On November 24, 2015, the IRS increased the de minimis safe harbor threshold from $500 to $2,500...
2017 – Federal Tax Legislation Finalized
Most importantly, Merry Christmas and Happy New Year to you and your family from the owners and employees of Thomas, Judy & Tucker. We appreciate your trust and look forward to working with you in the year to come.
The Tax Cuts and Jobs Act has now passed both the Senate and the House and is awaiting the president’s signature. This legislation that will impact businesses and individuals for tax year 2018 and beyond. Though most provisions in the bill will only impact future years, there are a few items to be aware of as 2017 draws to a close.
- Consider paying all of 2017 state tax liability before end of year
- Accelerate ticket-related donations to universities (Ram’s Club, Wolfpack Club)
- 100% Bonus Depreciation is retroactive to September 27th, 2017
Over the next several weeks we will begin deciphering the details of this complex legislation and publishing more information on tax planning opportunities for 2018. Please feel free to reach out to us at TJT if you have questions about how this legislation may impact your particular situation.
Please see the link below for a chart summarizing a comparison of current tax law versus the law under the new legislation.
|Current Tax Law||Reconciled Final Bill|
|Ordinary Income Tax Rates||7 brackets
(10%, 15%, 25%, 28%, 33%, 35%, 39.6%)
(10%, 12%, 22%, 24%, 32%, 35% and 37%)
|Top Bracket starts at:||$418,400 (individuals)
$470,700 (joint filers)
$600,000 (joint filers)
|Standard Deduction||$6,350 (S)
|Capital Gains and Dividends||20% top rate for net capital gains and qualified dividends. Additional 3.8% ACA tax on certain passive investment income.||Retains present-law maximum rates on net capital gains and qualified dividends and retains ACA tax. Indexed using the "Chain" CPI for after 2017.|
|Alternative Minimum Tax||Two rates (26% and 28%) on alternative minimum taxable income. Exemption amounts are $84,500 (MFJ) and $54,300 (S).||Rates retained, but with higher exemption amounts of $109,400 (MFJ) and $84,500 (S) than under current law.|
|State and Local Tax Deduction||State and local property and income taxes fully deductible (but not for AMT purposes)||Deduction for state/local income taxes and property taxes limited to $10K (aggregate).|
|Home Mortgage Interest and Home Equity Interest Deduction||Limited to interest on $1M (MFJ) and $500K (S) acquisition indebtedness on a taxpayer’s primary and secondary residences.
Interest from home equity indebtedness up to $100K.
|Limited to interest on $750K (MFJ) and $375K (S) acquisition indebtedness on a taxpayer’s primary and secondary residences. Mortgages existing on or before December 15, 2017 are grandfathered under the current law thresholds.
The interest deduction for home equity indebtedness is repealed.
|Charitable Contributions||Charitable contributions generally deductible (limited to certain percentages of AGI).
Contributions to obtain college athletic seating rights (80% deductible). Generally, where a taxpayer receives or expects to receive substantial benefit for a payment to charity, the payment is not deductible as a charitable contribution. However, special rules apply where (1) the amount paid is for the benefit of an institution of higher education and (2) such amount would be allowable as a charitable deduction but for the fact that the taxpayer receives (directly or indirectly) the right to purchase tickets for seating at an athletic event.
|The AGI limit for gifts of cash to public charities and certain other organizations is increased from 50 percent to 60 percent.
A charitable deduction is now denied for payments made in exchange for college athletic event seating rights.
|Medical Expense and Personal Casualty||Medical expenses and personal casualty losses are deductible (often limited to certain AGI thresholds).||Medical and dental expense deduction expanded. Unreimbursed medical and dental expenses will be deductible subject to the extent they exceed 7.5 percent of adjusted gross income (AGI) in 2017 and 2018. The percentage increases to 10 percent (the threshold in effect under current law) in 2019. The threshold applies to both the regular and alternative minimum tax.|
|Limitations on ltemized Deductions||Limitations apply for incomes above $261,500 (individuals), and $313,800 (joint filers)||Repeals the limit on itemized deductions.
