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Transportation Brief: Business Income Tax Rates

by Ronald J. Morelock

March 5, 2018

The centerpiece of the Act, which became effective on January 1, 2018, is a permanent reduction to the corporate income tax rate from a maximum rate of 35% to a flat rate of 21%.  Congress intends this change to make the U.S. tax system more competitive with other nations.  Because the Act repealed or modified a number of existing provisions (e.g., limits on like-kind exchanges and interest expense deductions), the overall impact on businesses is less clear.  In addition to permanently lowering corporate tax rates, for tax years 2018 through 2025, the law provides a temporary 20% taxable income deduction for owners of pass through entities (e.g., S-Corporations), subject to numerous limitations.  A pass-through entity’s taxable business income is taxed at the individual owner’s rate with a maximum rate of 37%, but when the 20% deduction is applied, this can lower the tax rate to 29.6%.  The new rates may affect business structuring and choice-of-entity options, and decision makers should also consider state income tax implications.

 

Scopelitis’ Transportation Brief® is intended as a report to our clients and friends on developments affecting the transportation industry. The published material does not constitute an exhaustive legal study and should not be regarded or relied upon as individual legal advice or opinion.


 

Also in this issue:
  • Transportation Brief: The New Tax Law Overview
    by Kelli M. Block , Steven A. Pletcher
    The Tax Cuts and Jobs Act (the Act) resulted in the most sweeping tax overhaul in decades. This offers overview of the changes in the Act that may have the most significant impact upon the transportation industry. Read Scopelitis' more here.
  • Transportation Brief: Temporary 100% Expensing
    by Ronald J. Morelock
    For qualified property acquired and placed in service after September 27, 2017, and before 2023, the Act temporarily increases the additional first-year bonus depreciation percentage from 50% to 100% with the percentages phasing down annually through 2026.  Read Scopelitis' insight here. 
  • Transportation Brief: Like-Kind Exchange
    by Ronald J. Morelock
    Under the prior tax law, owners of investment and business property could defer paying tax on gains if they exchanged property held as an investment or use in the taxpayer’s trade or business for property of a “like-kind” (1031 exchange). The Act retains like-kind treatment for real estate exchanges. Read Scopelitis' insight here. 
  • Transportation Brief: The Tax Law and Motor-Carrier-Sponsored Per Diem Plans
    by Kelli M. Block , Steven A. Pletcher
    While the Act did not change the motor carrier’s side of the balance sheet when it comes to properly structured per diem plans, motor carriers must ensure their per diem plans are carefully structured. Read Scopelitis' insight here.
  • Transportation Brief: Spotlight on Taxation Practice Area
    When federal laws took effect at the beginning of 2018, Scopelitis attorneys acted quickly to assist with federal compliance issues, and with the subsequent issues that continue to arise as states readjust to align with the new tax environment. Each member of Scopelitis’ Taxation Practice offers a unique set of experiences and thought leadership. Read more about them here.
  • Transportation Brief: For the Record
    We are pleased to announce that Jerry Cooper, a Partner in the Firm’s Chicago office, has been reappointed as a member of the Illinois Workers’ Compensation Commission Self-insurance Advisory Board effective through January 1, 2022.
  • On the Road
    Scopelitis attorneys are often invited to participate in meetings with transportation industry leaders. Learn more about their trips this quarter.
  • Dispatches
    Transportation Industry News & Trends