"One Big Beautiful Bill" Act Updates

There will be some slight increases in the inflation there. Basically they get one year extra inflation in those lower tax brackets to kind of continue to boost the benefits for lower income taxpayers. That's going to be effective after the end of this year. Pretty much all of these are going to be effective after the end of 2025 because that was when those CCJ provisions were scheduled to expire. We will highlight if it is a different day. So the extended the doubled standard deduction, there were some moderate increases here to 15,750 if you are single filer, 23,625 if you are ahead of household and 31,500 if you are married finally jointly. That's a very slight reduction from the original version of the senate's bill. Got to find some money everywhere you can so they were slightly reduced from the original amounts. Now seniors get a temporary 6,000 deduction and that is either regardless if they take the standard deduction or if they itemize their deductions, that is going to be a temporary increase from 2025 through 2028. It is within certain a GI limitations. However, the A GI phase out is quite generous for that senior deduction. You will be completely phased out at $175,000 if you are a single filer and at $250,000 if you are married filing jointly and only one person is over 65 or I believe $350,000 if you are married filing jointly and both are over 65. So it's quite a generous a GI phase out compared to most of the other phase outs that we've seen in this bill. And Sarah,

Jeff Kelson:When did you say this was done to?

Sarah Adkisson:Yes, I did. See we have a lot of questions about social security. So this was one of the very fun little wrinkles with reconciliation under the board rule, you cannot make changes to social security using reconciliation, whether it's beneficial or not to taxpayers, you just can't do it. So this is essentially a way around that limitation on not being able to make any changes to the taxation of social security benefits using reconciliation was to do this temporary standard or itemized deduction for seniors. That is kind of why people are saying that it reduces the tax on social security, it reduces your taxable income and that could include your social security benefits. So it was kind of a roundabout way of doing that. So that should answer that question.

Jeff Kelson:That's for people 65 or older

Sarah Adkisson:And that's only for 2025 through 2028.

Jeff Kelson:Four years.

Sarah Adkisson:Yes. So the bill also permanently increases the child tax credit to $2,200 that will also now have an annual inflation adjustment, the refundable amount also it will increase each year and that will also be adjusted for inflation and the $500 credit for other dependents was also made permanent. I really had to dig into the bill to find that that was made permanent and that is for, again, after the end of this year, the adoption credit and the dependent care credit we're also enhanced and made permanent. That starts for the end of last year. So it was retroactive at the beginning of this year. Those enhancements to that as well as the enhancement of the dependent care credit was also made permanent. That one is sorry, effective at the end of this year. So the adoption independent care credit is retroactive to the beginning of this year.

The dependent care credit, which are slightly different is the end of this year, the A MT exemption. So this increased the A MT exemption permanently to that $1 million. However, one of the things that again you kind of had to dig into the bill to find, it resets the date at which that $1 million will start to be increased for inflation. So that 1 million amount has been increased over the past eight years. Well starting in 2026 that is going to reset to a million dollars and then again increase for inflation. So while it made that 1 million permanent, it is both good and bad for some taxpayers, particularly taxpayers who may be within that kind of 1 million to $1.2 million income range. They will be again hit by the A MT. The salt cap, I feel like this was the headline for weeks on this bill was the salt cap. So the deal that they reached with the salt cap was the state and local tax deduction cap is increased to $40,000 or $20,000 for married filing separately and that is for taxpayers with a GI under $500,000 or $250,000 if you're married filing separately, that amount begins to phase down by 30% of the excess over $500,000 or $250,000. It cannot go below 10,000 or $5,000 if you married filing separately, there is an extra slide to go over this because it is a lot.

It will be increased instead of adjusted to inflation, it'll be increased by 1% in 2030. It snaps back to 10,000 or $5,000 if you're married. Filing separately and probably the best news was that all of the PTET restrictions that we saw in both the House version and the first Senate version, none of them made it through to the end. They were gone by the time they passed. So great news for anybody who has been using the PTET work rounds, the estate and gift tax exemption is increased to $15 million. That is permanent. That starts at the end of this year. Currently it's about 14 million. I think it's exactly like 13.99 million. So it's a moderate increase. It will be adjusted for inflation beginning in 2027. It also permanently extended the 60% a GI limit for cash charitable contributions. It creates this 0.5% floor so it effectively disallows 0.5% of your charitable contribution and allows non itemizes a 1000 deduction or if you are married filing jointly that is $2,000. That is very different from both the house version and some of the previous versions. The house version did not have that 0.5% floor. It did not make permanent the 60% a GI cash limitation and it only allowed $150 or $300 as a non itemized charitable deduction. So those provisions are going to permanent and that is at the end of this year is when that take effect.

