Year-End Tax Planning Opportunities: Roundup for Businesses

The New Year is just around the corner, but there is still time left for year-end planning. We’ve rounded up some of the top tax planning considerations for businesses to optimize their tax situation before the end of the tax year.

For more information on any of the below planning opportunities, please reach out to a member of our Tax Team.

Foreign Tax Considerations: GILTI, FDII and BEAT: Corporations with an international presence should assess and estimate the impact of GILTI, BEAT and FDII to effectively plan their 2020 tax strategy. Introduced as part of the 2017 Tax Cuts and Jobs Act (TCJA) these tax regulations create tax liabilities and opportunities for corporations with an international presence. Final regulations have been released for GILTI, but BEAT and FDII are still only proposed regulations. As they continue to evolve, it is important to stay up-to-date on the regulations and how they affect your corporation.
Read More: Proposed GILTI Regulations for Domestic Partnerships and S-Corps
Read More: Proposed FDII Regulations Provide Taxpayers with Guidance

Interest Deduction Limitations: Section 163(j), enacted as part of TCJA, is applicable to all taxpayers with business interest expense, other than certain small businesses that meet the gross receipts test. Taxpayers can deduct interest expense paid or accrued in the taxable year. However, if section 163(j) applies, the amount of deductible business interest expense in a taxable year cannot exceed the sum of: (1) the taxpayer’s business interest income for the year; (2) 30 percent of the taxpayer’s adjusted taxable income (ATI) for the year; and (3) the taxpayer’s floor plan financing interest expense for the year.
Read More: 2019 Year-End Tax Planning for Businesses

Nexus Considerations: After the landmark Wayfair v. South Dakota decision, corporations need to monitor their sales closely with the added complexity of complying with various state tax rules. They need to understand the sales taxability of their product or service as well as those products or services which they purchase for their operations. When conducting business corporations must also remember to obtain an exemption or resale certificate, even when making a sale to a tax-exempt entity, and keep the certificate on file for a minimum of four years. An important caveat being the statute of limitations does not begin to run if a sales tax return has not been filed. Therefore, keep in mind that if a sales tax return has never been filed, then the State can assess tax, penalties, and interest back to the first day business was conducted in the State.
Read More: Approaching Sales Tax in the Post-Wayfair Era

Bonus Depreciation: TCJA increased bonus depreciation allowances from 50 percent to 100 percent for qualified property acquired and placed in service after September 27, 2017, and before 2023 (January 1, 2024, for longer production period property and certain aircraft). In effect, the new rule permits “full expensing” of purchases of qualifying property. The 100 percent allowance is phased down by 20 percent per calendar year for property placed in service in taxable years beginning after 2022 (after 2023 for longer production period property and certain aircraft).
Read More: Bonus Depreciation Regulations Released

Opportunity Zones: The Opportunity Zone program was created in the TCJA legislation to promote investment in economically distressed communities. To take part in the program, investors must invest in a qualified opportunity fund (QOF) within 180 days after the sale or exchange of a capital asset. Taxpayers with recognized capital gain should consider making an investment in a QOF to obtain significant tax savings. As the end of 2019 quickly approaches, so does the deadline to obtain all of the tax benefits available in the Opportunity Zone program.
Read More: Proposed Regulations for Opportunity Zones

Corporate Alternative Minimum Tax (AMT): The 2017 tax reform repealed the corporate AMT, which was imposed on corporations and was added to their regular tax if and to the extent the tentative minimum tax exceeds the regular tax. Repeal of the corporate AMT is effective for taxable years beginning after December 31, 2017. AMT credits, or a corporation’s previous AMT liabilities, can offset the regular tax liability for any taxable year after 2017 or can be refunded for any taxable year beginning after 2017 and before 2022 for 50 percent of the excess credit for the taxable year (100 percent for taxable years beginning in 2021).
Read More: 2019 Year-End Tax Planning for Businesses

Federal Research Credits: The elimination of the corporate AMT means that such companies, who weren’t permitted to use the Research Credit to offset their AMT, now can benefit currently from the credit by offsetting any current regular income tax or carrying the credit forward for up to 20 years. These developments have increased the Research Credit’s value, and companies who aren’t looking into this opportunity should, especially if they incur expenses related to services in any technological field, e.g., physics, chemistry, biology, engineering, computer sciences.
Read More: 2019 Year-End Tax Planning for Businesses

The above tax considerations represent only a fraction of available opportunities for businesses to reduce their tax liability. Click below to read our 2019 Year-End Tax Planning for Businesses whitepaper or reach out to a member of our Tax Team for more guidance.


Daniel Sogolow
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