Repeals all miscellaneous itemized deductions subject to the 2% floor under present law.
|Family Tax Credits||Up to $1K credit (partially refundable) for qualifying children under the age of 17.||The final bill increases the child tax credit to $2K per qualifying child, double the amount under current law; of this amount, $1,400 per qualifying child will be refundable. The credit begins to phase out for AGI exceeding $400K (MFJ). In addition to the credit for qualifying children, the bill also provides for a $500 nonrefundable credit for qualifying dependents other than children.|
|Gain on Sale of Principal Residence||Taxpayer may exclude from gross income up to $250K ($500K for joint filers) of gain on the sale of a principal residence. Property generally must have been owned and used as principal residence for two out of the previous five years. Exclusion available once every two years.||Retains current law.|
|Retirement Accounts||Up to $18K pre-tax income can be contributed to 401(k) plan (for employees 50 and older; $6K catch-up contribution).
An individual who makes a contribution to one type of IRA (traditional or Roth) is permitted to recharacterize that contribution and have it treated as if made to the other type of IRA. An individual must recharacterize this contribution no later than the extended due date of the tax return for the year the contribution is made.
|Generally retains current law.
An individual will still be able to make a traditional to Roth conversion, but will no longer be able to change his or her mind. The provision permits regular annual contributions to be recharacterized.
|Stock Options and RSUs||Generally taxed on exercise of stock options or settlement of RSUs. Nonstatutory stock options (i.e., options that are not incentive stock options or options granted under an employee stock purchase plan) granted at fair market value are generally not taxable until the exercise of the option if the service recipient receives fully vested stock. Additionally, restricted stock units (RSUs) that are exempt from, or comply with, the nonqualified deferred compensation rules under section409A are generally not taxable until delivery of fully vested stock.
An employee who holds an incentive stock option (ISO) that meets the ISO requirements pays capital gains tax on any increase in the share price from grant of the ISO to sale of the shares received on exercise. However, because ISOs are subject to the alternative minimum tax (AMT) on exercise, the employee may nevertheless be taxed on the spread at exercise. For this reason (among others), many companies do not grant ISOs.
|Taxation of certain private company stock options and RSUs may be deferred for up to 5 years after exercise of options or settlement of RSUs. Section 83 continues to apply to compensatory stock options. Sec 83 generally doesn't apply to RSUs other than new Sec 83(i). Income tax withholding would be required at highest individual rate.
Generally remains the same. However, the final bill temporarily increases the individual alternative minimum tax (AMT) exemption amount by about 29% over current law levels and the exemption amount phase out thresholds, which could temporarily reduce AMT liability relative to applicable law for some taxpayers. Companies therefore may wish to reassess whether to grant ISOs.
|Estate Tax and Gift and Generation-Skipping Transfer (GST) Tax||$5M exemption amounts indexed for inflation ($5.49M for 2017).
Estate tax exemption amount is reduced by gift tax exemption used during lifetime. Surviving spouse may be able to use deceased spouse's unused gift/estate tax exemption, but not unused GST exemption. Maximum 39.6% rate.
|Doubled. $10.98M exemption amounts indexed for inflation, effective for estates of decedents dying, and transfers made, after 12/31/2017, with other current rules remaining in effect.
Estate and GST tax eventually to be repealed, effective for estates of decedents dying, and transfers made, after 12/31/2024, after which gift tax remains in effect with a $10M, inflation adjusted gift tax exemption and maximum 35% rate.
|Current Tax Law||Reconciled Final Bill|
|Pass-Through Rate||Income earned by pass-through businesses taxed at individual's regular rates ordinary income and capital gains.||An individual taxpayer may generally deduct from a partnership, S Corporation, or sole proprietorship, the lesser of (a) 20 percent of qualified business income, or (b) the greater of 50 percent of the W-2 wages with respect to the trade or business or the sum of 25 percent of the W-2 wages and 2.5 percent of the unadjusted basis, immediately after acquisition, of all qualified property.