So like I said, I promise that there would be a slide. So the state and local cap is a little complicated the way that they ended up having it happen. So we know that under current law your state and local tax deduction is capped at $10,000 or $5,000 to be married. Filing separately, obviously this was slated to expire at the end of this year. It raises a lot of money to have this cap so we knew that there would be some cap that would be in this bill. The final version aversion increases the allowable deduction and it is retroactive to the beginning of this year. So 2025, the allowable deduction is $40,000 or $20,000 if you were married filing separately, again your A GI cannot exceed $500,000 or $250,000 if you were married filing separately starting in 20

Jeff Kelson:A bit of a marriage penalty

Sarah Adkisson:Because whether you're single, yes, so the marriage penalty was not addressed, it's still in there.

Jeff Kelson:It's the same.

Sarah Adkisson:So if you were single, you get $440,000 if you were married filing jointly, you get $40,000. So there is a marriage penalty beginning in 2026. That amount will increase to $40,400 or $20,200 if you're married filing separately. That is put into 1 64 B and that is again for taxpayers who A GI do not exceed $505,000 or $252,500. The available deduction is going to be reduced by 30% of the amount by which your A GI exceeds that threshold. Again, it cannot drop below the 10,000 or $5,000 cap starting in 2027. The amounts of both the deduction and the A GI thresholds will increase by 1% not adjusted for inflation, it is 1% each year until 2029 or through 2029 I should say in 2030 it snapped back to $10,000. So that is going to be another cliff that we're going to see being addressed in 2030. So I guess we'll have another webinar then and we will keep everyone updated. And again, all PTET restrictions have been removed, which is great news. So it also terminates the deduction for moving expenses and miscellaneous itemized deductions. 

Jeff Kelson:Again that which had been missing in action for six years already.

Sarah Adkisson:I know it extends the mortgage interest deduction limit. It does add one thing that was not in any of the other previous versions of the bills in that it explicitly treats mortgage insurance premiums as interest that was added, I think it was one of those last minute changes that was added. It allows a deduction of up to 25,000 of tipped income for those whose a GI does not exceed $150,000 or $300,000 of your married filing jointly. This is a big difference between the original house version of the bill which did not have any kind of cap on how much income tip income you could exclude. That is a temporary provision. It will be in place for this year retroactive to the beginning of this year through 2028 and it also allows a deduction of up to $12,500 or $25,000 for married filing jointly for qualified overtime compensation for those again whose A GI does not exceed $150,000 or $300,000 if you're married filing jointly.

Really these three provisions, the deduction of tip income, the deduction of overtime compensation, compensation and the deduction for loan interest, they are all four years. They're all temporary provisions. So the deduction for loan interest for cars assembled in America, that is up to $10,000 and it begins to phase out when your modified adjusted gross income exceeds a hundred thousand dollars or $250,000, sorry $200,000 if married filing jointly. The full phase out is at adjusted gross income of over $150,000 if you are a single filer or $250,000 of merit filing jointly. So again, there's a little bit of marriage penalty there. It also replaces the peace limitation on the itemized deduction. It reduces the allowable deductions to 2 37 of the lesser of the amount on allowable deductions or the amount by which the taxpayer's income exceeds the dollar amount at which the 37% bracket starts. That is a very, very complicated way of saying that it will effectively limit itemized deductions to about 35 cents on the dollar for very high income taxpayers

Jeff Kelson:People in the 30 very long time to

Sarah Adkisson:Price that out.

Jeff Kelson:Yeah, they lose 2% on the other month

Sarah Adkisson:And that is a permanent provision that will take effect after the end of this year. So it creates Trump accounts. This is probably the provision that went through I think the most changes and the Trump accounts as it ended up in the bill. The final version, it's still going to have a non-deductible $5,000 a year contribution limit that will again be adjusted for inflation after 2027 and children born between the beginning of this year through the end of 2028 would receive what is now a refundable tax credit of a thousand dollars and that is deposited to an account if an election is made. However, the secretary can at their discretion make an election for any child that they deem as eligible. So it does not have to be an election made by the parent. The secretary of the Treasury can and I would assume will be making an election for the eligible children who are born. And

Jeff Kelson:It's interesting, this doesn't have any income limitations. This is for every child that is born in the United States to qualified parents.

