February 27, 2018
New Tax Legislation Hot Topics
After much speculation and media hype, major tax changes are here — so what does that mean for all of us? Partner Jeff Bowman and other members of our Ag Team recently attended classes at the CalCPA Tax Update Conference to learn more.
Three Hot Ag Topics
IC DISC: IC-DISC was on the chopping block but received a reprieve. No change means a big sigh of relief for many of our clients in the almond and walnut industries, where IC-DISC has provided significant tax benefits due to high levels of crop exports.
Entity Selection: Section 199A replaces the old DPAD rules and will potentially result in larger deductions in some cases, but also a significantly higher level of complexity. This new deduction, in theory, provides a 20% of net business income deduction. However, it is fraught with limitations for higher income taxpayers. Some types of businesses may not qualify, while others will have limits based on wages paid or assets invested in the business. As we work through these new rules, we may discover that our clients need to change entity type to maximize potential new tax benefits.
Depreciation Rule Change: Farmers planting permanent crops, such as orchards and vineyards, stand to benefit from changes in depreciation rules and first-year expensing. This rule even allows some of our ag clients exemption from requirements to capitalize pre-productive costs.
“The biggest take away from my recent conference is that the major new areas impacting businesses are so complex that we have to review each client’s situation,” Bowman says. “It is really tough to generalize and give clients a quick estimate of how much they will save or pay under the new law.”
Our team will continue to learn how to best interpret the new laws, and it would be our pleasure to share what we discover with you. To learn more about our ag expertise, please click here. As always, our Ag Team is here to help you understand how to get the most out of your investments.