In this fourth quarter update, we cover some of the most important tax issues for companies in the technology, clean technology, life sciences, and communications and media industries and touch on what your organization can do to stay ahead of them.
On December 2, 2017, the Senate passed the Tax Cuts and Jobs Act, a tax reform bill that seeks to reduce tax rates for corporations and individuals following a strategy outlined in our previous Alert. A similar tax bill was passed by the House of Representatives on November 16, 2017. The White House and Congressional leadership plan to have a unified tax reform bill ready for the president to sign into law before the Christmas holiday.
Potential Reconciliation Changes
Several updates to the unified tax reform bill are likely to occur during the reconciliation process.
Individuals
Corporations
International Provisions
It’s difficult to predict what provisions will survive the reconciliation process. Other changes may also occur, and if a new tax law is passed before the end of 2017, there may be actions that you can take to reduce your overall tax impact.
Many states changed their laws this year to generate more tax revenue from out-of-state companies, creating potential tax implications for technology, communications and media, and life sciences companies. Companies should be diligent about identifying changes in their income tax, sales and use tax, or other tax exposure.
In our recent webcast, we discussed some of the new laws and illustrate how the current tax environment may impact your company. View the webcast on-demand here.
The IRS granted a one-time exception to the R&D payroll tax credit, giving tax filers until January 2, 2018, to amend their 2016 tax returns and claim it.
The documentation required by the IRS to claim the credit can take several weeks to prepare, so companies should take action soon to meet the upcoming deadline. Filing for the credit may require coordination between a company’s tax preparers and payroll providers or professional service organizations (PEOs). Read more in our Insight .
Whether or not tax reform passes, there are still actions you can take to reduce your overall tax liability. Our complimentary annual tax guide can help you make more informed year-end tax planning decisions. Download the guide here .
When it comes to worldwide expansion, even the simplest transactions can be complex, costly, and time consuming. Our complimentary Global Tax Strategies Guide can help you establish a more efficient and cost-effective expansion plan for your business, finding the right balance between implementation costs and your tax exposure. Download the guide here.
The United States Department of the Treasury and the IRS issued Notice 2017-36, announcing a one-year delay in the application of the documentation requirements in final regulations under Section 385.
Under Section 385, the Treasury is authorized to prescribe rules to determine whether certain instruments between related parties are treated as debt or equity—or as in part debt and in part equity. The Treasury and IRS intend to amend the documentation regulations to apply only to interests issued or deemed issued on or after January 1, 2019.
The IRS Large Business and International Division (LB&I) introduced a research credit directive for taxpayers that report R&D costs on audited financial statements. This directive will allow these taxpayers to take advantage of a safe harbor under which an adjusted amount of their ASC 730 R&D costs can be used as qualified research expenses (QRE) for the Section 41 research credit.
If a taxpayer complies with the requirements of the directive, the LB&I examiners won’t challenge certain QRE amounts for the R&D credit. Taxpayers should perform a feasibility analysis to determine if the safe harbor would be beneficial as compared to their current approach for identifying QREs.
Taxpayers who’ve purchased, built, or improved their real estate holdings can benefit from current tax rates by employing strategies and deductions that may not be available, or as valuable, in future years. Read more in our Insight .
Moss Adams continuously reviews the regulatory and tax landscape for technology, life sciences, and communications and media companies. For more information about any of the issues discussed above or for insight on how they may impact your business, contact your Moss Adams professional.