Special Report: Proposed GOP Tax Cuts and Jobs Act for Businesses

November 9, 2017

  The United States House of Representatives recently released proposed legislation entitled the “Tax Cuts and Jobs Act.” The proposal contains major changes to business income taxation, which have been summarized below. Note that this legislation is only proposed; it is not law.

  • Corporate tax rate would be a flat 20%
  • 100% immediate ‘bonus’ depreciation for property placed in service between September 27, 2017 and before January 2023

Observation  – The new ‘bonus’ provisions would be available for the taxpayer’s first use of property, repealing the current requirement that original use of the property begin with the taxpayer.

  • Section 179 expensing increased to $5 million with a $20 million phase-out
  • Businesses with average gross receipts less than $25 million would be allowed
  • Cash method accounting
  • Exemption from uniform capitalization rules for inventories
  • Use of the completed contract method for long-term construction contracts
  • All businesses would be subject to a limitation on interest expense equal to 30% of the business’s adjusted taxable income
  • Net operating losses would be limited to 90% of taxable income
  • The net operating loss carryback would be no longer allowed after 2017
  • Like-kind exchange deferral rules would apply only to ‘real property’
  • Entertainment expenses would not be allowed as a deduction
  • Meals would continue being subject to the 50% deduction limitation
  • The deduction for income attribute to domestic production activities would be repealed
  • Repeal of the work opportunity credit
  • Credit for increasing research activities would be maintained

  RDHB CPAs provides its clients with personalized tax, business planning, accounting, auditing, and wealth management services. The items discussed in this report are just a few highlights of the business changes in the new tax proposal. For more information on the new tax proposal, please contact David Feor, CPA at dfeor@rdhbcpa.com, or a member of your RDHB team.

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