Taxation of Recoveries Origin of the Claim 21% rate Return of - PowerPoint PPT Presentation

Taxation of Recoveries • Origin of the Claim – 21% rate – Return of capital – Foreign v domestic source – State attribution

How Tax Reform Impacts Your Company • Business taxation – 21% corporate tax rate – Expensing for purchases of tangible assets – Net interest limitations – Repeal of corporate AMT – 20% deduction for non-corporate business

How Tax Reform Impacts Your Company • International taxation – Territoriality / deemed repatriation of deferred foreign earnings – Minimum tax on payments to foreign affiliates (BEAT) – Revised taxation of income from intellectual property (GILTI and FDII)

How Tax Reform Impacts You • Lower rates! • Cap on state tax deductions • Standard deduction

How Tax Reform Impacts You Taxable Taxes under Income* Prior Law Taxes in 2018 Tax Savings $100,000 $16,478 $13,879 $2,599 $200,000 $42,885 $36,579 $6,306 $300,000 $74,217 $60,579 $13,638 $400,000 $107,217 $91,379 $15,838 $500,000 $143,231 $126,379 $16,852 $600,000 $182,831 $161,379 $21,452 >$600,000 $39,600 $37,000 $2,600 (per $100,000) * Married filing jointly

How Tax Reform Impacts You Taxable Cost of Loss of State Tax Income* Deductions Net Tax Savings (Cost) $30,000 $50,000 $30,000 $50,000 Lost deductions $100,000 $6,600 $11,000 ($4,002) ($8,002) $200,000 $7,200 $12,000 ($895) ($5,695) $300,000 $7,200 $12,000 $6,438 $1,368 $400,000 $9,600 $16,000 $6,238 ($162) $500,000 $10,500 $17,500 $6,532 ($648) $600,000 $10,500 $17,500 $10,952 $3,952 >$600,000 $780 $1,300 $1,820 $1,300 (per $100,000) * Married filing jointly

How Tax Reform Impacts You • Legislation introduced in California – Donate to “California Excellence Fund” – “Charitable contribution” for federal tax purposes (not subject to $10,000 limit) – Dollar-for-dollar offset against state income tax liability • Treasury Secretary says this is “ridiculous” • Similar legislation being discussed in NY, NJ, and other states

How Tax Reform Impacts You • Standard deduction: $24,000 (married filing jointly) • Consider “bunching” charitable contributions Separate “Bunched” Year 1 Year 2 Year 1 Year 2 State tax $10,000 $10,000 $10,000 $10,000 Interest $10,000 $10,000 $10,000 $10,000 Contributions $10,000 $10,000 $20,000 $10,000 Annual $30,000 $30,000 $40,000 $24,000 deduction 2-year total $60,000 $64,000

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