Sweeping Tax Reform Affects ABA Members

President Donald Trump is poised to sign a historic tax overhaul bill after the House and Senate gave it their final blessing Wednesday. The Tax Cuts and Jobs Act of 2017 is the first major rewrite of the U.S. tax scheme in more than 30 years. It is packed with changes that could have an impact on you and your business. Here are some of the biggest changes and how they may affect you:

  • Corporate tax rate permanently reduced to 21 percent, effective 2018. Repeals the corporate alternative minimum tax.
  • Across-the-board cuts in individual tax rates, with a top marginal rate of 37 percent for taxable incomes over $600,000 (married) and $500,000 (single).  Effective 2018 through 2025. Reduces the impact of the individual alternative minimum tax.
  • Provides a 20 percent deduction for qualified business income of pass-through entities (i.e., sole proprietorships, partnerships, C corporations, trust and estates). Two limitations apply. First, the deduction cannot exceed 20 percent of taxable income (reduced by capital gains). Second, for taxpayers with taxable income in excess of $157,500 ($315,000 married filing jointly), a wage limitation applies. In such cases, the wage limitation is the greater of (1) 50 percent of W-2 wages paid attributable to a qualified business, or (2) the sum of 25 percent of W-2 wages and 2.5 percent of the original cost of existing property. 
  • Increases the current-law small business expensing limitation under section 179 from $500,000 to $1 million and the phase out range from $2 million to $2.5 million for taxable years 2018 and beyond. The $1 million and $2.5 million amounts are indexed for inflation. Also, treats certain personal property used in lodging, HVAC property, fire protection and security systems as qualified property.
  • In addition to increasing the section 179 limits, the bill temporarily increases the bonus depreciation percentage to 100 percent for property placed in service after Sept. 27, and before Jan. 1, 2023 (2024 for certain longer production period property and aircraft). The expensing percentage phases down to 80 percent for 2023, 60 percent for 2024, 40 percent for 2025, and 20 percent for 2026 (with one-year extensions for certain longer production period property and aircraft).
  • Provides greater access to the cash method of accounting by allowing businesses with average gross receipts of $25 million or less to use the cash method.
  • The bill places limitations on the deductibility of business interest expense, but exempts businesses with average gross receipts of $25 million or less.
  • Doubles the exemption amount of $5 million to $10 million (indexed for inflation) for estate and gift taxes for decedents dying after 2017 and before 2026. 
  • The bill repeals like-kind exchange treatment for exchanges of personal property. However, the permanent increase in the amount of section 179 expensing and the temporary increase in other expensing (discussed above) should hold most like-kind exchanges of personal property harmless.
  • Provides that no deduction is allowed with respect to any activity generally considered to be entertainment, amusement or recreation, even if such activities are directly related to the active conduct of a trade or business. Retains the 50 percent deduction for food and beverage expenses associated with a trade or business.
  • Disallows the deduction for providing any qualified transportation fringe benefits to employees (except as necessary to provide for safety) and for any commuting expenses.  
  • No changes to fuel taxes.

About the American Bus Association

The American Bus Association (ABA) is the trade organization of the intercity bus industry, with more than 1,000 motorcoach and tour company members in the United States and Canada. Its members operate charter, tour, regular route, airport express, special operations and contract services. Another 2,800 members are travel and tourism organizations and suppliers of bus products and services who work in partnership with the North American motorcoach industry.

Contact

Melanie Hinton, Director of Communications & Media Relations, ABA
Office: (202) 218-7220
Email: .(JavaScript must be enabled to view this email address)