Spring 2018 issue of Horizons

Alternative Minimum Tax The corporate alternative minimum tax (AMT) for C corporations has been repealed for tax years beginning after December 31, 2017. AMT credit carryovers can be used to reduce a corporation’s regular tax liability. For tax years 2018 through 2020, 50% of AMT credit carryovers that exceed a corporation’s regular tax liability are refundable. The remaining credit carryovers will be fully refundable in tax year 2021. Research Credit The research and experimentation tax credit was preserved with the only modification being that certain research and experimentation expenditures incurred after 2022 are to be capitalized and amortized over five years. Many taxpayers have been limited from claiming the full amount of the research and experimentation credit generated in the current tax year. With the elimination of the alternative minimum tax for C corporations and the substantial revisions to the rules for individuals, taxpayers who were limited in prior years may be able to claim a credit for the full amount of the research credit generated in a tax year. Small Business Opportunities New opportunities exist for taxpayers with less than $25 million in average annual gross receipts. The average period for this purpose is the three prior tax years.

the performance of services…where the principal asset of such trade or business is the reputation or skill of one of more of its employees.” More guidance from the IRS is likely to follow in order to help clarify eligibility. If a taxpayer’s taxable income is less than $315,000 (married filing joint) or $157,500 (all other filing statuses) the taxpayer is exempt from both the W-2 wage limit and the service business exception. The deduction is applicable for tax years beginning after December 31, 2017, and before January 1, 2026. deduction (DPAD) that has been available to manufacturers for several years has been repealed for tax years beginning after December 31, 2017. Net Operating Loss The net operating loss (NOL) rules for C corporations have been revised to limit future deductions to 80% of taxable income, where the NOL arose in tax years ending after December 31, 2017. No such limitation applies to NOLs incurred prior to the 2018 tax years. The two-year carryback rule has been eliminated, but NOLs may now be carried forward indefinitely rather than being limited to 20 years. Domestic Production Activities Deduction The domestic production activities

32 Manufacturers and Distributors Feel Effect of Sweeping Tax Reform