A Report on Legal Issues Affecting Privately Held Businesses and Personal Wealth
IN THIS ISSUE – House and Senate Unveil New Tax Reform Bills – H appy Thanksgiving From MendenFreiman
House and Senate Unveil New Tax Reform Bills Months after the Trump administration released its overview of intentions for tax reform, the House and Senate released their tax reform plans – each a separate version known as the Tax Cuts and Jobs Act. There are common themes in each version, but there are several key differences. Both bills provoked conflict among congressional Republicans and Democrats, while business groups raised concerns that the bills would disadvantage multinational companies. If passed, a final compromise bill could have important implications for small-business owners; so if you have questions about how the law will affect your own company, it is important to contact an experienced business tax attorney who can advise you. CONTINUED ON PAGE 2
House and Senate Unveil New Tax Reform Bills
CONTINUED FROM PAGE 1
THE TAX CUTS AND JOBS ACT
The following are other major
could have the effect of increas-
Both versions of the Act would
changes included in the bills:
ing economic growth in the short
cut the corporate tax rate from 35 percent to 20 percent (House effective 2018; Senate effective 2019), while also reducing household income tax rates. For example, the law would increase the standard deduction for income taxes from
– Changes to state and local tax deduction for sales and income taxes, the versions differing on elimination of the deduction or a possible cap on the deduction. – Changes by reducing the
term, some critics have pointed out that with the economy at full employment, it could also strain the economy’s capacity to respond to the spike in activity, resulting in the Federal Reserve raising interest rates more rapidly.
$6,350 to either $12,200 (House) or
mortgage interest deduction.
$12,000 (Senate) for individuals and
For example, the House version
While many upper- and middle-
from $12,700 to $24,400 (House)
reduces the $1 million
income households would benefit
or $24,000 (Senate) for married
mortgage interest deduction
from the lowered tax rates, others
taxpayers. Both tax reform plans
on new homes to $500,000.
would suffer because the House’s
could also make a number of changes that would affect the family, including: – Some form of eliminating specialinterest deductions in order to increase effective tax rates. – Establishing a new family credit
– An elimination of the $4,500 personal tax exemption. – Either reducing the number of
deductions for state and local income taxes. Doubling the standard deduction will most likely
to four (House) or retaining
not be able to make up for those
losses. Finally, reports indicate that
– A repeal of deductions for tax preparation fees, alimony
Tax Credit by $600 or $650 and
payments, student loan interest,
providing a credit for each parent
and moving expenses.
cover household expenses.
deduction and eliminates
income tax brackets from seven
that includes expanding the Child
and non-child dependent to help
bill caps the mortgage interest
– The estate and generation-
if the bill is passed, as much as $1.7 trillion would be added to the country’s debt over the next 10 years, including $260 billion in interest.
immediately doubled, with the
THE POTENTIAL IMPACT ON SMALL BUSINESSES
exclusions for dependent-care
House scheduling repeal after
Last week, the National
Federation of Independent
– Possible elimination of tax
– Streamlining higher education benefits to help families pay college tuition.
skipping tax exemption being
Business announced it would not
THE POTENTIAL IMPACT ON INDIVIDUALS The new tax bills propose lowering individual tax rates for low- and
support the House’s recently released tax bill due to concerns that it would negatively affect small businesses across the country.
middle-income Americans to help foster consumer spending and business investment. While this CONTINUED ON PAGE 3
THE MENDENFREIMAN ADVISOR
House and Senate Unveil New Tax Reform Bills
CONTINUED FROM PAGE 2
Of primary concern to the small-
than 25 percent in taxes. Many
The new tax reform bill could also
business lobby group is the 25
groups are urging lawmakers to
make the following changes:
percent tax rate for pass-through
adjust the tax rate to align with
businesses like partnerships and
the recently lowered corporate tax
S corporations where the owners
rate of 20 percent.
the cost of new equipment
There are, however, certain aspects
to wait five years.
pay taxes through individual returns. Unfortunately, there are some limits placed on the rates that would prevent any benefit to a variety of small businesses (especially those offering professional services). The National Federation of Independent Business has argued that as many as 90 percent of small businesses will not benefit from this change because their income already falls below the $250,000 threshold, which means they already pay less SUMMER 2017
of the bills that could help the small-business owner, especially closely held corporations and family businesses. For example, small businesses would benefit from doubling the death tax
– Allow businesses to write off immediately instead of having
– Allow small businesses to write off any interest on loans that help with business expansion, hiring, and increasing pay. – Preserve the Research &
exemption. In fact, if the death tax
Development Tax Credit that
were eliminated after six years,
encourages small businesses to
small-business owners would no
develop new “Made in America”
longer have to worry about double
products and services.
or triple taxation when handing down their businesses to relatives. CONTINUED ON PAGE 4
House and Senate Unveil New Tax Reform Bills CONTINUED FROM PAGE 3
– Make changes to the international tax system so American businesses that operate on a global scale would not be taxed twice. If you own a small business and have questions about how the new changes could affect your operations, you should consider speaking with an experienced business tax attorney who can address your concerns.
CALL US TODAY To learn more about the recently released tax reform plan, contact one of the dedicated business tax attorneys at MendenFreiman by calling 770-379-1450 today. We have the knowledge and skill required to assist you
Happy Thanksgiving from MendenFreiman As the holidays approach, MendenFreiman would like to thank our clients, colleagues and friends for their continued support. Thank you for your business, your unwavering confidence and your commitment to our firm. In the spirit of giving thanks, we have made donations to the following charities in your honor: Atlanta Ronald McDonald House Charities – The mission of Atlanta Ronald McDonald House Charities is to nurture the health and wellbeing of children and families. Camp Sunshine – Camp Sunshine enriches the lives of Georgia’s children with cancer and their families through recreational, educational and support programs.
throughout each step.
We hope you have a wonderful Thanksgiving and a happy holiday season! At MendenFreiman, we understand business and life can be complicated. For 20 years, we have made it our mission to identify and simplify complex business, wealth and life-planning issues for our clients. In addition to law degrees, most of our attorneys have earned advanced degrees in business, accounting or tax; and several are certified public accountants. This diverse combination of legal, management, tax and financial expertise sets our firm apart. Our clients trust us to help them solve complicated business planning, transactional, wealth transfer and estate planning matters.
5565 GLENRIDGE CONNECTOR, N.E.
ATLANTA, GA 30342