According to a report produced by KPMG, “New Tax Law
Observations,” the Tax Cuts and Jobs Act is projected to provide a “net tax
reduction of approximately $1.456 trillion” over the next 10 years. The
following are some bullet points highlighting some of the changes to tax form
legislation from the Tax Jobs and Jobs Act signed by President Trump on
December 22, 2017.
Tax Rate – A permanent reduction to the corporate tax rate, from 35% to
21%, begins in 2018. Combined with state and local taxes, the effective rate
under the new law will be 26.5%. This would put the United States below some
European nations, which may help with the goal to raise revenues.
Individual Income Tax – The Tax Cuts and Job Act created many
temporary provisions, some examples include:
Repeals the Obamacare tax on those without
Keeps AMT and increases exemption amounts.
Increases Child Tax Credit from $1,000 to
Eliminates personal exemptions and most itemized
The elimination of personal exemptions and
itemized deductions will hurt some working and middle class taxpayers but is
believed that overall it will boost consumer spending, encourage savings and
investment for more economic growth.
Deduction – Of the four sources of taxable income identified in ASC 740 to
support deferred tax asset realization. Two have been limited due to the Tax
Cuts and Jobs Act.
Eliminates the carryback of all NOL’s arising in
a tax year ending after 2017 but allows carry forwards indefinitely, limited to
80% of taxable income.
Tax planning strategies is limited since NOL’s
generated after 2017 will not expire, therefore, a tax planning strategy would
not provide a source of future taxable income.
The elimination of the carryback option
regarding NOL’s will help ease financial reporting.
AMT tax – The 1986 Tax Reform Act enacted the alternative minimum tax,
which requires corporations to pay some tax even when they have low or no
regular taxable income due to tax breaks they gain from the tax code. The 2017 act repeals AMT for tax years
beginning after 2017. According to PWC’s In Depth report on the new tax reform
“for tax years beginning 2018, 2019, and 2020, the AMT credit carryforward can
be utilized to offset regular tax with any remaining AMT carryforwards eligible
for a refund of 50%.”
Production Incentive – There is a new incentive for United States companies
to produce goods and services domestically and sell them abroad by allowing a
37.5% deduction for foreign derived intangible income. This is consider to be a
special deduction to encourage production and increases revenues to deal with
Please let me know your opinions on the tax changes that
have been highlighted and contact me if you have any further questions or
require additional information.