Specified service trades or businesses are specifically excluded from the definition of a qualified trade or business. This includes services in the fields of health, law, accounting, actuarial science, performing arts, consulting, athletics, financial services, brokerage services, and any trade or business where the principal asset of such trade or business is the reputation or skill of one or more of its employees.
There is an income phase-in of $315K (or $157K) for both the wage limit and the specified service trade or business exclusion.
For purposes of this provision, qualified property means tangible property of a character subject to depreciation that is held by, and available for use in, the qualified business at the close of the taxable year, and which is used in the production of qualified business income, and for which the depreciable period has not ended before the close of the taxable year. The depreciable period means the period beginning on the date the property is first placed in service and ending on the later of (a) the date 10 years after that date or (b) the last day of the last full year in the applicable recovery period that would apply to the property under section 168 (without regard to section 168(g)).
|Pass-Through Source of Gains||Gain/(Loss) on the sale of a partnership interest by a foreign person of an interest in a partnership engaged in a U.S. trade or business is foreign source ( Grecian Magnesite Mining v. Comm'r , 149 T.C. No. 3 (July 13, 2017)).||Gain/(Loss) from the sale of a partnership interest is treated as effectively connected with a U.S. trade or business to the extent that the transferor would have had effectively connected gain/(loss) had the partnership sold all of its assets. Transferee of a partnership interest is required to withhold 10% of the amount realized unless the transferor certifies it's a U.S. person.|
|Pass-Through Carried Interest||"Carried interest" earned by the general partner of a private equity fund is taxed under pass-through principles, with a significant portion of such income being treated as LTCGs.||Imposes a three-year holding period requirement for qualification as LTCG with respect to certain partnership interests received in connection with the performance of services.|
|Technical Termination of Partnerships||A technical termination occurs when 50% of the total interest in capital and profits is “sold or exchanged” within a 12-month period. A “sale or exchange” includes a sale from one partner to another. In such cases, a short-year return must be filed by the partnership.||The technical termination rule is repealed. Accordingly, a partnership would be treated as continuing even if more than 50% of the total capital and profit interests of the partnership are sold or exchanged, and new elections would not be required or permitted.|
|Corporate Tax Rate||Approximating 35% for most corporations with taxable income exceeding $100K.||21% rate for all corporations. No special rate for personal service corporations.|
|Corporate AMT||20% tax on alternative minimum taxable income.||Eliminates the corporate AMT.|
|Income Recognition||Various rules apply to determine when income is recognized; reporting year generally based on accounting method.||Corporate taxpayers would be required to recognize income no later than taxable year in which income is taken into account under GAAP on F/S (exception for certain long-term contract income).|
|Corporation method of accounting||Forced onto accrual method if receipts > $5M
(3yr avg. gross receipts test applies).
|May use cash method if receipts < $25M
(3yr avg. gross receipts test applies).
|Method of accounting for businesses with inventory||In most cases, businesses cannot report purchases and sales of inventory items using the cash method and are forced onto accrual method (no threshold, Rev. Procs. 2001-10 and 2002-28) unless qualifying under a small business exception rule or other tests.||Businesses with inventory may use cash method if receipts < $25M.
(3yr avg. gross receipts test applies).
|Method of Accounting for Long-term Contracts||Forced switch from completed contract method to percentage of completion for accounting for long-term contracts. (Receipts > $10M)||Completed contract method available if receipts < $25M.
(3yr avg. gross receipts test applies).
|Requirement to apply Section 263A Unicap rules to inventory (no threshold for producers, $10M in receipts for resellers).||UNICAP rules may not apply If receipts < $25M.
(3yr avg. gross receipts test applies).
|Net Operating Loss Provisions||NOLs can generally be carried back for 2 tax years and carried forward for 20 years. Any NOL remaining after the 20-year carryforward period is lost.
Taxpayers subject to the corporate AMT may only offset 90% of taxable income with carryover NOLs.
|NOL carryback period would generally be eliminated but can be carried forward indefinitely. Restricts deduction to 80% of current year taxable income. Special rules apply to certain farming and insurance losses.
