The new tax bill unveiled today by House Republicans proposes to repeal like-kind exchanges for personal property. In its place, the bill provides for 100% expensing of property, however this provision is only temporary, sun-setting after five years. 100% expensing may be extended, as other unrelated provisions have in the past, but the uncertainty makes long-term planning difficult for businesses.
Earlier this month, as part of Accruit's ongoing advocacy efforts, I attended the Associated Equipment Distributors (AED) 2017 Washington Fly-In, an opportunity for AED members to actively participate in the legislative process on important issues. Tax reform is one such issue, along with the preservation of Section 1031 like-kind exchanges and the benefit they represent to the industry and the economy.
Early April is the expected date for committee discussions on a preliminary tax reform bill. Or is it May? Perhaps before the August recess?
That was the comical consensus I received after attending 17 meetings in Washington D.C. last week. Lately, when monitoring the news out of our nation’s capital, we’ve all become a bit skeptical of what defines “good reporting.” The proposed House tax plan labeled A Better Way is reported to have the full support of Republican lawmakers. However, some closed-door conversations with members of Congress last week provided me with an entirely different story.
Thinking about changing your corporate structure from a C corporation to a subchapter S corporation? S corporations, partnerships, and certain LLCs are considered pass-through entities, which means they "pass through" various types of taxable income: interest, dividends, deductions, and credits to the shareholders, partners, or members responsible for paying tax. This avoids the double taxation associated with C corporations that pay entity-level taxes and then distribute dividends that become subject to individual taxes.
While congressmen and women are out campaigning, congressional staff continue to work in the area of tax reform. As part of Accruit’s continued advocacy efforts on behalf of our real estate and personal property LKE clients and as co-chair of the Federation of Exchange Accommodators Government Affairs Committee, I’ve made six trips to Capitol Hill this year to meet with congressional staff, specifically targeting members of the House Ways & Means Committee and Senate Finance Committee, both of which determine U.S. tax policy.
A recent California Code of Regulations proposal considers requiring corporate taxpayers to use an historical apportionment formula to trace assets through numerous layers of like-kind exchanges to determine how to apportion gains from the eventual sale of a replacement asset that might be a decade (or more) removed from the original sale of a relinquished asset. The attached letter from the leaders of the American Financial Services Association, the Equipment Leasing and Finance Association, and the Association of Commercial Vehicle Lessors was written to the California Franchise Tax Board to provide insight into the burden that such a requirement would place upon the taxpayers.
The FEA is our nation’s only recognized association dedicated to education, proper conduct, and legislative representation for qualified intermediaries servicing IRC Section 1031 of the tax code, and as a sitting board member for over seven years, I am acutely aware of our membership’s activity levels. Activity levels that, in many ways, mirror our broader economy.