MoldMaking Technology

SEP 2018

Advertising in MoldMaking Technology offers

Issue link: https://mmt.epubxp.com/i/1016849

Contents of this Issue

Navigation

Page 45 of 67

44 MoldMaking Technology —— SEPTEMBER 2018 THE BOTTOM The Tax Cuts and Jobs Act of 2017 (the Act) limits, or outright eliminates, deductions that mold shops are accustomed to claiming. Tax Reform Limits and Eliminates Popular Deductions By Michael J. Devereux II, CPA, CMP The Tax Cuts and Jobs Act of 2017 (the Act) limits, or outright elimi- nates, deductions that mold shops are accustomed to claiming. These include the Domestic Production Activities Deduction (eliminated), business entertainment expenditures (eliminated), interest expense (limit- ed) and net operating losses (limited). The changes to these tax provisions will certainly have an impact on mold builders' tax liabilities. While the U.S. Treasury has yet to issue substantive guidance on these new provisions, the following is an overview of these limitations before the issuance of U.S. Treasury Regulations. The Domestic Production Activities Deduction Introduced in 2004, the Domestic Production Activities Deduction (DPAD) provides for a deduction equal to 9 percent of the tax- able income that is associated with a mold shop's U.S. manufac- turing activities. The Act capped the deduction at 50 percent of the W-2s associated with the otherwise qualifying production activities. The Act elimi- nated this deduction for tax years beginning after December 31, 2017. For calendar-year mold shops, 2017 is the last year for which they are eligible to claim the Domestic Production Activities Deduction. Fiscal-year taxpayers will claim their last DPAD in the year that ends in 2018. Entertainment Expenditures Generally, mold shops could deduct 50 percent of both meal and entertainment expenditures that were directly related to or associated with their business before the Act. Also, meals provided to employees for the convenience of the employer were 100-percent deductible before the enactment of the Act. However, the Act disallows a deduction for business enter- tainment expenses effective January 1, 2018. So, all forms of business entertainment (including but not limited to sports tickets, fishing trips, golf outings and theater tickets) are no longer deductible beginning in 2018 and beyond. The deduction for business meals is still allowable, subject to the 50-percent limit. Also, the Act eliminates the ability to deduct meals that are provided to employees for the conve- nience of the mold shop for amounts paid or incurred after December 31, 2025. The U.S. Treasury is expected to issue guidance concerning these provisions, including how mold shops can split expen- ditures between meals and entertainment when both types of expenditures are associated with the same event. Interest Expense Historically, mold shops have been able to deduct their inter- est expense in the year that the expense was paid or accrued, without limitations. The Act limits the ability of some large mold shops to deduct their interest expense when it is paid or incurred. Mold shops with average annual gross receipts of more than $25 million for the prior three tax years may have limited ability to deduct their interest expense in tax years beginning after December 31, 2017. While the Act is likely to reduce the federal income tax liabilities for most mold shops, mold builders should evaluate the changes to determine how the changes may impact their tax liabilities in 2018 and beyond.

Articles in this issue

Archives of this issue

view archives of MoldMaking Technology - SEP 2018