Tax Reform | Trump Administration | Trump Tax Reform | Rea CPA

Tax Reform: Banning The Banter

Tax Reform | Trump Administration | Ohio CPA Firm
We often say that summer is the best time to identify and implement a tax planning strategy – and that holds true today. Just because there is uncertainty in Washington doesn’t mean the same should be true for your business. There are still solid strategies you can put into action now

Since President Donald Trump took office earlier this year there has been a lot of buzz about his administration’s stance on a number of high profile issues. As a result, we’ve found ourselves on the receiving end of questions about potential policy changes and how businesses could be impacted in the months and years ahead.

In some ways, answering questions about the future of tax reform and the Affordable Care Act is difficult because we, like you, are still unsure about many of the details. But it’s also easy because, even if a concrete plan were available, transitioning that plan into law will be a long, drawn-out process that requires much debate, discussion, alterations and time.

The simple truth is that we don’t have any answers at this time – no one does.

Read Also: A Primer To President Trump’s Proposed Tax Policy Changes

The Year Ahead

Let The PATH Act Be Your Guide

Key Tax Provisions Made Permanent
By The PATH Act:

15-year recovery period for qualified leasehold improvements, qualified restaurant buildings and improvements, and qualified retail improvements
Extension and modification of the Research & Experimentation Tax Credit, including allowing certain small businesses to claim the credit against AMT liability and employer’s payroll (i.e. FICA) liability
179 expensing limitations and phase out increased to $500,000 and $2 million respectively
Exclusion of 100 percent of gain on certain small business stock
Extension of tax-free distributions from IRAs for charitable purposes
Earned Income Tax Credit
Child Tax Credit

Key Provisions Extended Through 2019

Extension of the New Markets Tax Credit in which Congress authorized $3.5 billion allocation of credits each year from 2015 until 2019
Extension and expansion of the Work Opportunity Tax Credit. Bonus depreciation is extended at 50 percent for 2015 through 2017, 40 percent for 2018, and 30 percent for 2019

We often say that summer is the best time to identify and implement a tax planning strategy – and that holds true today. Just because there is uncertainty in Washington doesn’t mean the same should be true for your business. There are still solid strategies you can put into action now – particularly because the likelihood of tax reform passing through Congress this year is slim.

Not only are we already halfway through the year, Congress is still on track to take its annual August recess, which means nothing will likely move forward until September. And, even then, with the government’s fiscal year concluding on Sept. 30, it will probably be the end of the calendar year before anything tangible makes its way through the legislation.

In fact, there have been years in which we’ve seen a lot of tax changes come through in December or January of the following year. However, with the sort of overhaul being discussed, I believe it’s unlikely that anything will be pushed through or made retroactive in 2017. That being said, there are still quite a few provisions business owners can take advantage of, such as 179 expensing limitations, bonus depreciation and the research and development credit. The Protecting Americans From Tax Hikes Act of 2015 (PATH Act), which was made retroactive to Jan. 1, 2015, made several key tax provisions permanent while extending others. And while tax reform may eventually uproot the PATH Act, for current tax planning purposes, our course of action is all but certain.

Now, looking further into the future, we could be facing a completely different scenario. If you look through the material being passed around, you’ll see a lot of proposed tax code changes that would impact the corporate rate, pass-through rate and even individual rates. The validity and feasibility of these scenarios, however, is yet to be seen. It’s important to remember that the legislative process moves very slowly and there is going to be a lot of lobbying back and forth before we get to see anything close to a final proposal.

Hold The Phone

Even though the headlines are dire, I would urge you to focus less on uprooting your company’s financial strategy based on rhetoric and current events and more on summer fun and family time.

While there are still topics you’ll want to talk about with your CPA, tax reform doesn’t have to be one of them – yet. At this time, the only time you really need to call your financial advisor is when you are considering a transaction or other major decision that could have a significant impact on your business. A good reason to pick up the phone would be if you were in the market to buy a business or a piece of real estate, sell your business, make a large equipment purchase or reconsider your choice of entity, to name a few. These are conversations that still need to take place regardless of what’s going on in Congress. Your advisor will be able to help you consider how a particular decision can impact your business and, based on that information, whether it makes more sense to wait or forge ahead.

In the meantime, check out our website regularly for tax updates and insight into timely developments. Or, if you are in the process of considering a major transaction, give your Rea advisor a call to find out if it makes sense and whether the timing is right.

By Lesley Mast, CPA, MAcc – Taxation (Wooster office)

Check out these episodes of unsuitable on Rea Radio for additional insight

Learn more about tax reform and how businesses everywhere can prepare for the coming changes by listening to episode 70 of unsuitable on Rea Radio. You can also get some great insight on legislative issues closer to home with Greg Saul on episode 86 of the podcast.