Tax Cuts and Jobs Act Resource Center

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This Just In…

Tax Reform Updates - March 2018

AICPA seeks clarification of 20% pass-through income deduction

Internal Revenue Code Section 199A, which houses the Tax Act’s new 20% deduction of certain pass-through income, is riddled with ambiguities. (For example, a common question as basic as “is rental income eligible for the deduction?” has not been clearly addressed.) The American Institute of Certified Public Accountants (AICPA) recently send a letter to the Treasury Department, requesting clarification on a number of Sec. 199A issues. A copy of that letter may be found here. Hopefully this will lead to Treasury Regulations, at least in proposed form, before we get too far into 2018.

Reminder – Repatriation tax deadline

The deadline for the first payment of tax resulting from the new “deemed dividend repatriation tax” is April 16, 2018. By this date, 8% of the total tax is due; the balance is deferred and payable in various percentages over the next 7 years.

State impact

Most states base their tax structures on the federal rules – but do so in different ways. About a third of the states use “rolling conformity,” which means their rules automatically adopt federal law changes like the Tax Act, with no action needed by their legislatures to accomplish it. (Often certain carve-outs are not conformed, though, so if the rule changes involve those areas, conformity is not complete.) Slightly more states conform to the federal rules as written as of a certain date, and those states will have to decide whether to conform or not – until they do, any changes to the federal rules are ignored. A few states’ tax structures are not based on federal income at all – they make their own rules.

For most of the Tax Act, this is a concern for the 2018 tax year, the activity of which is reportable a year from now for most taxpayers. But for the few sections of the Act that are retroactive (like depreciation changes and the repatriation tax noted above), we need answers before we can confidently file the 2017 tax returns at hand now.

We have very little feedback on how the states will respond to the Tax Act, but we will be updating readers as more is learned.

The Tax Cuts and Jobs Act - A Guide Through Its Many Changes

We’ve put together a comprehensive guide covering an overview of changes related to a variety of tax areas including individual, business, international, and much more.

Are C Corporations More Attractive Now that the Rates Have Dropped?

With the new Tax Act, many business owners have taken a renewed interest in whether their current entity type still makes sense. The Act generated a lot of publicity surrounding the large tax rate reduction for C Corporations, which was reduced from graduated rates topping out at 35% to a flat rate of 21% for tax years starting after 12/31/2017.

Tax Deductibility of Meals and Entertainment Expenses

The Tax Cuts and Jobs Act of 2017 made some very significant changes to the deductibility of meals and entertainment expenses. The purposes of this article are to summarize those changes and to provide businesses with some guidelines for grouping 2018 (and beyond) meals and entertainment expenses based on whether they are 100%, 50%, or 0% deductible (or, in the case of certain transportation workers, 80% deductible) under the new rules.

One-Time Deemed Dividend Repatriation Tax on Deferred Foreign Earnings

The recently passed tax act uses the mechanics of subpart F to impose a one-time “toll tax” on the undistributed, non-previously taxed, post -1986 foreign earnings and profits (E&P) of certain U.S.-owned corporations as part of the transition to a new partial territorial tax regime.

A New 20% Deduction for Qualified Business Income of Flow-thru Entities

As part of the Tax Cuts and Jobs Act, Congress created Code Section 199A, providing owners of flow-through businesses and sole proprietors with a potential deduction, thereby allowing them to be more competitive with C Corporations.

How Compensation and Benefits are Changed by the Tax Cuts and Jobs Act

Compensation and benefits saw many changes from the new tax act, including repeals to the deductions businesses can take for meals and entertainment, and caps on other employee-related benefits.

International Tax Provisions of the Tax Cuts and Jobs Act

The Tax Cuts and Jobs Act represents a true game changer for U.S. corporations, foreign corporations doing business in the U.S., and individuals and pass through entities with international investments and transactions.

New Limitation on Interest Deductions for Businesses

The recently passed tax reform adds a new limitation on deduction of interest expense incurred in a trade or business.

Mortgage Interest: What’s Deductible Now and Should I Refinance?

The Tax Cuts and Jobs Act makes two substantial changes to prior tax policy with regard to mortgage interest.