On December 18th, Congress released the details of the final version of the GOP tax plan. The National Association of Manufacturers (NAM) have praised this bill as a major win for manufacturers.
“We are very encouraged by the work of the conference committee in developing a federal tax system for job creators that allows American businesses to compete in today’s global economy,” said Ray McCarty, president and CEO of Associated Industries of Missouri. “We look forward to passage of the compromise bill through both chambers and approval by President Trump.”
The bill has several key components.
A permanent corporate rate of 21 percent, effective January 1, 2018. This change is above the fought for 20%, but still a substantial reduction from the current 35% rate.
The corporate AMT has been removed from the bill, a change considered to be a big win for NAM.
Pass-through entities benefit from a reduction in the top individual rate and a 20 percent deduction for business income.
The bill adopts a territorial tax system and removes the excise tax.
Full expensing for property acquired between September 28, 2017 and December 31, 2022 has been added. After that period the bonus depreciation percentage decreases by 20 points per year, phasing out entirely by 2027. The final bill no longer requires property eligible for bonus depreciation to be new; it extends this benefit to used property as well.
R&D tax credit. The bill changes the treatment of deductible research and experimental costs starting January 1, 2022. After that date, these expenses must be amortized over five years.
The bill adopted the EBITDA standard of 30 percent limitation and eliminated the proposed worldwide limit. However, the final bill only allows for EBITDA through 2021.
The bill brought the repatriation of 15% rate for cash and 8% rate for earnings reinvested in hard assets, with an 8-year window to pay the tax.