According to a report produced by KPMG, “New Tax LawObservations,” the Tax Cuts and Jobs Act is projected to provide a “net taxreduction of approximately $1.456 trillion” over the next 10 years. Thefollowing are some bullet points highlighting some of the changes to tax formlegislation from the Tax Jobs and Jobs Act signed by President Trump onDecember 22, 2017. · CorporateTax Rate – A permanent reduction to the corporate tax rate, from 35% to21%, begins in 2018. Combined with state and local taxes, the effective rateunder the new law will be 26.5%.
This would put the United States below someEuropean nations, which may help with the goal to raise revenues. · Individual Income Tax – The Tax Cuts and Job Act created manytemporary provisions, some examples include:§ Repeals the Obamacare tax on those withouthealth insurance.§ Keeps AMT and increases exemption amounts.§ Increases Child Tax Credit from $1,000 to$2,000.§ Eliminates personal exemptions and most itemizeddeductions.The elimination of personal exemptions anditemized deductions will hurt some working and middle class taxpayers but isbelieved that overall it will boost consumer spending, encourage savings andinvestment for more economic growth.
· NOLDeduction – Of the four sources of taxable income identified in ASC 740 tosupport deferred tax asset realization. Two have been limited due to the TaxCuts and Jobs Act.§ Eliminates the carryback of all NOL’s arising ina tax year ending after 2017 but allows carry forwards indefinitely, limited to80% of taxable income. § Tax planning strategies is limited since NOL’sgenerated after 2017 will not expire, therefore, a tax planning strategy wouldnot provide a source of future taxable income.
The elimination of the carryback optionregarding NOL’s will help ease financial reporting. · Repeal ofAMT tax – The 1986 Tax Reform Act enacted the alternative minimum tax,which requires corporations to pay some tax even when they have low or noregular taxable income due to tax breaks they gain from the tax code. The 2017 act repeals AMT for tax yearsbeginning after 2017. According to PWC’s In Depth report on the new tax reform”for tax years beginning 2018, 2019, and 2020, the AMT credit carryforward canbe utilized to offset regular tax with any remaining AMT carryforwards eligiblefor a refund of 50%.
” · U.S.Production Incentive – There is a new incentive for United States companiesto produce goods and services domestically and sell them abroad by allowing a37.5% deduction for foreign derived intangible income.
This is consider to be aspecial deduction to encourage production and increases revenues to deal withfiscal needs. Please let me know your opinions on the tax changes thathave been highlighted and contact me if you have any further questions orrequire additional information.