2018 Tax Cuts and Jobs Act – Other Business Provisions

Posted by Valerie Middlebrooks, CPA

NOL Deduction – Under the old law NOL utilization was not subject to limitations based on taxable income.  Under the new law NOL utilization will be limited to 80% of taxable income.  Also under old law NOL’s could be carried back 2 years and forward for 20 years.  Under the new law NOL’s can no longer be carried back but can be carried forward indefinitely.  These new rules are effective for NOL’s arising in tax years beginning after December 31, 2017.

Alternative Minimum Tax – Under the old law corporate alternative minimum tax was assessed at 20% with an exemption amount up to $40,000.  Effective for tax years beginning after December 31, 2017 the corporate AMT is repealed.

Dividends-Received Deduction – Under the old law corporations that received dividends were entitled to a deduction of 80% if they owned more than 20% of the stock of the other corporation and a 70% deduction for all others.  For tax years beginning after December 31, 2017 the 80% dividend-received deduction is reduced to 65% and the 70% deduction is reduced to 50%.

Exclusions from Contributions to Capital – Generally, prior tax act law excluded from gross corporate income contributions to capital.  Effective for contributions after December 22, 2017 the tax act provides that contributions to capital do not include:

  • Contributions in aid of construction or any other contribution as a customer or potential customer and
  • Contributions by any governmental entity or civic group (other than a contribution made by a shareholder)

Domestic Production Activities Deduction – Under prior law, taxpayers could claim up to a 9% deduction for qualified domestic activities with certain limitations.  For tax years beginning after December 31, 2017 this deduction is repealed.

Specified Research & Experimental Expenses – Under prior law taxpayers may elect to deduct currently the amount of certain research and experimental expenses paid or incurred in connection with a trade or business.  Alternately, they could capitalize these costs and recover them over their useful lives not to exceed 60 months or by election over 10 years.  Under new guidance for amounts paid or incurred in tax years beginning after December 31, 2021, all expense must be capitalized and amortized over a 5-year period.

Employer’s Deduction for Fringe Benefits – Currently a taxpayer may deduct 50% of expenses relating to meals and entertainment.  For amounts incurred or paid after December 31, 2017 deductions for any entertainment expenses are disallowed.  Also, the scope of the 50% limitation on deductibility of meals is expanded to all meals, including meals provided at the convenience of the employer. The  new Tax Act then completely eliminates the deduction for meals at the convenience of the employer for tax years beginning after December 31, 2025.

Photo by Patrick Giblin (License)

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