Tax Cuts and Jobs Act (TCJA)
On December 22, 2017, President Trump signed the Tax Cuts and Jobs Act (TCJA) into law. This new legislation is the biggest Federal tax law change in 31 years. The law makes fundamental changes to our nation’s tax system and creates tax savings and planning opportunities for individuals and businesses. We are continuing to analyze the changes and the impact to our clients. This page contains information and resources to help you understand the law and its affect on your situation.
What are some of the most significant changes in the new tax reform law?
Tax Reform Resources
Info for Businesses
General Business Information
Just as individuals saw reductions in tax rates, changes in the treatment of deductions, credits, and other items, tax reform will result in massive changes to businesses. The number and impact of these changes are immense, and tax reform could cause businesses to rethink almost every aspect of their organization. Our firm sees this as an opportunity to help businesses navigate the changing tax landscape and add value to what we do. At MBE CPAs we plan to analyze the impact of tax reform on every business we touch, proactively do planning to assess the impact, and discuss considerations and issues with business owners and decision makers.
The Act includes several important tax changes that will directly impact domestic businesses. The main provisions include the following: Read More
Changes were made to the treatment of capital expenditures and asset purchases. These include expanded expensing under IRC 179 and a temporary increase in “bonus” depreciation. Read more about two pitfalls to avoid when navigating the new bonus depreciation rules.
One of the unfavorable rules under the TCJA is the limitation on the deductibility of business interest expense. This limitation generally will not apply to taxpayers with average gross receipts that do not exceed $25 million for the three-taxable-year period ending with the prior taxable year. Read more
Pass-Throughs, S-Corporations & Partnerships
Businesses organized and taxed as C-Corporations, also saw major changes. The reduction in the corporate tax rate is substantial. Effective for years after December 31, 2017, a flat corporate 21% tax rate is in place, replacing a graduated corporate tax rate system ranging from 15% to 35%. The elimination of the corporate alternative minimum tax (AMT), changes to the treatment of net operating losses, limitations on certain deductions, and an overhaul of international tax system and treatment of foreign earnings, will also impact corporate tax results.
Key Tax Reform Provisions and Considerations for Pass-Through Entities. This 2-page document gives a condensed summary of the major changes and some issues and opportunities to consider.
Info for Farmers
Please visit the following link to review a comparison of key provisions for the prior year and under the new tax law, additional tax planning strategies to consider, and a summary of the revised ordinary income tax rates.
Info for Individuals
A reduction in the individual tax rates ranging from 0 to 4%, will impact all individual taxpayers. Other changes include increased standard deductions, changes to itemized deductions and the expansion of the child tax credit.
Reacting quickly to the new tax law, the IRS released updated withholding tables for employers to adjust payroll for rates now in effect for 2018. Notice 1036 will be incorporated into Publication 15 published later in January, but the withholding tables have been released in advance so that employers may begin to incorporate them into their systems. The IRS has stated that employers should implement the new tables as soon as possible but no later than Feb. 15, 2018. Read More
Key Tax Reform Provisions and Considerations for Individuals. This 2-page document gives a condensed summary of the major changes and some issues and opportunities to consider.
Info for Tax Exempt Organizations
The Tax Cuts and Jobs Act is a sweeping tax reform package that impacts virtually all taxpayers, including tax exempt organizations. Here’s a look at some of the more important elements of the new tax law that have an impact on tax-exempt organizations. In general, the provisions involved are effective starting in 2018.
- Excise tax on exempt organization’s excessive compensation. Before the new law, executive compensation paid by tax-exempt entities was subject to reasonableness requirements and a prohibition against private inurement. The new law adds an excise tax that is imposed on compensation in excess of $1 million paid by an exempt organization to a “covered” employee. The tax rate is set at 21%, which is the new corporate tax rate.
