AAFCPAs Highlights Provisions in Proposed Tax Legislation and Planning Opportunities for Businesses & Individuals

The US House of Representatives’ tax writing committee has released its first draft of proposed tax legislation. Many of its provisions have been the subject of news articles and debate. Highlights include the following:

  • Limitation of the mortgage interest deduction to $500,000 of new debt
  • Capping the deduction for property taxes to $10,000
  • Eliminating the deduction for state income taxes
  • Doubling of the standard deduction to $24,000 for joint filers
  • Expansion of child care and similar tax credits
  • Four tax brackets ranging from 12% to 39.6%
  • Creation of a 25% tax rate on pass-through income, or portion thereof
  • Changing the corporation tax system from a worldwide to territorial tax
  • Lowering the corporate tax rate to 20%
  • Immediate expensing of fixed assets
  • Elimination of business tax deductions, including partial loss of interest deduction
  • Elimination of most tax credits, with the Research and Low Income Tax Credits being two notable exceptions
  • Elimination of the Estate Tax

For all the attention that these and other provisions have received, they should be viewed as guidelines as to the House’s thinking rather than the final definitive legislation.
During the week of November 6, the House bill will be going through a continued markup at the committee level, at which point it will be presented to the full House for a vote. It is anticipated that this will occur prior to Thanksgiving, if not sooner.
Concurrently, the Senate is working on its own version of a tax bill. Traditionally, details are not released until a final bill passes the House. Accordingly, the Senate’s legislation will not be released until late November or early December. Once released, members of both chambers will form a conference committee to develop a compromise version of the bill that will ultimately be sent to the President for signature.

What does AAFCPAs advise? 

If form holds true to previous legislation involving significant changes to the tax law, there will likely be many changes to the details released thus far. Some of these items will be left as is, while others will be deleted and replaced by newly written provisions.
Equally, if not more important, the effective date of the legislation remains in flux. Using prior legislation as a guide, some items will apply retroactively, some prospectively, and others will be phased in over multiple years.
From a year end planning perspective, the above uncertainties require that tax forecasting (and related cash flow planning) be done under the presumption that 2017 changes will be minimal. However, once legislation is finalized, AAFCPAs will re-consider 2017 strategies to best address any provisions that either apply retroactively, or change clients’ 2018 tax situations in such a way that it warrants the acceleration of a transaction into 2017.
Individuals and businesses should also be mindful of the impact of Federal legislation on their state tax costs. Since many states use Federal income as the starting point in their calculations, a reduction to business deductions will have the effect of raising the tax base on which state taxes are calculated. (Massachusetts individuals should take note that most changes to the calculation of taxable income requires separate legislation at the State House.)
AAFCPAs will continue to monitor the legislative process and keep you informed as significant changes occur or provisions become better clarified.
If you have any questions please contact your AAFCPAs partner, or Richard Weiner, CPA, MST at 774.512.4078, rweiner@nullaafcpa.com.

Webinar: AAFCPAs’ 2017 Year-End Corporate & Individual Tax Planning

Join AAFCPAs on Tuesday, November 14th from 12-1pm for a live, 1-hour corporate and individual tax planning webinar! AAFCPAs’ Richard Weiner, CPA, MSTBella Amigud, CPA, and Josh England, JD, LLM will provide business owners, finance executives, and their business advisors with valuable information so you may efficiently plan for the upcoming tax season and retain tax benefits to which you are entitled.

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About the Author

Rich has over 30 years of broad tax experience with a specialty in tax planning and consulting for private and publicly-held businesses. Rich has specific expertise in the Software, Bio-Technology, Medical Device, Life Science, Manufacturing, Retail, Professional Service and Publishing industries, as well as U.S. aspects of international taxation. He works extensively with European companies expanding into the U.S. market. Additional areas of focus include companies and stockholders in transition, including structuring of and planning for Mergers & Acquisitions, planning for changes in ownership and management, and adoption of tax methodologies with a view toward the long term. He is well known in his field and is a frequent speaker on a variety of tax related topics.