N/A, since corporate AMT is repealed.
|Dividends Received Deduction||Corporate shareholders are entitled to a 70% deduction for dividends received from other corporations. This deduction is increased by 80% for dividends from corporations in which the taxpayer owns more than 20 percent of the stock (by vote and value) and to 100% for dividends from corporations in the same affiliated group as the shareholder.||Reduces the 80% dividends received deduction is reduced to 65% and the 70% dividends-received deduction is reduced to 50%. Effective for tax years beginning after Dec. 31, 2017.|
|Capital Investment Depreciation and Expensing||Annual depreciation and amortization based on life of asset.
Section 179 expense (limited to $500,000). Taxpayers (other than trusts and estates) can elect to claim Sec 179 for the cost of Sec 1245 property that is bought for use in a business.
Sec 179 can apply to many items typically used in a business, such as machinery and equipment, but not for section 1250 property, such as land, buildings, or section 1250 land improvements. Section 1245 land improvements do qualify.
Under Section 168(k), bonus depreciation is an additional first-year depreciation allowance for new property (i.e., the original use of property begins with the taxpayer). Currently, the allowance (determined by year placed into service) are 50% through 2017, 40% in 2018, and 30% in 2019. Bonus depreciation applies to “qualified property,” consisting of MACRS property (20 years or less), certain computer software, and qualified improvement property.
Qualified property is defined as tangible property with a recovery period of 20 years or less under the modified accelerated cost recovery system (MACRS), certain off-the-shelf computer software, water utility property or qualified improvement property. Certain trees, vines, and fruit-bearing plants also are eligible for bonus depreciation when planted or grafted. To be eligible for bonus depreciation, the original use of the property must begin with the taxpayer (i.e., used property does not qualify). Under current law, taxpayers have the option of making an annual election to not claim bonus depreciation with respect to qualified property under Section 168(k)(7). Alternatively, taxpayers may elect under Section 168(k)(4) to accelerate alternative minimum tax (AMT) credits (as refundable credits) in lieu of claiming bonus depreciation with respect to qualified property. Such election comes with the added requirement to depreciate that qualified property using a straight-line recovery method.
Under Section 280F(a), the amount of depreciation taxpayers may claim for certain passenger automobiles is limited. For passenger automobiles placed in service in 2017, and for which the additional first year depreciation deduction under Section 168(k) is not claimed, the maximum amount of allowable depreciation is $3,160 for the year in which the vehicle is placed in service, $5,100 for the second year, $3,050 for the third year, and $1,875 for the fourth and later years in the recovery period. The limitation is indexed for inflation and applies to the aggregate deduction provided for depreciation and Section 179 expensing. For passenger automobiles that qualify for the additional first-year depreciation allowance in 2017, the first-year limitation is increased by $8,000.
Under current law, Section 168(e) contains separate definitions for qualified improvement property, qualified leasehold improvement property, qualified restaurant property and qualified retail improvement property. Specifically, qualified improvement property is any improvement to the interior of a building that is nonresidential real property if the improvement is placed in service after the date the building is first placed in service. Further, qualified improvement property may be recovered under the general depreciation system over either a 15 or 39-year period, depending on whether such property meets the definition of qualified leasehold improvement property or not (and thus is treated as nonresidential real property). The alternative depreciation system (ADS) must be used for tangible property used predominantly outside the United States, certain tax-exempt use property, tax-exempt bond financed property and certain imported property covered by an Executive Order. In addition, taxpayers may elect to use the alternative depreciation system for any class of property for any tax year. Under the alternative depreciation system, nonresidential real property and residential rental property are recovered over 40 years, while qualified leasehold improvement property is recovered over 39 years.
|Makes certain property available for immediate expensing (100% bonus); expands Sec. 179.
Sec. 179 up from $500k to $1M and a phaseout begins at $2.5M. Qualified property expanded. Effective beginning after 2017.
Section 179 property expanded/modified to include improvements to nonresidential real property (roofs; HVAC property; fire protection and alarm systems; and security systems).
