December 27, 2017

As of December 14, Republicans in the House and Senate had reached a deal on a final tax reform package that reconciled differences in their respective versions of the "Tax Cuts and Jobs Act." The House and Senate voted on final passage December 20 and it was signed by the president on December 22. Here's a summary from JA’s legislative counsel, Haake Fetzer, of some of the key business-related provisions in the final version of the bill:

Big Changes to Pass-Through Businesses

With most small businesses operating as pass-through entities -- sole proprietorships, partnerships, limited liability companies and S corporations -- changes to the tax code that affect pass-through businesses could have the greatest impact on jewelry businesses.
  • The House proposed capping the top tax rate for pass-through entities at 25%.
  • The Senate plan would continue taxing pass-through businesses at the individual rate that would apply to the owner, with a top proposed rate of 38.5%. However, to reduce taxes for them, the Senate bill would allow most pass-throughs to deduct 23% of qualified business income from their taxes.
  • Update: The final bill keeps the individual tax rate, but allows qualified businesses to deduct 20%.

The Estate Tax

Jewelers of America has long supported repeal of the estate tax. 
  • The House proposed doubling the estate-tax exemption from $11 million to $22 million per couple (or from $5.5 million to $11 million per individual) next year and repeal the tax entirely by 2024.
  • The Senate bill also doubled the exemption, but otherwise keeps the estate tax.
  • Update: The final bill doubles the exemption, but keeps the tax in place. This is a win for Jewelers of America Members, the majority of whom have revenues below the exemption threshold.

Corporate Tax Rate

  • Both the Senate and House bills would cut the corporate tax rate to 20 percent.
  • Update: The final version of the bill sets a 21 percent corporate tax rate to create additional revenue under the final plan.

LIFO Accounting Method

In good news for many jewelers, repeal of the LIFO (Last In, First Out) accounting method was not included in either the House or Senate tax reform bills or in the final version passed by both chambers and expected to be signed by the president. This was a major win for Jewelers of America members. 

Jewelers of America will provide a more detailed analysis of the final legislation in January.
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