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The Trump Administration, together with the House Ways and Means Committee and the Senate Finance Committee, recently released its
“Unified Framework for Fixing Our Broken Tax Code.”

Below is a comparison of the current tax law and the framework:

Corporate and International Tax Provisions


Current Law

Tax Reform Framework

Top Corporate Tax Rate



Top Pass Through Tax Rate


25% on business income of small and family-owned businesses conducted as sole proprietorships, partnerships and S corporations

House and Senate committees to adopt measures to prevent re-characterization of personal income into business income

Carried Interest

Taxed as long-term capital gain

No specific proposal

Corporate Alternative Minimum Tax

Imposed on corporation to extent tentative minimum tax exceeds regular tax



Cost recovery over period of years

Full expensing for the cost of new investments in depreciable assets other than structures made after September 27, 2017 for at least 5 years

Interest Expense

Generally deductible

Deduction for net interest expense incurred by C corporations partially limited

Committees to consider appropriate treatment of interest paid by non-corporate taxpayers

Net Operating Losses (NOLs)

Generally may be carried back two years and carried forward 20 years

No information

Research credit

Generally either 20% credit for qualifying research expenses in excess of base amount or 14% alternative simplified credit


Domestic Production Activities Deduction (IRC Sec. 199)

Up to 9% deduction for certain income attributable to domestic production activities


Employer Provided Child Care

$150,000 maximum tax credit for on-site childcare

Portion of credit subject to recapture if child care facilities closed within first 10 years after placed in service

No information

Taxation of International Income

Worldwide with deferral


100% exemption for dividends from foreign subsidiaries (in which U.S. parent owns at least 10% interest)

To prevent companies from shifting profits to “tax havens,” rules to protect U.S. tax base by taxing at a reduced rate and on a global basis the foreign profits of U.S. multinational corporations

Rules to be adopted to “level playing field” between U.S.- headquartered parent companies and foreign-headquartered parent companies


Repatriated foreign source income taxed at full corporate rate subject to foreign tax credit or deduction

Foreign earnings that have accumulated overseas under current system treated as repatriated

Accumulated foreign earnings held in illiquid assets taxed at a lower rate than foreign earnings held in cash or cash equivalents

Payment of tax liability spread over several years

Cross-border transactions


No information

Subpart F income

Subpart F rules limit deferral for certain foreign income

No information

Individual Tax Provisions


Current Law

Tax Reform Framework

Ordinary Income Tax Rates

7 brackets: 10%, 15%, 25%, 28%, 33%, 35% and 39.6%

12%, 25% and 35%

Additional top rate may apply

Use of more accurate measure of inflation for indexing tax brackets and other tax parameters

Capital Gains/Qualified Dividends

Short-term capital gains (held less than 1 year) taxed at ordinary income rates

Long-term capital gains (held 1 year or more) taxed at preferential rates, top rate of 20%

Dividends taxed as ordinary income; qualified dividends taxed at capital gains rates

No Information

Alternative Minimum Tax

Alternate tax calculation based on 26%/28% tax rate, payable if greater than regular tax calculation


Net Investment Income Tax

3.8% above $200,000 adjusted gross income (single), above $250,000 (married filing jointly)

No Information

Medicare Surtax on Wages

0.9% --adjusted gross income greater than $200,000 (single), adjusted gross income greater than $250,000 (married filing jointly)

No Information

Personal Exemptions

$4,050; Personal exemption phase-out applies for taxpayers with adjusted gross income above certain amounts


Itemized Deductions

Phase-out applies to taxpayers with adjusted gross income above certain amounts

Eliminate most itemized deductions except home mortgage interest and charitable contributions

Standard Deduction

$6,300 (single and married filing separately)

$9,300 (head of household)

$12,600 (married filing jointly)

Additional standard deduction ($1,250) for elderly or blind

Standard deduction and personal exemption combined and increased to $12,000 (single) and $24,000 (married filing jointly)

Children and Families

Childcare tax credit

Repeal personal exemptions for dependents

Increase Child Tax Credit

First $1,000 of Child Tax Credit refundable as under current law

Increase income levels at which Child Tax Credit begins to phase out

Non-refundable credit of $500 for non-child dependents

Estate / Gift Tax Provisions


Current Law

Tax Reform Framework

Estate Tax

Exemption: $5,450,000, adjusted for inflation; top rate of 40%

Additional tax may apply to generation-skipping transfers

Repeal estate and generation-skipping transfer tax

Gift Tax

Lifetime exemption: $5,450,000, adjusted for inflation

Annual exclusion: $14,000 per donee, adjusted for inflation

No specific proposal

What is Bitcoin and Why Should I Be Excited By It?

