“The President’s Framework for Business Tax Reform” is a document recently released by the Treasury Department. It outlines the President’s plan for a 28% corporate tax rate, for simplify corporate tax rules and to reduce the tax burden for small business.
The following are some of the highlights of the document. Keep in mind that none of these reforms have been introduced as bill in the House or Senate and there is a chance that they may never come to pass. It does however give us a hint to what the White House will be pushing for.
- Plans to reduce the top corporate tax rate to 28%, and reduce top rate for manufacturing income to 25%.
- Change the present depreciation schedule, this could mean longer asset lives or a change in MACRS
- Increase the simpler tax research credit calculation from 14% to 17% and make the credit permanent.
- Allow small businesses to expense up to $1 million in fixed asset purchases.
- Increase the number of businesses that can use the cash method of accounting.
- Double the deduction for start-up costs from $5,000 to $10,000.
It is always difficult to predict what will happen with Congress. If the corporate tax rate is in fact reduced, it could offer some tax planning opportunities. With the possibility of individual tax rates increasing, in some cases shareholders may be better served by owning a C-Corporation instead of a S-Corporation. Only time will tell.