November 17, 2016

2016 Election’s Impact on Business Tax Planning

The results of the 2016 election are settled, and the winner is Donald Trump. While most are aware of this fact, it’s also important to note that starting in 2017 the Republican Party will have a majority in Congress. This is important because it means that changes in tax policies are expected to be introduced in the coming year. Although it will likely be some time before regulations are changed, it’s essential to be aware of the president-elect’s vision for tax reform. Not only will this allow businesses the opportunity to take advantage of existing incentives and credits, but also to identify future opportunities. To help clients, prospects and others understand the president-elect’s plan; Wilson Lewis has provided a summary of key points below.

Proposed Business Tax Changes

• Reduction of Tax Rates – Like the individual tax rates, the president-elect’s plan would also reduce corporate tax rates as well. Currently there is a top rate of 35%, but under Trump’s plan the top rate would be significantly reduced to 15%.
• Alternative Minimum Tax – Under the new plan, this tax structure for business taxpayers would be eliminated.
• Tax Benefit Elimination – There are many current tax deductions and credits that would be eliminated under the new plan. This includes ALL business deductions and credits, such as the domestic production activities deduction (Section 199). Notably, the research and development (R&D) tax credit would not be eliminated.
• Un-Repatriated Earnings – The plan calls for a significant change in how repatriated earnings would be taxed when brought back to the United States. Currently, there is a 35% corporate tax imposed when earnings are brought back to the U.S. Under the new plan, the higher tax rate would be eliminated and replaced with a 10% tax on repatriated income.
• Capital Investments – Under existing tax regulations, capital investments in property and other assets are required to be capitalized and depreciated over a span of several years. However, under the new plan, certain companies, such as manufacturing companies, would have the option to expense such deductions (resulting in an immediate tax benefit).
• Childcare Deductions – There would be a significant increase in the deduction amount for employer-provided daycare. Under existing regulations, the cap is $150,000, but under the new plan it would be increased to $500,000.
   

Contact Us

It’s clear that change is coming to the tax structure under the new administration. Although it’s unlikely all the changes will pass Congress, it’s possible that 2016 may be the last year to take advantage of certain benefits. If you have questions about the proposed changes or need assistance with year-end tax planning, Wilson Lewis can help! For additional information please call us at 770-476-1004, or click here to contact us. We look forward to speaking with you soon.