Implementation Phase of The Tax Cuts and Jobs Act and Tax Reform II Status

October 15 has come and gone and most taxpayers have filed their 2017 tax returns by this time. Possibly visions of, and planning for, the November and December holidays are at the forefront of your concerns. Your 2018 taxes may be the least of your current priorities. But … it is not too early to think about 2018 taxes. This year, in fact, it may be more imperative than ever to plan ahead. The changes brought by the Tax Cuts and Jobs Act (the “ACT”) are having both positive and negative impacts on taxpayers. Do you know the impact it will have on you?

It has been noted by us and other tax professionals that the quick enactment from initial bills to final legislation was accomplished in an unprecedented short period of time compared to the last major tax overhaul in 1986. Last year at this time, the basic framework of tax reform was under construction. A short six weeks later, the Tax Cuts and Jobs Act (TCJA) was completed. It became the most comprehensive change to federal tax law in over a generation. Some ten months after enactment, taxpayers are still waiting for guidance regarding a significant number of the new provisions of the TCJA that have significant impact on taxpayers’ 2018 federal tax liabilities.

We will continue to study the various aspects of the TCJA in more detail and will provide insight as the IRS issues additional guidance (or if previous guidance is supplemented or even changed). Compliance issues and traps have been, and will continue to be, identified—and potential planning opportunities will be introduced.

However, the fact remains that the quick turn-around from initial bill to final law resulted in less than well-structured and defined statutory language. The delay in issuing guidance by the IRS has often compounded the situation. As a result, taxpayers and advisors are still uncertain about how to interpret and apply provisions in many instances (qualified opportunity zone provisions are but one example).

Additionally, there was also talk of “Tax Reform II” earlier in the year. In fact, the Congressional House of Representatives approved three separate bills back in September that collectively make up Tax Reform II. While the House has passed the bills, they sit in the Senate awaiting further action. However, it seems unlikely that anything will be done by year-end even on the heels of President Trump’s recent comments that he would consider raising other taxes to pay for a 10% middle-class tax cut.

The retention by Republicans of a majority in the Senate will likely not be enough to approve additional Republican-initiated tax legislation. However, it is probably sufficient to prevent Democrats from repealing any part of the TCJA. While a Congress divided upon partisan lines may result in fewer tax bills being approved, any successful legislation will likely be bipartisan.

Our thoughts on the TCJA (as well as other tax topics) do not comprise an in-depth analysis of the provisions. Rather, they are intended to generate questions and discussions. We invite you to continue to review this material and to reach out to Schneider Downs as we monitor developments and explore the tax landscape for ideas that optimize your financial and tax position. Our professionals are well versed in the TCJA’s many details; and we welcome the opportunity to speak with you about the opportunities for you and your organization.