The “Big 6,” a group of top Republicans in the House, Senate and Administration, yesterday unveiled their framework for tax reform.
Below is a summary of some of the areas of the plan that impact American Gaming Association (AGA) members. Of notable concern, the blueprint envisions some unspecified limitation on business interest deductibility to be determined by the House Ways and Means and Senate Finance Committees.
It is important to keep in mind that this framework is not binding, but instead provides guideposts for the House and Senate tax writing committees as they develop their respective bills. As negotiations occur, the details (e.g. tax rates, inclusion of various controversial provisions) are likely to change. AGA will remain directly engaged on the Hill and through our partnership with business coalitions to ensure legislation reflects the priorities of our members.
Notable Provisions Impacting the Gaming Industry
TAX RATE STRUCTURE FOR CORPORATIONS: The framework reduces the corporate tax rate to 20% – which is below the 22.5% average of the industrialized world. In addition, it aims to eliminate the corporate AMT, as recommended by the non-partisan JCT. The committees also may consider methods to reduce the double taxation of corporate earnings.
“EXPENSING” OF CAPITAL INVESTMENTS: The framework allows businesses to immediately write off (or “expense”) the cost of new investments in depreciable assets other than structures made after September 27, 2017, for at least five years. This policy represents an unprecedented level of expensing with respect to the duration and scope of eligible assets. The committees may continue to work to enhance unprecedented expensing for business investments, especially to provide relief for small businesses.
INTEREST EXPENSE: The deduction for net interest expense incurred by C corporations will be partially limited. The committees will consider the appropriate treatment of interest paid by non-corporate taxpayers.
TERRITORIAL TAXATION OF GLOBAL AMERICAN COMPANIES: The framework transforms our existing “offshoring” model to a territorial tax system for future overseas earnings, but coupled with some form of global minimum tax, taxing at a reduced rate and on a global basis the foreign profits of U.S. multinational companies. It envisions a one-time deemed repatriation tax for existing overseas earnings, at a two-tier rate with a higher rate for cash assets and lower rate for illiquid assets. Payment of this tax liability will be spread out over several years.
RESEARCH & DEVELOPMENT TAX CREDIT: The framework envisions preserving the current R&D credit.
As always, I appreciate your engagement and input. Please don’t hesitate to reach out with any questions.
