Presentation by Taxation Business Committee

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Presentation transcript:

Presentation by Taxation Business Committee 6.22.2017 Upcoming Tax Reform Presentation by Taxation Business Committee 6.22.2017

Proposed Tax Reform Current House Blueprint Trump Plan Corporate Tax Rate 35% 20% 15% Individual Tax Top Marginal Rate Ordinary Income: 39.6% Capital Gains/Dividends: 20%-23.8% Pass-Through Rate: 0% AMT Regime Ordinary Income: 33% Capital Gains/Dividends: 16.5% Pass-Through Rate: 25% AMT Regime Repealed Ordinary Income: 35% Capital Gains/Dividends: 20% Pass-Through Rate: 15% Net Investment Income Tax (NII) 3.8% 0% Interest Deduction All Interest Deductible Subject to a Number of Limitations Deductible up to Interest Income Only Elect: Deduct Interest or Capital Expenditures Capital Expenditures Depreciated Over Life of Asset Full Cost Immediately Deducted (other than land) Carried Interest Capital Gains Rate (20% - 23.8%) No proposal Ordinary Income Rates (35% is the Highest Marginal Rate) Historical CFC Earnings No Tax Until Repatriation One-time Tax of 8.75% (Earnings Held in Cash or Equivalents); 3.5% (Other). Payable in Installments over 8 Years One-time Tax of 10% on All unrepatriated Foreign Earnings Future CFC Earnings Immediate Taxation of Subpart F Income; Other Income Deferred Territorial Tax System

Tax Planning Opportunities Accounting methods can result in permanent tax savings Accelerate deductions (ex: year-end bonus, prepaid expenses) Defer recognition of income Deferral or acceleration x difference in rate = permanent benefit Utilization of tax attributes (ex: NOLs) E&P Planning for CFCs to reduce repatriation “toll charge”

Comments Reduced Corporate Tax rate would help attract increased investments from abroad reduce the incentive for MNC’s to book profits offshore Reduced rate for flowthrough income would spur both job growth and the economy creates strong incentives for owners to hold investments or earn income leading to possible abuse gives the IRS greater incentive to challenge payments made to owners provisions may be needed to prevent abuses

Update Trump administration is aiming for tax reform legislation this fall A unified proposal or discussion has not yet been unveiled There appears to be a lack of consensus among House and Senate lawmakers, as well as top tax officials leading tax reform efforts within the Trump administration. There is a significant level of uncertainty in terms of the overall direction, detail, timing, and transition of reform.