Temporary 100% expensing for investment in assets currently eligible for 100% bonus depreciation, with certain modifications. This would apply to qualifying property placed into service after September 27, 2017 and before January 1, 2023. Thereafter, the bonus depreciation percentage phases down annually through 2026 (80 percent in 2023, 60 percent in 2024, 40 percent in 2025, and 20 percent in 2026).
Under Section 168(k), used property would now be considered qualified property eligible for immediate expensing provided that the taxpayer itself had not previously used the property and/or the property is not acquired as part of certain carryover basis or related party acquisition transactions. Further, a real property trade or business that elects not to be subject to certain interest provisions of Section 163(j) would have to depreciate qualified improvement property under the alternative depreciation system (and thus, such property would not be eligible for bonus depreciation). Because amendments to Section 168(k) allow for the immediate expensing of 100% of the cost of qualified property (including but not limited to tangible personal property with a recovery period of 20 years or less under MACRS, computer software, and qualified improvement property), this effectively nullifies the impact that Section 179 would have for such property. However, the increases to the expense limitations and related phase-out under Section 179, coupled with the revised and expanded definition of "qualified real property," would still provide immediate expensing to taxpayers that invest in certain "qualified real property" that may not otherwise meet the definition of qualified property under Section 168(k). Property with longer production periods and certain aircrafts receive an additional year of full expensing, with phase downs also beginning a year later. The full expensing provision also eliminates the current requirement that the original use of the property begins with the taxpayer. Thus, property qualifies under this provision as long as the property was not used by the taxpayer prior to the time of acquisition.
Increases the depreciation limitations that apply to passenger automobiles. As such, for passenger automobiles for which the additional first-year depreciation deduction under Section 168(k) is not claimed, the maximum amount of allowable depreciation would be $10,000 for the year in which the vehicle is placed in service, $16,000 for the second year, $9,600 for the third year, and $5,760 for the fourth and later years in the recovery period. The provision would index the limitations for inflation for passenger automobiles placed in service after 2018. The provision also would retain the $8,000 increase in the first-year limitation for passenger automobiles that qualify for the additional first-year depreciation allowance.
Eliminates the separate definitions of qualified leasehold improvement property, qualified restaurant property and qualified retail improvement property. Instead, it would provide a general 15-year recovery period (utilizing a straight-line recovery method and half-year convention generally) for qualified improvement property. Also requires a real property trade or business that elects out of the limitation on the interest deduction under Section 163(j) to use the alternative depreciation system to depreciate any of its nonresidential real property (40yrs), residential rental property (30yrs), and qualified improvement property (20yrs). The new law streamlines the treatment of certain real property by utilizing a qualified improvement property definition and provides taxpayers a benefit by providing qualified improvement property, which is subject to less onerous requirements than the prior definition of qualified leasehold improvement property, with a 15-year recovery period. The modification to the recovery period under the alternative depreciation system for residential rental property, as well as providing a 20-year recovery period to qualified improvement property for alternative depreciation system purposes, also provides taxpayers in a real property trade or business that elect out of the limitation on the interest deduction under Section 163(j) with the ability to recover real property over shorter recovery periods in certain instances when compared with current law.
|Tax Treatment of Interest Expense||Interest expense generally is fully deductible in the computation of taxable income (subject to a number of limitations). For a taxpayer other than a corporation, the deduction for interest on indebtedness that is allocable to property held for investment (investment interest) is limited to the taxpayer’s net investment income for the tax year.||Every business, regardless of its form, is generally subject to a disallowance of a deduction for net interest expense in excess of 30% of the business’s "adjusted taxable income" (business EBITDA, before NOLs, and the 20% pass-through deduction). Disallowed business interest carried forward indefinitely. The net interest expense disallowance is determined at the tax filer level. However, a special rule applies to pass-through entitles, which requires the determination to be made at the entity level, for example, at the partnership level instead of the partner level. Effective for tax years beginning after Dec. 31, 2017.
Small businesses (with $25M or less of avg. gross receipts) are exempt from this limitation. Real property trades or businesses can elect out of the provision if they use ADS to depreciate applicable real property used in a trade or business.
