In 2017, the Tax Cuts and Jobs Act was signed into law—the most extensive tax reform legislation enacted in more than three decades.
The measure is having a dramatic impact on both individuals and corporations. The statute’s laundry list of provisions significantly affect corporate taxpayers, according to the Tax Foundation, including provisions that:
reduce the corporate income tax rate from thirty-five percent to twenty percent;
- eliminate the corporate alternative minimum tax;
- tax pass-through business income at a maximum rate of twenty-five percent, subject to anti-abuse rules;
- allow for capital investment, except for structures, to be fully and immediately deductible for five years, and increase the Section 179 expensing limit from $500,000 to $5 million, with an increased phaseout threshold;
- limit the deductibility of net interest expense on future loans to thirty percent of earnings before interest, taxes, depreciation, and amortization for all businesses with gross receipts of $25 million or more;
- restrict the deduction of net operating losses to ninety percent of net taxable income and allow net operating losses to be carried forward indefinitely, increased by a factor reflecting inflation and the real return to capital;
- eliminate net operating loss carrybacks;
- eliminate the domestic production activities deduction (Section 199) and other business deductions and credits; and
- create a territorial tax system, exempting from U.S. tax 100 percent of dividends from foreign subsidiaries.
Of course, this complex legislation—enacted rather quickly—has produced a plethora of regulations and guidance, which, not surprisingly, have raised a number of unresolved issues for corporate taxpayers. And the beat (pun intended) still goes on, with additional regulations and guidance expected in the coming months and years.
It would be impossible to cover every change to the tax law in the pages of this magazine, but we wanted to highlight what’s currently happening regarding several key provisions and regimes. This cover feature is divided into five parts:
Part II: GILTI, FDII, and FTC Guidance and International Tax Planning by Amanda Varma
Part III: Moving to the BEAT by Sam K. Kaywood and Ryan J. Kelly
Part IV: TCJA Changes to Section 168(k) by Ellen McElroy
Part V: Section 965 Transition Tax by Jay Singer
We hope this article enhances your understanding of this landmark legislation. Let us know what you think.