What is bitcoin?

Bitcoin is form of currency that was created in 2009 by an unknown person using the alias Satoshi Nakamoto that has no physical presence anywhere in the world. It’s all based on a technology called blockchain where there are no physical “coins” like dimes, nickels and quarters.

What bitcoin is literally, though, is software.  It's a program that is run across an interlinked network of computers and which provides a way for people to exchange value on the internet.  Bitcoin is also described as a cryptocurrency and like other cryptocurrencies, exists on the internet.  There are over 1,300 cryptocurrencies listed on CoinMarketCap.com with a total market capitalization of more than $340 billion, which is almost the size of Johnson & Johnson. But bitcoin is the biggest by far and was the first cryptocurrency.

Transactions are made with no middle men. It is global and decentralized and there isn't any government overseeing it.  Bitcoin can be used to make purchases.  But much of the hype about Bitcoin has been about getting rich by trading it.

Where does bitcoin "live"?

Every bitcoin transaction is recorded on an open ledger visible to the public which has come to be called the blockchain.  Blockchain is a public spreadsheet that maintains a constantly updating history of bitcoin history that can't be altered or erased.  Blockchain allows you to have an account without having to identify yourself in any way.  However, blockchain provides a public ledger which means that every transaction is fully visible to the world.

How do you use bitcoins?

Bitcoins can be used to buy merchandise anonymously, without a middleman and involving lower or no fees and no banks. In addition, international payments are easy and cheap because bitcoins are not tied to any country or subject to regulation. Small businesses may like them because there are no credit card fees. Websites such as CoinDesk and 99Bitcoins list the names of businesses that accept bitcoin as payment.

However, some people just buy bitcoins as an investment, hoping that they’ll go up in value.

What if I want to own Bitcoins as an investment?

Many marketplaces called “bitcoin exchanges” allow people to buy or sell bitcoins using different currencies. Coinbase is a leading exchange, along with Bitstamp and Bitfinex.  People can buy and sell using various currencies. But security can be a concern

Bitcoins are stored in a “digital wallet,” which exists either in the cloud or on a user’s computer. The wallet is a kind of virtual bank account that allows users to send or receive bitcoins, pay for goods or save their money. Unlike bank accounts, bitcoin wallets are not insured by the FDIC.  Bitcoin wallets can be the targets of hackers just like any other online account.  So if you get robbed that bitcoin is as gone as if someone stole cash from you.

Though each bitcoin transaction is recorded in a public log, names of buyers and sellers are never revealed – only their wallet IDs. While that keeps bitcoin users’ transactions private, it also lets them buy or sell anything without easily tracing it back to them. That’s why it has become the currency of choice for people online buying drugs or other illicit activities.

Why are people so crazy about bitcoin?

Simple. Supply and demand. People are buying up bitcoin.  The floor value of bitcoin is zero. It does not pay interest. There is no asset value attached to it except what the market gives it. It has no central bank supporting it.  What it does have is value, just as gold has had for thousands of years.

Bitcoin has value because a community believes it has value.  Unlike the history of other forms of currency, with bitcoin you are replacing trust in the solvency of a government and its institutions with trust in the codebase, cryptography and incentives used to run the decentralized network.

Should I play in the bitcoin space?

Many urge caution, despite its impressive price increase in 2017. Bitcoin is a highly speculative, experimental new type of digital asset whose value fluctuates wildly. Therefore, there is substantial uncertainty around its future evolution and potential. Individuals should not invest any capital that they cannot afford to lose tomorrow. 


