Recently IRS Commissioner Kautter announced a timeline for when to expect TCJA tax reform guidance. Below is what was stated as timing for substantive updates for pass-through businesses, expensing provisions, and international provisions:
- The Internal Revenue Service will issue guidance to explain the tax law's 20 percent deduction for pass-through businesses by mid-to-late July.
- Pass-through businesses, which include sole proprietorships and partnerships, are eagerly awaiting guidance to see who qualifies for the deduction. Above certain income levels, the perk isn't allowed for owners of specified service businesses listed in Section 1202(e)(3)(A), including law, performing arts, health, consulting, accounting, or athletics. Engineering and architecture trades or businesses were left off the list of service types that aren't allowed to take the deduction after hitting the income limits.
- The pass-through guidance “won't cover everything or every question that taxpayers have,” Kautter said.
- Upcoming guidance will explain the tax law's full expensing provision that allows businesses to immediately write off purchases of capital expenditures and certain kinds of property. On May 11, an IRS official said the agency is “anticipating” issuing those proposed rules under amended Section 168(k) by late June or early July.
- Guidance on international provisions will stretch from late summer to December, More than two dozen pieces of guidance are expected before Aug. 15.
- Guidance on global intangible low-taxed income (GILTI) should be out by the late summer, but guidance on the base erosion and anti-abuse tax (BEAT) won't be ready before November or December, he said.
- The GILTI provision is a tax on income from intangible assets, like patents and trademarks, and from other kinds of overseas assets. The BEAT is a 10 percent minimum tax to stop companies from shifting profits overseas through “excessive” deductible payments. The BEAT increases to 12.5 percent after 2025.
We'll be sure to update you when the IRS issues its TCJA tax reform guidance on these and other areas of the new law. If you have questions about your business, please contact your LGA tax advisor or Steve Gallant.