After passing both the U.S. Senate, and the U.S. House of Representatives, President Donald Trump signed the new tax reform bill, Tax Cuts and Jobs Act, into law on December 22, 2017.
This tax reform bill, is based on a tax reform plan that was developed in consultation with the Trump administration, and will make significant changes to the federal tax code.
Specifically, the tax reform bill will have a substantial impact on businesses.
For example, it:
Lowers the corporate tax rate
Beginning in 2018, the bill reduces the corporate tax rate to 21 percent (down from 35 percent) and eliminates the corporate Alternative Minimum Tax (AMT), in an effort to make American corporations more competitive globally.
Creates a new tax deduction for small businesses
The bill establishes a new 20 percent tax deduction for all businesses conducted as sole proprietorships, partnerships, LLCs and S corporations.
Allows Businesses to 'expense' their capital investments
The bill allows businesses to immediately write off (or “expense”) the cost of new investments for at least five years.
Repeals or restricts many existing business deductions and credits
Because the bill substantially reduces the tax rate for all businesses, it also eliminates the existing domestic production (Section 199) deduction, and repeals or restricts numerous other special exclusions and deductions (including those for employer provided transportation and commuting benefits). However, the bill explicitly preserves business credits related to research and development, and low-income housing, as well as deductions or exclusions for employer provided dependent care assistance programs (DCAPs), education assistance programs, and adoption assistance programs.
Ends “offshoring” incentives
The bill ends the incentive to offshore jobs and keep foreign profits overseas by exempting them when they are repatriated to the United States. It imposes a one-time, low tax rate on wealth that has already accumulated overseas so there is no tax incentive to keep the money offshore.
Repeals the individual mandate tax penalty imposed under the Affordable Care Act (ACA), effective in 2019.
However, the tax reform bill does not affect the following tax provisions:
Tax treatment of employer-sponsored health plans; and
The ACA’s Cadillac tax on high-cost employer-sponsored health coverage.
ClubPay is ready to help implement the provisions of this bill, and offer solutions to manage your payroll tax obligations. We will continue to monitor the tax reform process for any future updates. Contact us for more information.
ClubPay offers dedicated support from private club labor management experts to help clubs streamline their payroll administrative process with a custom suite of web-based payroll and HR solutions- and offers personalized compliance protection from certified HR professionals who understand the complex laws, and regulations that affect the club industry.
“Landmark Tax Reform Bill Passes” CertiPay Blog / December 2016