by Michael Lodge –
With a new President and a Republican majority in Congress, there will be new tax changes that will affect us all.
Bloomberg BNA’s Daily Tax Report released its 2017 Outlook, forecasting major changes to tax and accounting policies under the incoming Trump Administration and a Republican Congress.
“There is no doubt that 2017 will be a milestone year for tax policy along the lines of 1986 and 1954,” said George Farrah, editorial director of tax and accounting at Bloomberg BNA. “Every area of tax is going to be impacted, not only by a tax overhaul but also by the likely repeal of Obamacare, potential elimination of some major tax regulations, and changes in evolving state tax laws and policies.”
“These are monumental changes,” he said, noting that the federal area could see a rewrite of the entire Tax Code. “Some of the pieces of that which seem likely are changes in tax rates, the elimination of the corporate minimum tax, border adjustments, IRS restructuring, a move towards a territorial tax system, and repeal of the estate tax,” he said.
“Not only do we have tax overhaul, but potential repeal of Obamacare, which would have many significant tax ramifications,” he said. “Moreover, tax practitioners are grappling with the partnership audit rules and how to plan for them.”
The IRS budget will likely be “miserable” for 2017 and beyond, according to the report. “The IRS is down 5,000 revenue agents and criminal investigators from six years ago, and the IRS commissioner has recently warned that the agency could fail if it doesn’t get more funding,” it notes.
The survivability of the estate tax valuation rules is tied to two things in the new administration, the report notes – what happens to the rules themselves and what happens to the estate tax as a whole.
“Clearly, international tax is in the eye of the storm and there seems to be a growing consensus to change tax laws to prevent companies from relocating offshore,” Farrah noted. “A lot of money is being held offshore that an one-time repatriation would allow back into the U.S. The issues that a tax overhaul would address would be a reduction in the corporate income tax rate to make it more in line with other countries, a move to a territorial tax system, and border adjustments. In addition to these, there are other major tax issues that could happen, such as the elimination of some major tax regulations, including the earnings stripping regulations.”
State and local governments will continue to grapple with applying tax to emerging technologies in the next year, the report indicates. Emerging platforms, such as Airbnb and Uber will face considerable scrutiny from states that are hunting additional revenue sources.
There is not a lot of guidance on the federal level on nexus, with the result that there is a lot of uncertainty in that area. “Frustration after another year of congressional inaction will mobilize more stats to reach for remote sales taxes in 2017,” Farrah predicted. “There will be more states adopting economic nexus,” he said.