- Excise tax on private college’s investment income. Before the new law, private colleges and universities were generally treated as public charities, as opposed to private foundations, and were therefore not subject to the private foundation excise tax on their net investment income. The new law imposes an excise tax on the net investment income of colleges and universities meeting specified size and asset requirements. The excise tax rate is 1.4% of the institution’s net investment income and applies only to private colleges and universities with at least 500 students, more than half of whom are in the U.S., and with assets of at least $500,000 per student.
- Exempt organization’s UBTI computed separately for separate businesses. Before the new law, a tax-exempt organization computed its unrelated business taxable income (UBTI) by subtracting deductions directly connected with the unrelated trade or business from its gross income from the unrelated trade or business. If the organization had more than one unrelated trade or business, the organization combined its income and deductions from all of the trades or businesses. Under that approach, a loss from one trade or business could offset income from another unrelated trade or business, thus reducing overall UBTI. Under the new law, an exempt organization cannot use losses from one unrelated trade or business to offset income from another one. Gains and losses are calculated and applied to each unrelated trade or business separately. There is an exception for net operating losses from pre-2018 tax years that are carried forward.
- Exempt organization’s UBTI to include disallowed fringe benefit costs. Under the new law, an exempt organization’s unrelated business taxable income (UBTI) is to include any nondeductible entertainment expenses, and costs incurred for any qualified transportation fringe, parking facility used in connection with qualified parking, or any on-premises athletic facility. However, UBTI is not to include any such amount to the extent it is directly connected with an unrelated trade or business regularly carried on by the organization.
If you wish to discuss any of these provisions, please don’t hesitate to contact us.
What does the Tax Cuts and Jobs Act Mean for Corporate Entities? – This live event will present an overview of the key provisions of the tax reform bill, as well as international and state and local considerations. Some of the topics which will be covered are:
- New rules for net operating loss carryovers
- Elimination of the alternate minimum tax (AMT) and conversion of AMT credit carryovers to refundable credits
- Transition to a territorial-type tax system
- The one-time repatriation tax
- Identifying if you are affected by global intangible low-taxed income (GILTI), Base Erosion Anti-Abuse Tax (BEAT) or foreign-derived intangible income (FDII)
Tax Reform: Key Provisions of the Tax Cuts and Jobs Acts – This one-hour recorded webinar covers the major provisions of the Tax Cuts and Jobs Act.
Tax Opportunities and Challenges for Manufacturers – An analysis of key tax issues confronting manufacturers in 2018, including Federal tax reform is provided in this one-hour recorded webinar.
Tax Reform Observations, Opportunities for Individuals and Business Owners – You have heard the details of the key provisions of the Tax Cuts and Jobs Act. Now it is time to determine how to plan to ensure you don’t miss an opportunity under these new sets of rules.
Tax reform: Key Considerations for Individuals and Business Owners – Observations and Opportunities for High Net Worth Individuals
What does the Tax Cuts and Jobs Act mean for pass-through entities? – The Tax Cuts and Jobs Act (the Act) has undoubtedly captured your attention and left you with questions on how its provisions will affect your pass-through entity.
Re-evaluating your choice of entity after tax reform – Most pass-through businesses consider their entity structure only once, at the time of formation. However, the Tax Cuts and Jobs Act has taken the traditional rules and turned them upside down. Corporate tax rates have been slashed from 35 percent to 21 percent while pass-through businesses such as S corporations and partnerships may now qualify for a new pass-through deduction that would effectively cut their tax rates from 39.6 percent to 29.6 percent.
If you have questions or would like to discuss the impact of tax reform on your specific situation, please contact us or talk to your MBE CPAs tax professional.
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The information contained herein is general in nature and based on authorities that are subject to change. RSM US LLP guarantees neither the accuracy nor completeness of any information and is not responsible for any errors or omissions, or for results obtained by others as a result of reliance upon such information. RSM US LLP assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect information contained herein. This publication does not, and is not intended to, provide legal, tax or accounting advice, and readers should consult their tax advisors concerning the application of tax laws to their particular situations. This analysis is not tax advice and is not intended or written to be used, and cannot be used, for purposes of avoiding tax penalties that may be imposed on any taxpayer.