In the context of disallowed business interest, Section 381 also would be modified to provide that the acquiring corporation shall take into account, as of the close of the day of distribution or transfer, the carryover of disallowed business interest under Section 163(j)(2) to tax years ending after the date of distribution or transfer.
|Corporate State and Local Tax Deduction||State and local income and property taxes fully deductible (but not for AMT purposes).||Retains deduction for corporations, but state and local income taxes paid by an individual owner of a pass-through business would not be deducible on the individual's tax return.|
|Like-Kind Exchange||The like-kind exchange rules under Section 1031 generally apply to tangible property (real and personal) and certain intangible property.
Generally no gain or loss is recognized to the extent that property held for productive use in the taxpayer's trade or business or for investment purposes is exchanged for property of a like-kind that is also held for productive use in a trade or business or for investment. The taxpayer then utilizes a carryover basis in the property acquired in the exchange equal to the basis of the property exchanged, decreased by the amount of any money received by the taxpayer and increased by the amount of gain or decreased by the amount of loss to the taxpayer that was recognized on such exchange, if any. The like-kind exchange rules under Section 1031 generally apply to tangible property (both real and personal), as well as certain intangible property.
|Keep Sec. 1031 for only real property (limited exceptions might apply).
The repeal of Section 1031 for all exchanges of property (with the exception of exchanges of real property) has an immediate impact on taxpayers that are contemplating exchanges of tangible personal, as well as intangible, property, including taxpayers that participate in a mass asset like-kind exchange program, as well as taxpayers that would otherwise participate in an exchange that contains both real and personal or intangible property. Taxpayers that would otherwise complete one or multiple exchanges of tangible personal property, wherein the acquired property would be considered qualified property for bonus depreciation purposes, will be able to offset the taxpayer-unfavorable impact of not being able to utilize Section 1031 by utilizing the immediate expensing provisions set forth by the modifications made to Section 168(k).
|Meals and Entertainment expenses||Limited to 50% deduction.
Although most meals and entertainment expenses are only 50% deductible, current law allows a taxpayer to deduct 100% for qualified employer-provided de minimis meals and entertainment, such as (1) qualified transportation fringe benefits, and (2) meals provided on or near the business premises (e.g. meals provided in a qualified employer-operated eating facility). In addition, the following expenses are currently 100% deductible: (1) amounts reported as compensation to an employee; (2) amounts includable in the gross income of a recipient who is not an employee; (3) certain reimbursed expenses, including reimbursement arrangements in which an employer reimburses the expenses incurred by a subcontractor's employees; and (4) qualified employee recreation, social, or similar activities (including facilities therefor) primarily for the benefit of employees (other than employees who are highly compensated employees (within the meaning of Section 414(q)).
|Meals are still 50% deductible. Entertainment and travel expenses nondeductible.
Taxpayers would be allowed a 50% deduction for business meals and beverages; however, taxpayers would no longer be able to deduct expenses for entertainment, amusement or recreation expenses, membership dues for clubs (including clubs organized for business, pleasure or social purposes), and facilities used in connection with entertainment, amusement or recreation. Examples of such expenses would include, but not be limited to, sporting event tickets, theatre tickets, golf green fees, and license fees paid to sporting arenas, etc. The provision would permit taxpayers to continue deducting 100% for: (1) amounts reported and included in compensation of employees; (2) amounts includable in income of non-employees; (3) qualified reimbursed expenses; and (4) qualified employee recreation.
