Tax Cuts and Jobs Act of 2017

So you arrive at a net number and that is the amount that you can claim credits against.

So, go back to 2017, the TCJA is enacted.

People originally thought, or some people had this idea that GILTI was like a minimum tax.

As long as you paid a certain rate of foreign tax, you weren't subject to any more US tax, kind of like the way Pillar 2 operates.

I feel like that became particularly in vogue, and this is like 20 years ago, Wade, it doesn't really feel like that long, but when we had CFC look through, right? And we wanted, and that was just one of those provisions that was never permanent, it was always expiring, and this gave us the ability to have an extra 11 months for calendar year CFCs to take advantage of look through, in other words, dividends, interest, rents, and royalties that could be paid between CFCs without running afoul of subpart F income.

And then that just kind of stuck with us.

We had TCJA.

We ended up with this so-called donut hole period, which we talked about in some of the litigation related to that with some of these mismatched provisions.

So, you know, I guess one that comes to mind, and I know you discussed in your article, is the idea of charitable bunching.

Now, this became more popular after the Tax Cuts and Jobs Act was passed back in 2017 because TCJA at the time dramatically raised the amount of the standard deduction.

To the point that many, many more people were taking the standard deduction as opposed to itemized deductions.

So with charitable bunching, the idea here is that you sort of bunch your charitable contributions into one particular year.

That always seems to happen.

I say this because remember when 199 CAP-A came up, the TCJA in 2017.

It had like six panels on 199 CAP-A.

It was incredible.

You're stuck with all of them.

And also they rejected the defense that they've been doing this ever since the TCJA came out, you know, ever since I should say the Affordable Care Act came together, you know, since 2010.

They said, you know, the fact that you, you know, the Bureau cannot acquire lawful authority to do something merely by doing it against the law for a long period of time.

The court granted, therefore, you know, the taxpayer's motion and held that the net of S income tax adjustment basically was null and void because they lack any authority to impose such a tax and to mirror Chapter 2A taxes, right, independently or to override Treasury regulations.

That was Trump's first big signature tax bill.

Why has that been particularly a ripe topic for regulation validity, even outside the fact that we have the Supreme Court decision? But I feel like this TCJA, there are a number of reasons why there are a bunch of issues from a validity perspective associated with some of those international tax regulations.

There are, yes.

So it was massive change, especially in the international tax space.

And so prior to TCJA, US multinationals operated in a deferral regime.

So foreign subsidiaries, their earnings were not subject to any sort of current taxation at the US corporate level.

Not until those earnings were repatriated back to the US would they be subject to tax.

And so the TCJA moved away from the deferral and into a territorial taxing system.

created an opportunity.

So that was a Republican-led tax cut, but it created an opportunity for Democratic-led high-tax states to ask the IRS, hey, we want to embrace TCJA, and we want to allow these pass-through entities to pay state tax at the corporate level, which means that if you own a business, you're paying the, your business is paying the state tax.

So you're not paying federal tax on the income you're taking to pay the state tax.

It's yet another tax advantage for business ownership.

Now, most of you know this as Section 174.

And to give you a little bit of a background here, the Tax Jobs and Cuts Act, they were the first that came forward and said, you know what? You don't have to capitalize.

You can take a full expensing of some of these R&E expenditures.

Now, of course, TCJA sunset, which then you had to start capitalizing and there was a big overwhelming push to be able to expense this again.

... it's either 34 or 35%, the headline corporate tax rate.

The 2017 Tax Act took it down to 21%, which was even a sharper reduction than corporate lobbyists were asking for.

Um, so something in the mid to high 20s, I think is, is reasonable.

Yeah.