Keeping Up with US Tax Savings for Your US Business

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

Proposed US tax benefits to watch

You are probably aware of generous US 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 US tax purposes of the cost of many business assets – as well as full current tax deductions for R&D expenses.

Specifically, the US House of Representatives has recently passed these and other tax benefits – but the US 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 that a US (or other) business that uses US 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 US tax savings.  Clearly this conflicts with the US’s sovereign constitutional power to tax its own taxpayers at whatever rates it wishes, including by providing US tax credits and deductions.

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

Please feel free to contact the author with questions or comments on the above points at or by phone at (646) 345-0586.

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.

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