Tax Reform

Monday, February 5th, 2018
Posted In:
dreamstime_m_104997848

Tax Reform

It Did Happen

by DANA COLE, Executive Director Hardwood Federation

Legislation comprehensively revising the Internal Revenue Code, something that has not been achieved since 1986, passed Congress and was signed by the President in the waning days of 2017. While the 600 page bill addresses a wide range of disparate issues, the Hardwood Federation efforts were focused on the following areas.

S Corporation and Pass Throughs: The Tax Cuts and Jobs Act creates a 20 percent deduction for the non-wage portion of pass-through income. Senators Daines and Johnson had negotiated a 23 percent deduction during Senate negotiations, but this was ratcheted back to 20 percent, coupled with a lowering of the top individual rate to 37 percent. This blended approach creates an effective tax rate for these entities of 29.6 percent. While this rate is higher than what was promised when leadership and the Administration offered their tax reform blue print back in September, it is certainly an improvement over the current treatment of these tax structures. One caveat—service industries are not eligible for the deduction, but that restriction should not affect our hardwood manufacturing facilities.

The 20 percent deduction is limited to the greater of 50% of a business’s W-2 wages or 25% of a business’s W-2 wages plus 2.5% of the unadjusted basis, immediately after acquisition, of all qualified property held in the qualified business for taxpayers with income over $315,000 (married) or $157,500 (individuals). The limitation is phased in over the next $100,000 (married) of taxable income and $50,000(individuals).

Estate Tax: The final bill maintains the estate, gift, and generation-skipping transfer taxes (currently at a 40-percent tax rate).  For estates of decedents dying and gifts made after 2017, the new law doubles the exemption for all three taxes from $5,600,000 to $11,200,000 per person. The gift and estate tax exemptions would remain unified, so any use of the gift tax exemption during one’s lifetime would decrease the estate tax exemption available at death.

Net Operating Losses (NOLs): Current law generally permits a taxpayer to carry back a NOL two years and carry forward a NOL 20 years to offset taxable income. Effective for losses generated in tax years following 2017, the new law limits a taxpayer’s ability to utilize its NOL deduction to 80 percent of taxable income (determined without regard to the deduction). Additionally, carrybacks of all NOLs arising in tax years after 2017 are eliminated and instead would permit all NOLs in this category to be carried forward indefinitely.

Expensing/cost recovery: The new law allows for 100 percent (up from 50 percent in existing law) expensing for investments in new and used property made after Sept. 27, 2017 and before January 1, 2023. A five-year phase down of full expensing begins in 2023.

Sec. 179 Expensing Limits: This benefit was made more robust by increasing the limit to $1 million, with a phase-out beginning at $20 million in total qualified property placed in service. The provision is expanded to include property used to furnish lodging and improvements to nonresidential real property including roofs, heating, ventilation and air-conditioning property, fire protection and alarm systems, and security systems.

Business Interest Expense: This new provision targets interest payments, which companies have been able to deduct from taxation.   Under the new law, the amount of interest expense companies can deduct from their taxes is limited to 30 percent of EBITDA or earnings before interest, taxes, depreciation and amortization.   This runs through 2021 after which the basis will be EBIT, or earnings before interest and taxes. EBIT is a more restrictive test and will likely increase taxes for companies with considerable depreciation or amortization.

State and Local Property Tax Deductions: The new law allows individual taxpayers to deduct for tax years beginning after 2017 up to $10,000 for any combination of state and local income taxes, property taxes, and sales taxes.

Corporate tax rate: The final agreement settled on a 21 percent tax rate for C Corporations, a notch higher than the 20 percent rate in both the House and Senate-passed versions. The corporate alternative minimum tax or AMT is also repealed. Inclusion of AMT at a 20 percent rate in the Senate version threatened to undermine any benefits of a newly lowered 20 percent rate for C Corporations.

Note: Existing tax incentives for standing timber and reimbursements for reforestation costs were left along by tax writers. (This was an area of focus of the September HF Fly-In and we are pleased that Congress recognized the benefits of these incentives to maintain the viability of our nation’s working forests.)

Final Note: All of the renewable energy tax credits that made it into the House tax reform bill were stripped out in conference. Leadership has vowed to pursue a follow-up package of so-called “tax extenders” to address these credits. One of the proposals in the mix is the Biomass Thermal Utilization or BTU Act, which would provide an investment tax credit for installing residential and commercial biomass heating units that run on chips or pellets. The Hardwood Federation has been advocating for this proposal as a means of addressing our residuals issues.

A word of caution though—while we have attempted to describe the relevant provisions and their potential effect on our sector, each company will be impacted in different ways based on your unique circumstances. We strongly urge you to consult with your tax planners and accountants as this new law moves into the implementation phase.

28,484 thoughts on “Tax Reform”

  1. Attractive section of content. I simply stumbled upon your weblog and in accession capital to claim that I acquire in fact enjoyed account your blog posts.
    Any way I will be subscribing in your augment or even I success you get right of entry
    to consistently quickly.

