The Tax Cuts and Jobs Act (TCJA) became law in December 2017 under the Trump administration, marking a radical shift in corporate tax policy. The corporation tax rate was reduced to 21 percent, the lowest in the history of the US. This action was sold as part of a plan to boost internal investment, wages, and employment, yet the actual effects of this policy have been highly controversial. A tax consultant lawyer is the one who can help businesses navigate through these changes.
The blog raises the question of which areas of business, corporate structures, and investment types truly profited under these tax changes, and what business executives can learn today about leveraging changes in fiscal policy to their advantage.
1. Large Multinational Corporations: The Clear Winner
Very large and diffuse multinational corporations were the most direct and apparent beneficiaries of the decreased corporate tax rate, especially those corporations with comparatively high effective tax rates and substantial international earnings. Companies such as Apple, Pfizer, and Alphabet (the parent company of Google) have managed to bring back overseas earnings at a lower rate due to a tax provision known as repatriation.
These companies were shedding liabilities, which they used to repurchase shares, pay dividends, and bolster their balance sheets, rather than hiring more employees. Apple is the only company to have declared the repurchase of its stock to the tune of $100 billion after the tax cuts, indicating where a large part of the cash was absorbed.
2. Retailers and Consumer-Facing Industries
Industries that have consistently recorded close to the full effective tax rate in the past, such as the retail sector, have also experienced significant gains. Companies like Home Depot, Walmart, and Target have experienced a significant decrease in the amount of taxes they pay, which can now be used to renovate stores, train staff, and upgrade infrastructure with digital connections.
But this was advantageous in different ways. The less substantial retailers, which lacked the scale and legal structure to capitalize on tax liabilities, did not reap the same benefits. The larger retailers were in a significantly better position to align with the new rules and capitalize on fast depreciation and investment charges.
3. Capital-Intensive Industries and Real Estate Firms
The TCJA introduced 100 percent bonus depreciation for qualified assets, allowing businesses to immediately deduct the full cost of purchases of qualified capital investments. This provision particularly favored manufacturing, construction, and real estate - these are the industries that depend heavily on equipment, infrastructure, and property development.
Depreciation schedules and cost segregation studies were also utilized as tax-deferral tools in the strategy. In a cryptocurrency business where depreciation is quite different, a cryptocurrency tax attorney is someone who can help the company navigate new regulations and ensure compliance.
4. Pass-Through Entities: Small Business Winners (With Conditions)
C-corporations had their rates permanently slashed, but pass-through businesses (S-corporations, partnerships, and sole proprietorships) were granted a 20% qualified business income (QBI) deduction on a temporary basis under Section 199A. This was beneficial to high-income earners in professional fields, medical groups, and consulting, though not without some losses.
Now that negotiations are underway on whether the TCJA should be overturned or modified, companies should remain engaged. Probably the difference between being in a position to reap the rewards of the federal policy and not receiving any of it at all is the degree to which your business is ready to shift gears when the laws shift.
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