TAX: Trump Administration Proposes Rules on Pass-Throughs, Expensing, Repatriation

Key Summary

• Trump Administration proposed rules implementing key parts of the 2017 Tax Cuts and Jobs Act
• New guidance clarifies which pass-through entities qualify for the 20% income tax deduction
• Treasury proposed rules allowing full expensing of new equipment placed in service after Sept. 27, 2017
• Expensing begins phasing down in 2023 unless made permanent
• Proposed repatriation regulations set taxes of 15.5% on liquid overseas assets and 8% on other assets
• IRS is accepting public comments on all proposals for 45–60 days

In a series of steps to implement the U.S. Tax Cuts and Jobs Act of 2017 (TCJA), the Trump administration recently proposed several implementing regulations. Pass-Through Entities: On August 8, the U.S. Treasury issued proposed regulations defining the types of companies and professionals eligible to qualify as “pass-through” entities and receive a 20 percent income tax deduction. The rules provide guidance to address a variety of uncertainties, including how businesses that operate through multiple legal entities can aggregate those entities in order to take advantage of the 20 percent deduction without reorganizing themselves for tax purposes. The public will have 45 days to offer comments on the proposal. Expensing: Also in August, the Treasury Department released proposed rules on full expensing. The accelerated cost recovery that was enacted under Section 168(k) of the TCJA lets companies claim full deductions for new equipment in the same year it is bought. Equipment put into service after September 27, 2017 and before January 1, 2023 is eligible, with an annual phase down of 20% each year thereafter. The IRS will be accepting comments on this proposed rule for the next 60 days. IPC is working with other industry groups to advocate for making this provision permanent. Repatriation: The Treasury Department also released proposed regulations on how to calculate and report the repatriation tax created by the TCJA. Simply put, the regulation would apply a 15.5% levy on companies' liquid assets (i.e. cash) overseas, and an 8% tax on everything else. Corporations would have up to eight years to pay the tax. The IRS will take public comment on this rule for the next 60 days. Please contact IPC’s government relations team in Washington, D.C. if you have any questions or information to share on how these tax regulations would affect your company.