News and Analysis
For the first time in 31 years, Congress has acted on major tax reform with the passage of the Tax Cuts and Jobs Act. Among the bill’s changes to business taxes are the following key provisions:
Corporate rate: Lowers the corporate income tax rate permanently to 21%, starting in 2018 — the largest reduction in the corporate rate in U.S. history.
Pass-through businesses: Establishes a 20% deduction of qualified business income from certain pass-through businesses. (Specific service industries, such as health, law, and professional services, are excluded. However, joint filers with income below $315,000 and other filers with income below $157,500 can claim the deduction fully on income from service industries. This provision would expire December 31, 2025.)
Capital investments: Allows full and immediate expensing of short-lived capital investments for five years. Increases the section 179 small business expensing cap from $500,000 to $1 million.
Research and development: Retains tax incentives for research and development.
Territorial system: Moves the United States to a territorial system of business taxation.
The Tax Foundation models the effects of the act: “(T)he Tax Cuts and Jobs Act would increase the long-run size of the U.S. economy by 1.7%. The larger economy would result in 1.5% higher wages and a 4.8% larger capital stock. The plan would also result in 339,000 additional full-time equivalent jobs.” 12/19/2017
National Association of Manufacturers (NAM) President and CEO Jay Timmons released this statement after the U.S. Senate passed the Conference Report to H.R. 1, the Tax Cuts and Jobs Act.
He wrote: “When this bill becomes law, manufacturers in America will be more competitive than they have been in decades. This is a win for the American economy, and it puts the world on notice: America is even better prepared to compete and win for every job and opportunity.”
And: “… We reiterate our call for a triennial government study to see how our tax code compares to nations around the word–and determine what we can do to become even more competitive.” 12/20/2017
OMA Connections Partner, RSM, plans a webcast this Friday, December 22 at 11:00 a.m. EST, in which its Washington National Tax practice members will provide an update on the status of the Tax Cuts and Jobs Act.
They plan to discuss:
- Key final provisions of the legislation and the possible impact on your tax planning
- Areas where further guidance may be forthcoming from the IRS or the Treasury Department
Click here to register. 12/20/2017
Last month more than 100 Ohio cities filed a lawsuit against the state challenging portions of the municipal income tax changes included in the state budget bill.
The cities oppose new provisions that provide for the centralization of return filing and collection of municipal net profits taxes by the Ohio Department of Taxation.
Business interests, including manufacturers, successfully advocated for the change in the budget bill arguing that centralized filings would reduce burdens and costs for companies that file in multiple jurisdictions.
Ohio remains an outlier among states when it comes to local tax provisions and this change was seen as one area of improvement in the system. Cities argue that the Home Rule provisions of the Ohio Constitution prevent the state from taking on such authority. 12/14/2017
The National Association of Manufacturers (NAM) asked a couple Ohio manufacturers why federal tax reform would help their businesses.
Tanya DiSalvo of Criterion Tool, a precision manufacturing facility for the medical device, aerospace and photonics industries with 43 employees in Brook Park, said that her company would “Reinvest, additional training, raise the level of our lowest team members to the next level and back-fill their positions,” when asked what she would do with money from tax reform.
Karl Reuther of Reuther Mold and Manufacturing Company in Cuyahoga Falls answered the same questions this way: “To compete globally, we need a huge investment in newer technology. The newer technology enhances our ability to compete, for our workers to retain their jobs and for us to attract new manufacturing workers.” Reuther Mold has 60 employees and produces tooling for the manufacturing of military and commercial jets and oil production.
Read more from their interviews here. 12/13/2017
According to OMA Connections Partner, Plante Moran, an Affordable Care Act tax, absent action by Congress, is about to come back into effect after the expiration of a two-year moratorium.
Plante Moran wrote: “The medical device excise tax (MDET) was enacted as a part of the ACA and took effect in 2013, imposing a 2.3 percent excise tax that manufacturers and importers had to pay on the sales of certain medical devices. When Congress passed the “Protecting Americans from Tax Hikes (PATH) Act of 2015,” legislators granted relief to the medical device industry by enacting a moratorium on the MDET for sales occurring between Jan. 1, 2016 and Dec. 31, 2017.”
Here’s more from Plante Moran. 12/13/2017
The OMA joined the National Association of Manufacturers and a large number of other organizations wrote members of Congress to urge that they expedite passage of the “Miscellaneous Tariff Bill Act of 2017” (H.R. 4318 and S. 2108) to temporarily eliminate out-of-date and distortive taxes on imported products not manufactured or available domestically.
“The Miscellaneous Tariff Bill (MTB) plays an important role in the operations of domestic manufacturers as it corrects, on a temporary basis, historical distortions in the U.S. tariff code by eliminating border tariffs on imported products for which there is no or insufficient domestic production and availability. Such distortions undermine the competitiveness of manufacturers in the United States by imposing unnecessary costs and, in some cases, imposing a higher cost on manufacturers’ inputs than the competing foreign imported finished product,” wrote the organizations. 12/6/2017
OMA Connections Partner, GBQ Partners, posted this: “House Bill 49, Ohio’s budget bill for fiscal years 2018 and 2019, provides a new state-wide centralized filing and collection process for municipal net profit tax returns, beginning with tax year 2018.
“Under centralized collection, the Ohio Department of Taxation will be responsible for all administrative functions of municipal net profit tax returns filed, including assessments, audits and appeals. Municipalities will continue to administer personal income taxes and employer withholding.”
Here are highlights of the new system from GBQ. 11/20/2017
The Ohio Manufacturers’ Association (OMA) and the National Association of Manufacturers (NAM) praised the passage of H.R. 1, the Tax Cuts and Jobs Act, by the U.S. House of Representatives today.
In a news release, OMA president Eric Burkland said, “This is great news for Ohio’s manufacturing workers. The passage of this bill puts us on track for bold tax reform legislation that will empower manufacturers across Ohio and the U.S. Manufacturers large and small know this reform would mean more investment in America and more men and women making things in America.
“Ohio manufacturers are grateful to the members of the House who voted for tax reform. And when the Senate takes up its tax reform bill in the coming days, we urge Senators Brown and Portman to stand with manufacturers as well. The current tax system is hurting workers in Ohio. Our elected leaders need to seize this opportunity, get tax reform across the finish line, send it to President Donald Trump’s desk, and grow the American economy.”
Here are the members of Congress from Ohio who voted to improve the lives of manufacturing workers and all Americans: Steve Chabot (R-OH-01); Brad Wenstrup (R-OH-02); Jim D. Jordan (R-OH-04); Robert E. Latta (R-OH-05); Bill Johnson (R-OH-06); Bob Gibbs (R-OH-07); Warren Davidson (R-OH-08); Michael R. Turner (R-OH-10); Patrick J. Tiberi (R-OH-12); David Joyce (R-OH-14); Steve Stivers (R-OH-15); and Jim B. Renacci (R-OH-16). 11/16/2017
According to OMA Connections Partner, Clark Schaefer Hackett, many of the House and Senate provisions of their tax reform packages are similar. For example, both plans would repeal the alternative minimum tax and retain the charitable contribution deduction. However, there are a number of key differences. Here’s a look at some of the most significant for individuals and businesses. 11/15/2017