Issue 1, 2018

8 Oregon Trucking Associations, Inc. Oregon Truck Dispatch Kimberly Pepion joined Kernutt Stokes, CPAs and Consultants in 2012 where she and a team of professionals serve the transportation industry. Kimberly had a career in commercial insurance for 10 years prior to pursuing her degree in accounting. Her duties include providing comprehensive tax and consulting services to the firm’s clients, including trust and estate planning and compliance services. She serves numerous clients but her expertise lies in the transportation, professional corporations and timber niche areas. For questions or more information, contact Kimberly at 541.687.1170 or kpepion@kernuttstokes.com . T he corporate tax rate for C-Corporations has changed from a tiered tax with a top rate of 35% to a flat tax rate of 21%. This will be beneficial for large transportation companies but will not have the impact on smaller companies. For any transportation companies that are flow- through entities, such as S-Corporations, Partnerships, or LLCs, there is a deduction for up to 20% of the qualifying business income, subject to some limitations. The complete repeal of 1031 exchanges on tangible personal property will apply in 2018. The repeal applies to 1031 exchanges completed after 2017 for property that is not real property (Land/Buildings). This means 1031 exchanges for trucks and heavy equipment will no longer be available beginning in 2018. This repeal should have minor tax consequences to smaller businesses because gain recognition on the disposition of tangible personal property (trucks and heavy equipment) in an exchange adds to the basis of the replacement property, which can now be 100% expensed. With that said, the built-in gains tax cannot be escaped by trading in equipment. If you elected S status from a C-Corp the built-in gains tax would still apply during the built-in gain recognition period of five years. A new provision of the tax code allows for 100% bonus depreciation that applies to both new and used property that is acquired and placed in service after September 27, 2017. It will remain in effect until January 2023. Section 179 annual expensing limits were also increased to $1,000,000, with a new phase-out limit that was increased to $2.5 million. Many small businesses will be able to immediately expense close to all asset additions (other than buildings and luxury autos). Net Operating Losses (NOL’s) for tax years beginning after 2017 will not be allowed to be carried back. NOL’s created after 2017 and carried forward will only be allowed up to 80% of taxable income determined before any NOL deductions. NOL’s formed post 2017 will be allowed indefinitely as a carry forward. Pre-2018 NOL’s retain the old law’s 20 year carryover restriction. Accounting methods for small businesses will also be affected. The cash method of accounting will now be allowed for all businesses with average annual receipts of $25 million or less. With a new year comes new tax legislation, of which a number of provisions will have a significant effect on the transportation industry. By Kimberly Pepion, Senior Tax Associate at Kernutt Stokes, LLP How Does the New Tax Law Impact You?