Tax Reform and Jobs Act Presentation Highlights

On Thursday, February 15, the MacArthur Business Alliance hosted an informative presentation and answered audience questions on the recent Tax Reform and Jobs Act legislation.  Four tax professionals covered topics that were wide-ranging and specific to businesses in our area. Michael Dickson, Treasurer of the Board of Directors of the MacArthur Business Alliance and from the Office of Michael T. Dickson, CPA, P.C. was the organizer of the event.  The other speakers were Greg Garritano, CPA, of Garritano & Associates; Vito LaMonica, Jr., E.A., of Michael J. Berger & Co., CPAs, LLP; and Saranto Calamas, CPA, of the Office of Saranto Calamas, CPA, P.C.

The presentation began with an outline of changes that would affect all businesses, regardless of how they were structured. The following is an outline of this portion of the presentation.  Topics included:

Changes that affect all businesses (includes all business structures)

• Sec 1031 exchanges
  • Deferral of Capital gain for like kind property when a similar asset is purchased
  • Prior to 2018, sec 1031 exchanges applied to real estate and certain other property
  • 2018 and after – 1031 exchanges will only apply to real estate

• Employer tax credit for paid family leave
• Cutbacks on entertainment expenses that can be deducted
• Sexual Harassment settlements are not deductible if subject to an NDA.
  • Denies a business any tax deduction for any settlement, payout, or attorney fees related to a sexual harassment or sexual abuse claim, if the payments are subject to a nondisclosure agreement.
  • Which effectively means that businesses will now have to choose whether to require an NDA, or receive a tax deduction for the costs associated with a sexual harassment or abuse lawsuit
• Corporate Alternative Minimum Tax (“AMT”) repealed
• Repeal of Domestic Production Activities Deduction (Section 199)
• Five-year write-off of Research & Experimentation (“R&E”) expenses
  • For taxable years beginning after 2021, specified R&E expenses are required to be capitalized and amortized over a 5-year period
• Employer Deduction for Fringe Benefit Expenses limitations
  • Reimbursement of commuting expenses
  • Repealed deduction for employee, entertainment
• Increased gross receipts threshold to $25 million
  • Cash method of accounting
  • Accounting for inventories
• UNICAP

The presentation continued with discussion of tax law specific to C Corporations, including a lower taxable rate; a change subject to double taxation, where the company can be taxed at corporate level, and again when the owner takes a profit dividend distribution and the modification of the Net Operating Loss Deduction.

The impact on Sole proprietors (unincorporated), Partnerships, LLC’s, and S Corporations, known as “pass-through” entities, was also discussed in great detail.  The law is designed to make sure that the lower tax rates are not abused, to accomplish this they have added income limitations. (For more information on this, please email info@macarthurbusinessalliance.com for a copy of the presentation.)

Did you know that the tax cuts and jobs act increases first-year bonus depreciation to 100%. It goes into effect for any long-term assets placed in service after September 27, 2017. The 100% bonus depreciation amount remains in effect from September 27, 2017 until January 1, 2023. After that, first-year bonus depreciation goes down as follows:

• 80% for property placed in service after December 31, 2022 and before January 1, 2024.
• 60% for property placed in service after December 31, 2023 and before January 1, 2025.
• 40% for property placed in service after December 31, 2024 and before January1, 2026.
• 20% for property placed in service after December 31, 2025 and before January 1, 2027.

The impact on business consequences of personal changes reviewed, and topics included:

• Tax Brackets Affect Entity Choice
• Moving Expenses Reimbursements
• Limitation on Business Losses
• Other Business Provisions
• Alternative Minimum Tax

The CPAs also covered NYS’s response to the federal changes: decoupled from federal law; charitable contributions to benefit New Yorkers;  statewide employer compensation tax, and unincorporated business tax.

Don’t miss out on any of MacArthur Business Alliance’s informative events. Keep checking back her to our website for the exciting things that will be planned in 2018.