|Domestic Production Activities Deduction (DPAD)||DPAD provides a deduction from taxable income that is equal to nine percent of the lesser of the taxpayer’s qualified production activities income or taxable income.||Repeals DPAD.|
|Worker Opportunity Tax Credit (WOTC)||WOTC is available to qualified employers that hire/retain individuals who are members of certain targeted groups. The credit generally equals 40% of qualified first-year wages paid to these employees. The credit is subject to various wage limits between $6K and $24K varying by the specified target group.||WOTC is retained.|
|Rehabilitation Credit||The rehabilitation tax credit allows a 20% credit of qualified rehabilitation expenditures for any certified historic structure and 10% of expenditures for qualified buildings. This credit is taken into account in the year the rehabilitated building is placed in service.||Modifies the historic rehabilitation credit. Eliminates the 10% credit for buildings placed in service before 1936.|
|Research and Development (R&D) Expenses||Research and development ("R&D") expenses are generally capital expenses but can be deducted as current business expenses (must deduct R&D expenses in the first year such expenses are incurred; otherwise, you must capitalize unless IRS permission is obtained).||Beginning in 2026, R&D expenses must be capitalized and amortized over 5 years (15 years for expenses attributable to foreign research).|
|Investment Tax Credit||Investment tax credit ("ITC") currently provides an ITC equal to 30% of the cost basis of qualifying solar energy property for both residential and commercial property placed in service before January 1, 2017. After that date, the percentage of cost eligible for the credit reduces until 2022, after which a permanent 10% credit applies. The full 30% credit previously applied to other technologies (so-called orphan technologies, such as: fiber-optic solar energy, geothermal energy, qualified fuel cell, qualified microturbine, combined heat and power system, qualified small wind energy and thermal energy properties) until 12/31/16.||The conference agreement does not extend the investment tax credit.|
|Current Tax Law||Reconciled Final Bill|
|Private Foundations||Private foundations pay rate of 2%, reduced to 1% if payout levels met.||No change to current law.|
|Tax on Large Endowments of Private Colleges and Universities||Investment income currently exempt from tax.||1.4% tax on net investment income if aggregate fair market value of investment assets is at least $500K per student (applicable if at least 500 students and more than 50% of the tuition-paying students are located in USA).|
|Political Campaign Statements by 501(c)(3) Organizations||Under so-called Johnson amendment, 501(c)(3) organizations are prohibited from participating or intervening in any political campaign.||No change to current law.|
|Excess Tax-Exempt Organization Compensation||No limits on deductibility of compensation paid to employees of tax- exempt organizations (other than the limitation on private inurement).||Compensation in excess of $1M paid to any of five most highly-compensated employees of tax-exempt organization subject to a 21% excise tax payable by the organization.|
|Current Tax Law||Reconciled Final Bill|
|Modified Territoriality||Corporations liable for tax on worldwide income, subject to foreign tax credits; deferral regime for certain "active" income; certain investments in U.S. property by CFCs triggers deemed dividend.||Modified "territorial" regime: U.S. corporate shareholders entitled to 100% deduction for dividends attributable to foreign earnings that are received from 10%-owned foreign corporations. No tax credit for any foreign taxes (including withholding taxes) paid or accrued with respect to any dividend to which this 100% deduction applies.|
|Deemed Repatriation||N/A||Deferred foreign profits to be taxed at a 15.5% rate for cash and cash equivalents and 8% for illiquid assets.|
|Tax on Base Erosion Payments||N/A||A corporation (other than a RIC, REIT or S corporation) with excess base erosion payments for the taxable year must pay a tax equal to the excess of 10 percent (5 percent for taxable years beginning in 2018) of its taxable income (determined without regard to deductions attributable to base erosion payments) over its regular tax liability reduced by the excess of credits allowed under Chapter 1 against the regular tax liability over the sum of the R&D credit plus 80 percent of the sum of the low-income housing credit, the renewable electricity production credit determined under section 45(a), and the energy property investment credit determined under section 48. A base erosion payment generally means any amount paid or accrued by a taxpayer to a foreign person that is a related party of the taxpayer and with respect to which a deduction is allowable, including any amount paid or accrued by the taxpayer to the related party in connection with the acquisition by the taxpayer from the related party of property of a character subject to the allowance of depreciation (or amortization in lieu of depreciation). A base erosion payment also includes any amount that constitutes reductions in gross receipts of the taxpayer that is paid to or accrued by the taxpayer with respect to: (1) a surrogate foreign corporation which is a related party of the taxpayer, but only if such person became a surrogate foreign corporation after November 9, 2017, and (2) a foreign person that is a member of the same expanded affiliated group as the surrogate foreign corporation. A surrogate foreign corporation has the meaning given in section 7874(a)(2).|