Is tax reform really happening? Answers to 8 key tax reform questions
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Answers to key tax reform questions Is tax reform really happening?
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Transcript of Is tax reform really happening? Answers to 8 key tax reform questions
Answers to
key tax reform questions
Is tax reform really happening?
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Is tax reform really happening?The odds for tax reform are better than in decades, but there are still major obstacles such as the cost, the lack of 60 votes in the Senate, competing priorities and the potential political backlash.
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When will tax reform be enacted?Tax reform is difficult and complex and will likely take nearly all of 2017 and could even spill well into 2018.
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When would tax law changes become effective?Most changes are likely to be prospective beginning in 2018 or later, but individual provisions and “loophole closers” could be made retroactive to as early as the beginning of 2017.
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What are Republicans actually proposing?House Republicans want to repeal targeted tax benefits to pay for a rate cut that would lower the top rate to 20% for corporations, 25% for pass-through businesses and 33% for individuals. In addition, Republicans want to move toward a more cash-flow consumption-based tax by allowing full expensing and making business taxes border adjustable.
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How would full expensing work?The House plan would allow businesses to fully deduct property purchased domestically in the year the property is placed in service (including buildings), but would not allow a deduction for interest expense in excess of interest income (Special rules would exempt banks and other financial institutions).
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What does border adjustability mean?The House plan, details of which are still forthcoming, would generally not allow a deduction for any imports and would exclude export receipts from taxable income. This is a controversial provision expected to at least raise $1 trillion and pay for other aspects of tax reform.
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What’s the plan for international taxes?The House plan would move the U.S. to a territorial tax system essentially exempting offshore earnings from tax. To transition and raise revenue, a one-time tax on previously unrepatriated foreign earnings would be imposed at a rate of 8.75% for cash and cash equivalents and 3.5% for everything else. The tax would apply regardless of whether any of those earnings are repatriated, but could be paid over eight years.
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What are the next steps for tax reform?“House Republicans are currently drafting a full bill based on their tax reform blueprint, and are working closely with the administration. This bill will likely be introduced sometime in the Spring, and Speaker Paul Ryan is aiming to achieve House passage by the end of July. The Senate is months behind, however, and is planning either to produce its own bill or modify the House bill.”
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DisclaimerThis Grant Thornton LLP presentation is not a comprehensive analysis of the subject matters covered and may include proposed guidance that is subject to change before it is issued in final form. All relevant facts and circumstances, including the pertinent authoritative literature, need to be considered to arrive at conclusions that comply with matters addressed in this presentation. The views and interpretations expressed in the presentation are those of the presenters and the presentation is not intended to provide accounting or other advice or guidance with respect to the matters covered.
For additional information on matters covered in this presentation, contact your Grant Thornton, LLP adviser.
