Keeping-Up with U.S. Tax-Savings for your U.S. Business!

U.S. Tax Credits

Are you operating or forming a U.S. business that can use U.S. tax-savings? Strategies for using U.S. tax credits and deductions may add substantial value to your business!

Proposed U.S. tax benefits to watch

You are probably aware of generous U.S. energy-related tax credits and other benefits – including credits you can sell to others for cash – which were enacted in 2022 and have been implemented by government regulations during 2023-24.

However, Congress has also considered restoring previous business tax benefits such as 100% Bonus Depreciation – substantially equivalent to full deductibility for U.S. tax purposes of the cost of many business assets – as well as generous tax deductions for R&D expenses.

Specifically, the U.S. House of Representatives has recently passed these and other tax benefits – but the U.S. Senate cannot seem to adopt these, so they have not been sent to the President for final implementation. In case they are enacted, they may well be retroactive to the beginning of 2024 and perhaps earlier – so please watch for such developments!

What about pending Global Tax Reforms?

For the past several years, tax authorities in many countries have been considering major changes to International Tax Principles – including imposition of a Minimum Tax Rate of 15% on income of international taxpayers in each country in which they have operations.

This tax rate may be enforced in part – wherever an international taxpayer is escaping such minimum taxation – by allowing other countries to levy a top-up tax in the amount of the shortfall in minimum tax. This can mean a U.S. (or other) business that uses U.S. tax credits and deductions to fall below the minimum tax rate can be taxed by other countries on its global income, thereby eliminating the economic benefit of U.S. tax savings. Clearly this conflicts with the U.S.’s sovereign constitutional power to tax its own taxpayers at whatever rates it wishes, including by providing U.S. tax credits and deductions.

Recently the U.S. has indicated it cannot join these new principles if their implementation will override U.S. tax benefits – including the benefits described in the first part of this piece. Please watch for further developments to resolve this conflict!

The experienced tax attorneys at RJS Law assist individuals and businesses with a wide range of tax problems. If you have questions involving U.S. tax savings or any other tax related issues, please feel free to contact the author at [email protected]. You may also contact our office on the web or by calling 619-595-1655 for a free consultation.

IRS Circular 230 Notice:  Any advice contained in this communication (including any attachments) does not constitute a formal opinion of the author or her/his Firm and is not intended or written to be used, and cannot be used, for the purpose of (a) avoiding or reducing penalties that may be imposed by the Internal Revenue Service or any other governmental authority or (b) promoting, marketing or recommending to another party any transaction or matter addressed herein.