These are just a few of the “not so well publicized” impending tax law changes that I’ve had to read through.
ALCOHOL TAX REDUCTION – Reduced Excise Tax on beer from $18 per barrel to $16 (on the first 6 million barrels (1 barrel = 31 gallons) brewed. So-called Micro-Breweries will see a reduction from $18 to just $3.50 on the first 60,000 barrels. There is a similar reduction of tax on wine, but it is too long and complicated to go into.
Lobbyists for the alcohol industry were working overtime and evidently very successful.
FORM A CORPORATION IN THE U.S. VIRGIN ISLANDS – If a corporation is formed in U.S. Virgin Islands, it is classified as a domestic corporation for U.S. Virgin Islands purposes and a foreign corporation for U.S. tax purposes. Such a corporation is only subject to U.S. tax if it has U.S.-source income or income effectively connected with the conduct of a trade or business in the United States.
International tax planning will be alive and well after passage of the bill.
NET OPERATING LOSS DEDUCTION – limits the net operating loss deduction to 80 percent of taxable income (determined without regard to the deduction) in taxable years beginning after December 31, 2023. UNLESS you are a Property and Casualty Insurance Company, NOLs of property and casualty insurance companies may be carried back two years and carried over 20 years to offset 100 percent of taxable income in such years.
Insurance companies have deep pockets and plenty of lobbyists. Seems they can be excluded from certain rules.
MEALS PROVIDED TO EMPLOYEES FOR THE CONVENIENCE OF THE EMPLOYER – disallows an employer’s deduction for expenses associated with meals provided for the convenience of the employer on the employer’s business premises.
NOTE: I can’t imagine that any Lobby was involved in influencing this one. During tax season I often order food to be brought in for employees when our busy schedules can interfere with lunch or dinner breaks. A simple thing like a client showing up late for an appointment, or a client having an issue that requires more time than what we had allocated can cause a domino effect where each successive appointment is now behind.
EXCESSIVE EMPLOYEE RENUMERATION – adds a transition rule in connection with the expansion of section 162(m) so that the proposed changes do not apply to any remuneration under a written binding contract which was in effect on November 2, 2017.
We’re not going to let a company take a deduction for unreasonably high salaries to certain individuals, unless they were already doing it before we passed this rule.
529 PLAN for IN UTERO – The proposal specifies that nothing in Code section 529 shall prevent an unborn child from qualifying as a designated beneficiary. For these purposes, an unborn child means a child in utero, and the term child in utero means a member of the species homo sapiens, at any stage of development, who is carried in the womb.
I admit that I did not research where this came from, but it appears to give rights to an unborn child.
MISSISSIPPI RIVER DELTA FLOOD – Under the proposal, in the case of a personal casualty loss which arose in the Mississippi River Delta flood disaster area on or after August 11, 2016, where such loss was attributable to the severe storms and flooding giving rise to the Presidential declaration, such losses are deductible without regard to whether aggregate net losses exceed ten percent of a taxpayer’s adjusted gross income, although in order to be deductible the losses must exceed $500 per casualty. Additionally, such losses may be claimed in addition to the standard deduction.
I do not know why a casualty loss experienced in the Mississippi River flood would be more deductible than say, a person who was flooded in Texas or Florida by the hurricanes, but evidently it is.
Source: The November 15th markup by the Senate Committee on Finance https://www.jct.gov/publications.html?func=startdown&id=5037
At the end of the day, the only thing for certain is that there will be more changes. As the House and Senate Bills are reconciled there will be changes. After the final Bill becomes law and points of it are adjudicated in appeals and the courts, there will be changes. In fact, the Department of Treasury will no doubt issue corrections and adjustments during the initial implementation.
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