WEST PALM BEACH, Fla. (PRWEB) November 03, 2017
Congress just released the new bill for tax reform, and one of the important things to understand is that this plan would be implemented for 2018 - not for 2017. “With business, the corporate tax rates are going to decrease from 35 to 20 percent, there will be a limit on business interest deduction, and immediate expensing is going to go up significantly,” said Tax Reform Expert and CEO of Engineered Tax Services (ETS), Julio Gonzalez. Repatriation of foreign profits will be taxed at 12 percent and businesses will no longer be able to deduct entertainment expenses. From here, Congress will have time to mark-up the bill. Once that concludes (within the week), the bill will go to the Senate for mark-ups. The goal is to have President Trump sign it before the end of the year. Mr. Gonzalez agrees with these policy highlights and continues to push for tax reform to get done by the end of the year.
You can see the summary of the tax reform bill from Congress below:
Business-general:
- Permanently cuts corporate tax rate from 35% to 20%
- Limits businesses interest deduction
- Immediate expensing of business equipment (expires in five years)
- Eliminates many tax credits, deductions, and exclusions, such as breaks for moving expenses and employee achievement awards
- New one-time tax rate on U.S, companies stockpiles foreign profits will be significantly higher than in previous Republican plans, generating money to meet the $1.5 trillion target – 12% tax rate to cash in foreign subsidiaries and a 5% tax rate to illiquid investments
- Businesses would lose the ability to deduct certain executive compensation above $1 million
- Life insurers would lose some tax breaks
- Banks with assets exceeding $50 billion would get no deduction for certain payments to the Federal Deposit Insurance Commission
- Tax-exempt bonds could no longer be used to build professional sports stadiums
- Private universities with assets exceeding $100,000 a student would pay a new 1.4% excise tax on their net investment income
- Businesses would no longer be able to deduct entertainment expenses (though today’s rules for business meals would remain)
S corporations and partnerships:
- Passive owners of pass-through businesses would get the 25% rate, but those actively involved in the business would have a different standard. The bill starts with the presumption that 70% of that pass-through income is attributable to labor and would be taxable at higher individual income-tax rates. For some that would create a blended top tax rate of about 35%, which those businesses and their influential trade groups may argue isn’t low enough
- For professional services firms, including lawyers and financial-services professionals, the default rate would be 100% labor income, meaning they would get none of the benefit of the 25% tax rate for pass-through businesses
- That proposal may add new layers of complexity to the tax code. Business aren’t bound by those default rates, and they will hire tax lawyers and accountants who will be allowed to argue to the IRS that the firms contain capital investments. That could entitle them to more income at the lower business rates
Multinational Companies:
- U.S. companies would, generally, no longer pay taxes on their active foreign income, a move corporations and Republicans say is important in a competitive international landscape
- To prevent companies from shifting profits abroad, the bill creates a new 10% tax on U.S. companies’ high-profit foreign subsidiaries, calculated on a global basis
- New restrictions on foreign companies operating in the U.S. They would face a tax of up to 20% on payments they make abroad from their U.S. operations. That is designed to prevent them from loading up their U.S. operations with deductions and pushing profits to low-tax jurisdictions. Companies could lower those taxes by agreeing to have more of their operations in the U.S. tax system
- Many companies would face a new limit on their interest deductions, which would be capped at 30% of earnings before interest, taxes, depreciation and amortization, which is a measure of cash flow. Real-estate firms and small businesses would be exempt from that limit
Individual:
- Doubles exemption for Estate Tax immediately and then repeals estate tax in full in 2024
- Limits deductions for state and local tax payments
- Keeps ability to put $18,000 pre-tax funds per year into 401(k) savings accounts
- Individual tax brackets to four: 12%, 25% (starts at $90,000 for married couples / $45,000 for individual) 35% (starts at $260,000 for married / $200,000 for individual) and 39.6% (starts at $1 million for married / $500,000 for individuals)
- Increases child credit from $1,000 to $1,600
- New $300 per person credit for filers, their spouses and non-child dependents such as college students (expires in five years)
- Nearly doubles the standard deduction
- Repeals the alternative minimum tax
- Repeals an itemized deduction for medical expenses, a crucial provision to households with extraordinary health-care costs
- Repeals the tax credit for adoption
- Repeals the deduction for student-loan interest
- Limits the home mortgage-interest deduction--new home purchases limit interest deduction to loans up to $500,000 (down from $1 million today); existing loans would be grandfathered
- No increase to charitable donations to offset higher standard deduction that will limit the benefit of making charitable deductions
- Estate-tax exemption doubled immediately and full repeal in 2024 – after repeal, heirs would continue to get something known as a “step-up in basis.” That means they would only owe capital-gains taxes on the difference between the sales price of an asset they inherit and the value of the asset at the previous owner’s death. Previous versions of estate-tax repeal had limited that benefit
About Julio Gonzalez:
Tax reform expert, Julio Gonzalez, works weekly in Washington, D.C. to advise on tax reform. He is the go-to tax expert representing Hispanic 100, Hispanic Council, and family offices. Mr. Gonzalez is a regular public speaker on a national level regarding tax reform and tax sophistication for wealth preservation.
Besides being a go-to tax reform expert, Mr. Gonzalez founded the Gonzalez Family Office and is the CEO and Founder of Engineered Tax Services, Inc. (ETS). ETS is the country's largest specialty tax engineering firm which specializes in the preservation of wealth and United States' job creation through IRS engineering-based services to include research and development manufacturing tax credits, energy tax incentives studies, cost segregation deprecation studies for buildings, and disposition studies. In addition to ETS, Mr. Gonzalez started several other family operational companies including his family office, Gonzalez Family Office (GFO), Calle Gato Ocho (CGO), Engineered Venture Services (EVS) and Engineered Family Office (EFO). For more information, please visit EngineeredTaxServices.com.
