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Business Taxation

By December 19, 2016No Comments



Corporate Income Tax

During the campaign, Trump proposed to lower the business tax rate to 15 percent and eliminate the corporate alternative minimum tax.



The top corporate income tax rate is currently 35 percent. 


Small Businesses

Trump’s campaign materials about how pass-through entities (sole proprietor-ships, partnerships, and S corporations) would be taxed are broad-brush. Generally, Trump’s campaign materials indicate that the owners of pass-through entities could elect to be taxed at a flat rate of 15 percent on their pass-through income retained within the business, rather than be taxed under regular individual income tax rates (the top individual rate would be 33 percent under Trump’s plan).



This plan would appear to give a business quasi-corporate status in being able to be taxed at a new 15 percent corporate tax rate until assets are distributed. Upon distribution, a second layer of tax would be imposed similar to dividends now taxed to C Corporation shareholders.


COMMENT. Trump’s campaign materials also indicated a consideration of rules that would prevent pass-through owners from converting their compensation income taxed at higher rates into profits taxed at the 15 percent level. 


Business Tax Incentives

According to campaign materials, unspecified “corporate tax expenditures” would be eliminated, except for the Research and Development (R&D) credit, in exchange for a lower corporate tax rate.


Section 179 expensing

Specifically directed toward small businesses, Trump during the campaign indicated that he would increase the annual cap on Section 179 expensing from $500,000 to $1 million. 


Childcare credit for businesses 

During the campaign, Trump proposed to increase the annual cap for the business tax credit for on-site childcare. Additionally, the re-capture period would be reduced.


Manufacturing expensing

In lieu of deducting interest expenses, Trump proposed during the campaign that manufacturing firms would be able to immediately deduct all new investments in the business.


This article originally appeared in BDO USA, LLP’s “Post-Election Tax Policy Update” (November 2016). Copyright © 2016 BDO USA, LLP. All rights reserved.