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Tax reform law transforming business and tax planning

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Row of men in suits seated at tableThe Tax Cuts and Jobs Act represents a sweeping overhaul of individual, business and international taxes. President Donald Trump signed the bill on Dec. 22, 2017, meaning the effects must be included in 2017 financial statements. The bill’s tax changes are broad and transformational, and will affect all types of businesses in every industry.

Grant Thornton breaks down the new tax reform law and provides a detailed analysis of major provisions, changes and new additions.

What provisions made the cut in the Republican tax reform bill? Download our detailed analysis.Key changes and areas of resolution in the final version include:

  • Setting a top corporate rate of 21% (up from 20% in both bills) effective for tax years beginning in 2018
  • Setting a top individual rate of 37% (lower than the original proposals in either bill
  • Creating a 20% deduction for pass-through income, with provisions enhancing the deduction for capital intensive and real estate businesses with low wage expense, lowering the income allowance for professional services but providing an exception for architects and engineers, and allowing trusts and estates to use the deduction
  • Removing the worldwide limit on interest deductions
  • Increasing the rate on the one-time tax on unrepatriated earnings to 15.5% on cash and cash equivalents and 8% on other assets
  • Repealing the corporate AMT
  • Limiting NOL deductions to 80% of taxable income (down from 90% in earlier versions)
  • Retaining the individual AMT with higher exemptions and higher phase-out thresholds
  • Allowing up to $10,000 in state and local income or property taxes
  • Removing a provision requiring basis of securities to be determined on a first-in, first-out method
  • Retaining the estate tax with a higher exemption amount
  • Expanding the limit on a public company’s ability to deduct compensation under Section 162(m)
  • Replacing the current system of taxing U.S. corporations on foreign earnings of their foreign subsidiaries when the earnings are repatriated with a partial territorial system

  • While encouraging economic growth over simplification, many of the new provisions are extremely complex. The 500 pages of legislative language appear to include not only technical glitches, but also provisions that have unintended or surprising results when implemented. Other areas appear ambiguous and open to interpretation.

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    Contact
    Dustin Stamper
    Director, Washington National Tax Office
    T +1 202 861 4144

    David Sites
    Partner, Washington National Tax Office
    T +1 202 861 4104

    Andy Cordonnier
    Partner, Washington National Tax Office
    T +1 202 521 1502

    Eddie Adkins
    Partner, Washington National Tax Office
    T +1 202 521 1565

    Sharon Kay
    Partner, Washington National Tax Office
    T +1 202 861 4140

    Shamik Trivedi
    Senior Manager, Washington National Tax Office
    T +1 202 521 1511