  2. [url=http://vardenafil2.com/]purchase vardenafil[/url] [url=http://zoloft2.com/]order generic zoloft online[/url] [url=http://strattera1.com/]buy strattera in mexico[/url] [url=http://amoxicillin365.com/]amoxicillin 500 125 mg[/url] [url=http://lexapro911.com/]lexapro australia price[/url] [url=http://lasix24.com/]buy lasix without a prescription[/url] [url=http://sildenafil15.com/]sildenafil 100 mg tablet[/url] [url=http://estrace365.com/]estrace tablets price[/url] [url=http://sildenafil150.com/]sildenafil online[/url] [url=http://tadalafil25.com/]tadalafil online[/url] [url=http://albuterol911.com/]albuterol[/url] [url=http://acyclovir365.com/]buy acyclovir 800 mg online[/url] [url=http://diflucan2019.com/]diflucan prices[/url] [url=http://sildalis1.com/]buy sildalis 120 mg[/url] [url=http://cialis15.com/]cialis[/url] [url=http://cialis1.com/]buy generic cialis online[/url] [url=http://viagra125.com/]buy viagra no prescription[/url] [url=http://vermox100.com/]order vermox[/url] [url=http://ventolin2.com/]can you buy ventolin over the counter uk[/url] [url=http://tetracycline2.com/]tetracycline capsules 250 mg[/url]

  3. Autoliker, Working Auto Liker, autolike, Photo Auto Liker, Auto Liker, Status Liker, autoliker, Increase Likes, Status Auto Liker, Auto Like, ZFN Liker, Photo Liker, auto liker, Autoliker, auto like, Autolike International, Autolike

  4. [url=https://acyclovir365.com/]acyclovir 800 mg tablet[/url] [url=https://sildenafil15.com/]generic sildenafil coupon[/url] [url=https://prednisone1000.com/]prednisone 20mg[/url] [url=https://arimidex100.com/]arimidex capsules[/url] [url=https://sildalis1.com/]sildalis canada[/url] [url=https://sildenafil150.com/]sildenafil tablet brand name[/url] [url=https://paxil911.com/]paxil 20 mg[/url] [url=https://diflucan2019.com/]diflucan[/url] [url=https://viagra12.com/]viagra without prescription[/url] [url=https://levitra1000.com/]purchase levitra canada[/url]

  5. I blog often and I genuinely appreciate your content.
    This article has really peaked my interest. I’m going to take a
    note of your website and keep checking for new information about once a week.
    I subscribed to your Feed as well.

  6. Hi my family member! I want to say that this post is amazing,
    great written and include approximately all significant infos.

    I’d like to peer extra posts like this .

  7. I was wondering if you ever considered changing the structure of your website?
    Its very well written; I love what youve got to say.

    But maybe you could a little more in the way of content so people could connect with it better.
    Youve got an awful lot of text for only having 1 or 2 images.

    Maybe you could space it out better?

  8. Hi I am so happy I found your website, I really found you
    by mistake, while I was researching on Askjeeve for
    something else, Anyways I am here now and would just like to say thanks for a marvelous post and a all round interesting blog (I also love the theme/design), I don’t have time to read through it all at the moment but I have book-marked it
    and also added in your RSS feeds, so when I have time I will
    be back to read more, Please do keep up the excellent job.

  9. Please let me know if you’re looking for a author for your weblog.
    You have some really great posts and I feel I would be a good asset.
    If you ever want to take some of the load off, I’d absolutely love to write some
    content for your blog in exchange for a link back to mine.
    Please shoot me an e-mail if interested.
    Thanks!

  10. [url=https://diflucan2019.com/]how much is diflucan 150 mg[/url] [url=https://tadalafil25.com/]tadalafil online[/url] [url=https://avodart2.com/]avodart soft capsules 0.5 mg[/url] [url=https://tadalafil1000.com/]tadalafil tablets[/url] [url=https://estrace365.com/]estrace[/url] [url=https://antabuse911.com/]where can you buy antabuse[/url] [url=https://vardenafil2.com/]vardenafil online[/url] [url=https://lasix24.com/]lasix[/url] [url=https://strattera1.com/]where can i buy strattera online[/url] [url=https://cialis1.com/]cialis[/url]

  11. What’s Going down i am new to this, I stumbled upon this I have discovered It
    absolutely useful and it has helped me out loads. I’m hoping to contribute &
    help other users like its aided me. Great job.

  12. Hello there, I found your blog by way of Google while searching for
    a related subject, your website got here up, it looks great.
    I have bookmarked it in my google bookmarks.
    Hi there, simply was alert to your blog through Google, and
    located that it’s truly informative. I’m
    gonna watch out for brussels. I will appreciate when you proceed this in future.
    Many other folks shall be benefited from your writing. Cheers!

  13. Simply wanna remark on few general things, The website style is perfect, the content material is very fantastic. “I have seen the future and it doesn’t work.” by Robert Fulford.

  14. Unquestionably believe that which you said. Your favorite
    reason seemed to be on the net the easiest thing to be aware of.
    I say to you, I definitely get annoyed while people think about worries that they just don’t know about.

    You managed to hit the nail upon the top as well as defined out the whole thing without having side-effects
    , people could take a signal. Will probably be back to
    get more. Thanks

  15. Thanks for your personal marvelous posting! I genuinely enjoyed reading it, you
    can be a great author.I will remember to bookmark your blog and will
    eventually come back very soon. I want to encourage you
    to ultimately continue your great writing, have a nice evening!

Leave a Reply

Your email address will not be published. Required fields are marked *