Generating Significant Tax Savings Through The Use Of Retirement Plans

We accountants are always looking for savvy ways to help our business clients save on income taxes. One of our firm's favorite tools that offers a lot of potential for income tax savings is through the use of a retirement plan.  It is important to not only ensure that our business clients have maximized their contributions, but also that they have maximized their tax savings. And that they are in the right retirement plan for the current stage of their business.  Time is of the essence as most of these tax-saving strategies have to be implemented prior to year-end.

One-Participant 401(k) Plan

One strategy, often overlooked, is the One-Participant 401(k).  Sole business owners with no common-law employees, except perhaps a spouse, that have a SEP, SIMPLE, or profit-sharing plan, may benefit more from a One-Participant 401(k) Plan. This plan can allow a business owner to increase their retirement nest egg while deferring more in taxes given the same level of taxable income.

Business owners may prefer the One-Participant 401(k) for their business if they want to:

  • Make both employee and employer contributions (and possible tax deductions), thereby maximizing contributions and tax deferral (not permitted in SEP plans).
  • Vary their contributions.  Like a SEP plan they can decide annually whether and how much to contribute based on cash flow.
  • Benefit from catch-up contributions if they are age 50 or over and are self-employed (not permitted in SEP plans).
  • Add their spouse to the plan. The One-Participant 401(k) can virtually shelter most of the income of a lower earning spouse while adding money to the spouse’s retirement account.
  • Optimize W-2 compensation and possibly lower FICA taxes.

The maximum contribution into a One-Participant 401(k) participant’s account is $54,000 for 2017. If the participant is 50 years of age or older, they can make a catch-up contribution of $6,000 for a total contribution of $60,000 into their account.

Defined-Benefit Plan

But what if you need bigger tax savings for your business? This is where a defined-benefit plan optimized for the business owner may be appropriate.

In a nutshell, a defined-benefit plan is another type of qualified retirement plan that allows your business to make larger contributions of $100,000 or more. A defined-benefit plan can be combined with a One-Participant 401(k) where the business owner may be able to contribute over $200,000. If the business owner has been busy growing their business and haven’t saved much in personal cash for retirement, combining the One-Participant 401(k) with a defined-benefit plan may help them to shelter over $2,000,000 of W-2 income over a 10-year period.

The One-Participant 401(k) is an often-overlooked solution by business owners with no common-law employees. Combined with a defined-benefit plan, it can enable a business owner to defer a lot in taxes while at the same time building up their retirement nest egg.

If a business already has a retirement plan but needs additional tax deductions, it may want to consider reviewing and optimizing their retirement plan for maximum tax deductions given a similar level of compensation. For businesses that have full time common-law employees that do not qualify for the One-Participant 401(k), similar strategies can be employed using a combination of perhaps a safe-harbor 401(k) and a cash balance defined-benefit plan to maximize their retirement contributions and tax deductions.

Businesses Brace for a Bumpy Ride as IRS Commences
Enforcement and Potential Penalties Related to Employer

Under the Affordable Care Act (ACA) large companies, defined by the ACA as those with 50 or more employees, are mandated to offer their employees affordable insurance or pay a penalty.The IRS held off for years on assessing those fines, saying that it needed more time to build its compliance systems.  Those systems are now in place and thousands of businesseswill soon receive a notice from the IRS stating that they owe the government money because they failed to offer their workers qualifying health insurance. The first round of notices is being mailed to companies that have at least 100 full-time employees and ran afoul of the law in 2015, the year that the mandate took effect.

Businesses will generally incur fines of around $2,000 per employee (excluding the first 30) if they do not offer qualifying coverage to nearly all of those who work an average of 30 or more hours a week. The penalty is activated if at least one employee then buys insurance on the health law’s marketplace and receives a subsidy for it.  The per-employee fine increases each year, and can add up quickly: For example, a company with 100 workers that ignored the law this year would owe a penalty of more than $158,000.The employer mandate of the ACA is lucrative for the government with penalty payments of $207 billion expected over the next decade based on projections by the Congressional Budget Office.

To prove their compliance, businesses annually are required to send the IRS a report on their employee head count and the health care coverage that they offered. The tax agency began requiring those forms two years ago, but it repeatedly ran into problems processing them.

