TAX REFORM 2017 – Other Business Issues
***This blog has been updated on December 21, 2017 to reflect the tax bill passed by Congress***
In the past month, the House and Senate have both voted along party lines to approve their own versions of comprehensive tax reform legislation. In order to gather the necessary votes to pass their respective chambers, Republican leaders made some significant modifications during the process. In a series of blog posts, we will cover the major pieces of both bills and compare them to current law. You can see all tax reform 2017 related blogs here.
This blog will cover the topic of other business issues. Many parts of the tax code will be changed by this bill, but the changes may not warrant a full blog post to explain. Below are some of the important changes addressed by the new legislation that haven’t been covered previously in a separate blog.
| CONFERENCE COMMITTEE APPROVED BILL | HOUSE BILL | SENATE BILL | |
| CASH ACCOUNTING | Increases small business eligibility for small businesses, from $5 million to $25 million | Increases small business eligibility for small businesses, from $5 million to $25 million | Increases small business eligibility for small businesses, from $5 million to $15 million |
| BUSINESS CREDITS AND DEDUCTIONS | Modifies, but does not eliminate, the rehabilitation credit and the orphan drug credit, while also limiting the deduction for FDIC premiums and retaining certain other preferences eliminated in the House version | Eliminates credits for orphan drugs, energy, private activity bonds, rehabilitation, and contributions for capital, among others | Modifies, but does not eliminate, the rehabilitation credit and the orphan drug credit, while also limiting the deduction for FDIC premiums and retaining certain other preferences eliminated in the House version |
| INTERNATIONAL INCOME | Moves to a territorial system with anti-abuse rules and a base erosion minimum tax of the excess of 10 percent of modified taxable income over an amount equal to regular tax liability | Moves to a territorial system with base-erosion rules including the inclusion of 50 percent of excess returns by controlled foreign corporations in U.S. shareholders’ income, and an excise tax on payments made to foreign firms unless claimed as effectively connected income | Moves to a territorial system with anti-abuse rules and a base erosion minimum tax of the excess of 10 percent of modified taxable income over an amount equal to regular tax liability |
| DEEMED REPATRIATION | Enacts deemed repatriation of currently deferred foreign profits at a rate of 15.5 percent for liquid assets and 8 percent for illiquid assets | Enacts deemed repatriation of currently deferred foreign profits at a rate of 14 percent for liquid assets and 7 percent for illiquid assets | Enacts deemed repatriation of currently deferred foreign profits at a rate of 14.49 percent for liquid assets and 7.49 percent for illiquid assets |
| ESTATE TAX | Doubles the estate tax exemption | Increases exemption to $10 million, indexed for inflation, with repeal after six years | Doubles the estate tax exemption |
| INDIVIDUAL MANDATE | Reduces the individual mandate penalty to $0 | No change | Reduces the individual mandate penalty to $0 |
| NET OPERATING LOSSES | Eliminates net operating loss carrybacks while limiting NOL carryforwards to 80 percent of taxable income | Eliminates net operating loss (NOL) carrybacks while providing for indefinite net operating loss carryforwards, increased by a factor reflecting inflation and the real return to capital, while restricting the deduction of NOLs to 90 percent of current year taxable income | Eliminates net operating loss carrybacks while limiting NOL carryforwards to 80 percent of taxable income |