newly identified census tracts with either a coal mine closure or a coal-fired electric generating unit retirement, and census tracts directly adjoining those tracts.
- (3) Appendix 3 lists census tracts that newly qualify as coal closure census tracts because of location-data corrections issued since the publication of Notice 2025-31.
Notice 2026-39
The Treasury Department and the IRS have announced plans to issue proposed regulations under Code Sec. 4960 expanding the definition of a covered employee for purposes of the excise tax on excessive compensation paid by applicable tax-exempt organizations (ATEOs). The guidance follows amendments made by section 70416 of the One, Big, Beautiful Bill Act and applies to taxable years beginning after December 31, 2025.
The Treasury Department and the IRS have announced plans to issue proposed regulations under Code Sec. 4960 expanding the definition of a covered employee for purposes of the excise tax on excessive compensation paid by applicable tax-exempt organizations (ATEOs). The guidance follows amendments made by section 70416 of the One, Big, Beautiful Bill Act and applies to taxable years beginning after December 31, 2025.
Before the legislative change, a covered employee generally was one of an ATEO’s five highest-compensated employees for the tax year at issue or an individual who previously held that status. The amended law broadens the definition to include any employee of an ATEO and certain former employees for taxable years beginning after 2025. However, individuals who were not covered employees under the pre-2026 rules will not become covered employees solely because they worked for an ATEO before 2026.
The forthcoming regulations are expected to eliminate references to the five highest-compensated employees standard and make conforming changes. The agencies intend to retain exceptions similar to the current limited-hours and non-exempt funds exceptions, but discontinue the limited-services exception because its rationale no longer applies. Until proposed regulations are issued, ATEOs may rely on Notice 2026-36. The Treasury Department and the IRS requested comments on the proposed rules by August 4, 2026.
Notice 2026-36
IR 2026-73
The IRS has issued the 2025 Data Book detailing the agency’s activities during fiscal year 2025. The report provided an overview of the agency’s operations to meet statutory responsibilities. The revenue collected by the Service exceeded $5.3 trillion.
The IRS has issued the 2025 Data Book detailing the agency’s activities during fiscal year 2025. The report provided an overview of the agency’s operations to meet statutory responsibilities. The revenue collected by the Service exceeded $5.3 trillion.
“Fiscal Year 2025 was a pivotal year, as we began the process of implementing tax relief for hardworking Americans enacted as part of the Working Families Tax Cuts Act (WFTC),” said IRS CEO Frank J. Bisignano. “The numbers in the Data Book tell the story of an organization that serves as a key partner in the administration’s mission,” he added. The CEO also highlighted efforts to transform the IRS into a digital-first agency. These efforts would reduce paper processing through the “zero paper” initiative.
During the 2026 filing season, around 45 percent of individual tax returns claimed one or more of the new tax benefits from the WFTC. The average refund on a return claiming one of these deductions was over $3,200, as of May 27.
Further, online tools, including the IRS Online Account were upgraded to expand access and add new features. Expanded technology and advanced analytics would allow the Service to identify high-risk areas of non-compliance and tax fraud. Finally, more information can be found here.
IR 2026-74
The IRS announced the release of a new calculator to determine interest rates for large, multi-year construction and manufacturing projects. The calculator is named Percentage-of-Completion Method (PCM) Look-Back Interest Calculator and is MS Excel based. It supports calculations for Form 8697, Interest Computation Under the Look-Back Method for Completed Long-Term Contracts. However, it does not address all fact patterns or complexities associated with look-back interest calculations.
The IRS announced the release of a new calculator to determine interest rates for large, multi-year construction and manufacturing projects. The calculator is named Percentage-of-Completion Method (PCM) Look-Back Interest Calculator and is MS Excel based. It supports calculations for Form 8697, Interest Computation Under the Look-Back Method for Completed Long-Term Contracts. However, it does not address all fact patterns or complexities associated with look-back interest calculations.
“The IRS is focused on improving and enhancing how we serve taxpayers,” said IRS Chief Executive Officer Frank J. Bisignano. “We are transforming the IRS into a digital-first agency that provides the best possible experience for taxpayers, and tools like this calculator are an important step in that effort,” he added.
The look-back interest is determined using a three-step process:
- Hypothetically reallocating income to prior tax year based on actual revenues and costs;
- Computing hypothetical tax overpayments or underpayments of tax; and
- Calculating interest on tax underpayments or overpayments.
Taxpayers and tax practitioners may submit feedback about the calculator, by emailing Stakeholder Liaison and including "Look-Back Interest Workbook Feedback" in the subject line. More information can be found here.
IR 2026-70