The notices being sent by the IRS are based on the reporting forms companies submitted for 2015, the first year that they had to complete the new, and complex, disclosures.  However, based upon feedback from other professionals familiar with the process we believe that there will be a lot of inaccuracies in the IRS’ calculations.  Even companies that fully comply with the mandate have struggled to master its complicated reporting rules. Also, the inspector general has found that the IRS has also struggled to correctly analyze the returns.Accountants and others familiar with the process say they are bracing for more problems.The agency said companies that disagreed with its penalty notifications must contact them within 30 days to address their dispute.

While Republicans and the Trump administration continue trying to chip away at the ACA, the legislative provisions of the ACA are still in force until changed by Congress.  Accordingly, taxpayers remain required to follow the law, including the provisions of the employer mandate of the ACA and pay what they owe, including any back payments due going back to 2015.


Business Provisions of the Proposed Tax Reform Bill

The following is a more in-depth discussion of thebusiness provisions of the comprehensive tax reform bill released by the House Republicans on November 2.  At the present time, the House Ways and Means Committee is marking up this bill, for anticipated votes by the Committee and then by the full House prior to Thanksgiving bill’s business provisions.

Tax Rate Structure for Corporations. The corporate tax rate would be reduced to a flat 20%.  Currently, corporate tax rates are graduated and start at 15%, with a maximum rate of 35%.  Between $335,000 and $10 million of income, corporations effectively pay a flat 34% because the lower brackets are phased out.  The 35% bracket currently applies at $10 million of taxable income.

Alternative Minimum Tax.  The corporate alternative minimum tax (“AMT”) would be eliminated.  Taxpayers that have AMT credit carryforwards will be able to use them against their regular tax liability and would also be able to claim a refundable credit equal to 50% of the remaining AMT credit carryforward in years beginning in 2019, 2020 and 2021 and the remainder in 2022.

Expensing of Capital Investments.   Businesses would be allowed to immediately write off (expense) the cost of new investments in depreciable assets made after September 27, 2017 and before January 1, 2023.  Property that is “first-used” by the taxpayer would qualify, so the property would no longer have to be new. 

Interest Expense.  The deduction for net interest expense incurred by any business, regardless of form, would be subject to a disallowance of a deduction in excess of 30% of the business’s “adjusted taxable income.”  Adjusted taxable income is the equivalent of EBIDTA and is computed without regard to business interest income and expense, net operating losses, depreciation, amortization and depletion. The amount of disallowed interest would be carried forward for five years.  Exempt from these rules would be businesses with average gross receipts of $25 million or less, regulated public utility companies and real property trade or businesses. The rules would apply at the entity level for pass-through entities and special rules would apply to the pass-through entities’ unused interest limitation for the year. 

Net Operating Loss Rules.  The net operating loss (“NOL”) deduction would be limited to 90% of taxable income (determined without regard to the NOL deduction). The 90% limitation is currently the limitation on AMT NOL usage and it will create a 2% of taxable income minimum tax on all corporations.   Carrybacks of NOLs would no longer be allowed except for one-year carrybacks for small businesses and farms with casualty or disaster losses.  The provision would apply to losses arising in years beginning after 2017.  For year beginning in 2017, the current NOL carryback rules would apply but NOLs created from the increased expensing discussed above would not be available for carryback.   NOLs arising in tax years beginning after 2017 that are carried forward would be increased by an interest factor.

Like-Kind Exchanges of Real Property.  The like-kind exchange rules would only be available for real property.  The rule would be effective for transfers after 2017 but a transition rule would apply to personal property transfers started but not completed by December 31, 2017.

Repeal of Other Business Expenses.  The following business deductions would be repealed:

  • The IRC Sec. 199 domestic production activity deduction (“DPAD”).
  • The deduction for local lobbying expenses.
  • The deduction for entertainment expenses other than business meals.

Gain Rollover to Special Small Business Investment Companies (“SSBIC”).  The rollover of capital gain on publically traded securities into an SSBIC would no longer be allowed.

