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Transportation Brief: The New Tax Law Overview

by Kelli M. Block, Steven A. Pletcher

March 5, 2018

Late last year, President Trump signed the Tax Cuts and Jobs Act (the Act) into law, resulting in the most sweeping tax overhaul in decades. 

Many of the changes in the Act—primarily those intended to favor businesses in an attempt to spur economic growth—are permanent. Other changes—primarily those benefitting individual taxpayers—are temporary (at least for now). Some of the temporary changes include provisions: (1) reducing the top individual tax rate from 39.6% to 37%; (2) nearly doubling standard deductions ($12,000 for individual taxpayers; $24,000 for married taxpayers filing jointly); (3) eliminating miscellaneous itemized deductions for employee taxpayers; and (4) doubling the child tax credit. 

The impact of the Act on each individual and business will vary. While the Firm continues to analyze the potential implications for clients, below is a brief overview of those changes that may have the most significant impact upon the transportation industry: 

  1. Reduction in the corporate tax rate. The corporate tax rate has been slashed from 35% to 21%. 
  2. New deduction for pass-through entities. Pass-through entities continue to be taxed at the owner’s individual income tax rate.  The Act provides for a new 20% deduction for domestic “qualified business income” with some limitations.
  3. Depreciation changes. For equipment acquired and placed in service after Sept. 27, 2017, taxpayers can now write off 100% of the cost under revised bonus depreciation rules.
  4. Like-kind exchanges. The Act limits like-kind exchange treatment (previously used by transportation companies to defer gains on equipment sales) to real property transactions.
  5. No employee deduction for unreimbursed employee business expenses. Employee drivers can no longer deduct business expenses they incur while traveling away from home in the business of the employer. While this change does not directly impact the ability of motor carriers to offer per diem plans, it is not entirely clear what effect this change may have on how per-diem plans are administered nor how the IRS may view the continuation of such plans. 

This issue of The Transportation Brief provides additional insight on some of the above changes. The Firm will continue to analyze the Act in an effort to identify its intended and unintended consequences for the transportation industry.

 

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: Business Income Tax Rates
    by Ronald J. Morelock
    The centerpiece of the Act is a permanent reduction to the corporate income tax rate.  Read Scopelitis' insight 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