U.S. Tax Reform (Part 6) Tax deductions repealed or modified

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On December 22, 2017, President Trump signed into law the U.S. tax reform legislation, also known as the Tax Cuts and Jobs Act. This new legislation includes major changes to the previously existing tax system and will affect both businesses as well as individuals. 


Generally, the new legislation applies for tax years beginning after December 31, 2017. The IRS is working to develop guidance regarding the implementation of the U.S. tax reform legislation and publishes statements as it becomes available. Below are the highlights of the new corporate tax provisions which may have an impact on your business.
 

Tax deductions repealed or modified

A number of tax deductions have been repealed/modified by the U.S. tax reform Act in order to simplify the tax code and limit the loss of revenue for the treasury. This includes amongst others:

• The domestic production activities deduction has been repealed and will impact U.S. manufacturers
• Starting in 2022, research and experimental (R&E) expenses must be capitalized and amortized over 5 years (15 years if attributable to research conducted outside the U.S.)
• Entertainment expenses are no longer deductible
• Transportation benefits provided to employees are no longer deductible by the employer, but remain excluded from the employee’s taxable income
• Meals provided on company premises is now subject to the general 50% deduction limit

The corporate alternative minimum tax (AMT) is repealed, unlike the individual AMT. However, given the main impact of the corporate AMT was to reduce the use of NOL by 10% and the new NOL deduction is limited to only 80%, these new rules will probably not lead to an overall benefit.

 

Authors: Antoine Guillaud, Ben Troch, Pierre Arrouy

Chicago January 31st 2018

 

This article only includes general information and IMS is not, by means of this article, rendering any tax, legal or other professional services. This communication should not be relied upon for any decision or action that may have an impact on your business. Prior to taking any action, you should be in contact with your advisor.