Accounting Simplification for Small Businesses.  For certain businesses with less than $25 million in average annual gross receipts, the following accounting simplifications would apply:

  • Cash Method of Accounting.  C corporations and partnerships with C corporation partners would be able to use the cash method of accounting.  Currently, the gross receipts limitation is $5 million.  The new threshold would be indexed for inflation.
  • Accounting for Inventories.  Businesses would be able to use the cash method of accounting even though it had inventory.  The business would have to treat the inventory as a non-incidental material or supply.
  • Capitalization and Inclusion of Certain Expenses in Inventory Costs. Businesses would be fully exempt from the UNICAP rules for real and personal property, acquired or manufactured.
  • Long-Term Contract Accounting.  Businesses that meet the threshold would be able to use a non-percentage of completion method including the completed contract method.  

Business Credits.  The research and development (“R&D”) and low-income housing credits would remain.  The following credits would be repealed: orphan drug credit, employer-provided child care credit, rehabilitation credit, work opportunity work credit, new markets tax credit and disabled access credit. The deduction for unused credits would be repealed. 

Employer Credit for Social Security Taxes Paid with Respect to Tips. This credit would be modified to reflect the current minimum wage so that it is available with regard to tips reported only above the current minimum wage.  Additional reporting requirements would also be required.

Energy Credits

  • Production Tax Credit.  The inflation adjustment would be repealed, effective for electricity and refined coal produced at a facility the construction of which begins after November 2, 2017. Accordingly, the credit amount would revert to 1.5 cents per kilowatt-hour for the remaining portion of the ten-year period.
  • Investment Tax Credit (ITC).  The expiration dates and phase-out schedules for different properties would be synchronized. The 30% ITC for solar energy, fiber-optic solar energy, qualified fuel cell, and qualified small wind energy property would be available for property when the construction begins before 2020 and is then phased out for property when the construction begins before 2022.  No ITC would be available for property when the construction begins after 2021. Additionally, the 10% ITC for qualified microturbine, combined heat and power system and thermal energy property would be available for property when the construction begins before 2022. Finally, the permanent 10% ITC available for solar energy and geothermal energy property would be eliminated for property when the construction begins after 2027.
  • Residential Energy Efficient Property. The credit for residential energy efficient property would be extended for all qualified property placed in service prior to 2022, subject to a reduced rate of 26% for property placed in service during 2020 and 22% for property placed in service during 2021. The provision would be effective for property placed in service after 2016.
  • The enhanced oil recovery credit and the credit for producing oil and gas from marginal wells would be repealed.

Executive Compensation

  • Modification of the Limitation of Excessive Executive Compensation.  The exception to the $1 million deduction limitation for performance-based compensation would be repealed.  The definition of covered employee would also be amended to include the CEO, CFO and the three other highest paid employees.  Additionally, once an employee qualifies as a covered employee, his/her compensation would be subject to the $1 million limitation as long as the executive (or beneficiary) receives compensation from the company. 
  • Nonqualified Deferred Compensation. An employee would be taxed on compensation as soon as there is no substantial risk of forfeiture (i.e., the compensation is not subject to future performance of substantial services).  A condition would not be treated as constituting a substantial risk of forfeiture solely because it consists of a covenant not to compete or because the condition relates (nominally or otherwise) to a purpose of the compensation other than the future performance of services – regardless of whether such condition is intended to advance a purpose of the compensation or is solely intended to defer taxation of the compensation.  The provision would be effective for amounts attributable to services performed after 2017. For existing non-qualified deferred compensation plans, the current-law rules would continue to apply until the last tax year beginning before 2026.  At that time, the arrangements would become subject to the provision.
  • Excise Tax on Excess Tax-Exempt Organization Executive Compensation. The bill proposes a 20% excise tax on compensation in excess of $1 million paid to a tax-exempt organization’s five highest-paid executives. The provision would apply to all remuneration paid to such executives, including cash and the cash value of all remuneration (including benefits) paid in a medium other than cash, and excluding payments to a tax-qualified retirement plan and amounts otherwise excludable from the executive’s gross income. The excise tax also would apply to “excess parachute payments” by the organization to such individuals.  An excess parachute payment generally would include a payment contingent on the executive’s separation from employment with an aggregate present value of three times the executive’s base compensation or more. The provision would be effective for tax years beginning after 2017.