The Obama Administration has released its fiscal year 2013 budget (the full “greenbook” can be viewed here).  While the likelihood of these provisions becoming law in an election year may be questionable, we’d like to highlight a couple of the additions, changes and enhancements proposed to business tax incentives:

  • Establishment of an “In-sourcing” Tax Credit for companies who move certain business functions or processes from overseas locations back to the United States.  The proposed credit would equal 20% of the “eligible expenses paid or incurred in connection with insourcing a U.S. trade or business.”
  • Creation of a “Manufacturing Communities” Tax Credit – patterned after the New Markets Credit or Qualified Advanced Energy Project Credit (both are cited in the greenbook), the credit will provide a benefit for new manufacturing investments in communities affected by military base closures, the loss of a major employer(s), or other events that lead to mass layoffs.
  • Revision of the Domestic Production Activities Deduction to exclude energy production and other “non-manufacturing activities” from the definition of domestic production gross receipts.  The “savings” from the elimination of the benefit for “non-manufacturers” would fund a general increase in the size of the general size of the benefit, plus a bonus incentive for the manufacture of “advanced technology property.”
  • Permanent extension of the R&D Credit, and increase in the Alternative Simplified Credit (Section B on Form 6765) multiplier from 14% to 17%.

Other proposed incentives include an extension and enhancement of tax credits for the production of “plug-in” electric vehicles, as well as an enhancement and extension of the alternative energy production credits.

The Administration also details some of its “revenue” provisions, including allowing the lower tax rates on ordinary income set in 2001 and 2003 to expire for households earning over $250,000, restoration of the estate tax to 2009 levels, elimination of capital gains treatment for Carried Interest, and changes to transfer pricing rules and enforcement.