Sarah Adkisson:The original versions of this had a lot of restrictions, a lot of rules about when distributions could be made, when distributions would deem to be made. They really ended up simplifying it in the final bill. Essentially if are under the age of 18, if you have, you are a US citizen with a social security number and at least one parent has a social security number, you are considered an eligible child or I think it's actually an eligible individual to be a beneficiary for one of these accounts. They ended up really simplifying it. Most of the rules instead of it having all of these complicated distribution and contribution rules, they ended up instead just referencing 4 0 8 it will mostly be treated similar to an IRA, however the gains will be taxed like capital gains when distributions are made.

Jeff Kelson:Like a Roth.

Sarah Adkisson:There's going to be so many questions about Trump accounts. I know

Jeff Kelson:More like a Roth.

Sarah Adkisson:Yeah, so that is a permanent provision but the deposits are temporary Now the effective date of this is a little confusing. It essentially no contributions can be made until after 12 months after the date of enactment. So it's really kind of effective in 2026 but the deposits will be made for children who were qualified and born between 2025 and 2028. I expect that this is going to be a very interesting provision to put into practice. So we'll kind of see how that ends up shaking out but as Jeff likes to say, now every child will be a trust fund baby.

Jeff Kelson:That's right. 

Sarah Adkisson:A thousand bucks and then finally it does extend and enhance the ABLE accounts. Those were provisions from the TCGA and those have been made permanent effective at the end of this year. Alright, so our second polling question, what changes did the bill make to pass through entity tax or state and local tax workarounds? Did it limit the salt cap workarounds to only non-specified service trader businesses only? Did it cap the pass through entity tax deductions to the greater of $40,000 or 50% of PTA paid? Did it completely disallow these or are there no restrictions? And I feel like I tried to make this, I made a little confusing I guess since these provisions were, some of these provisions were in earlier versions of the bill,

Jeff Kelson:Sarah, we're getting a lot of questions on whether the tip income and the overtime exclusion would be taken. Even if you take the standard deduction I it's an exclusion not at the,

Sarah Adkisson:We have a lot of questions. Yes. So it is available I believe, regardless of whether you take the standard deduction or you itemize.

Jeff Kelson:Thank you. And to explain it Sarah, for those who understand it's an above the line exclusion. It's above the line deduction so it doesn't interfere with your standard deduction or your itemized deduction if you qualify for the tip or overtime exclusion.

Sarah Adkisson:So I've seen a couple questions also about how it'll be reflected on the W2 or schedule one. I would have to double check the wording of the bill, but I do know that some of the earlier versions of it very clearly say that both the treasury will have to put out new withholding tables but also that it will have to be clearly indicated on a W2, both any tip income and any qualified overtime compensation. So my understanding is that they are going to have to create new W twos for 2024 or sorry for 2025 that will clearly show that either the tipped income or the qualified overtime compensation. I keep trying to say overcompensating.

Jeff Kelson:There we go.

Sarah Adkisson:All right. Okay. Well a majority of the people got it correct. 65 got correct. There were no restrictions. The final version of the bill had no restrictions on PA workaround regimes. That's one thing you take away. That should be it. All right.

Jeff Kelson:Okay. Thank you Sarah. And you see how complicated this is. There's been a lot of misinformation and it's understandable. There's been so many gyrations between the house to descend it again back to the house that people are remembering things from something and now it's not in the final bill. So that's why you're here. And we've posted on the website as well. So let's go to the business provisions a lot in here to set out teeth into the highlight is, well a bunch of highlights. One of the highlights is the QBI deduction. That's that deduction you get for pass through entities and sole proprietors that are qualified trader business that or you can be a non-qualified one as well in certain a GI limitations. You get a 20% deduction and that is the final number. It was 23% in the house, now it's 20% and that sticks. And there's also this will make life a little more confusing. They added a $400 minimum deduction for taxpayers to materially participate. Have a thousand of qbi. So normally you'd have 200, you get 400.

It doesn't really move the needle much but it's there and there are. So if you have not a specialized service traded business so it doesn't qualify, you can still get it if you meet the income limitations once you're over that you get phased out and there's still W2 qualifications need a certain amount of W2 payroll and wages to qualify. So it's all pretty much as it was in essence. So I don't want to get too into the weeds because it changed a few things. It changed a few limitations that added this 400 minimum, but by and large it's instead of 20 and that's where it's been for pass throughs and Schedule Cs. Okay, here's what I think the biggest headline if you want Jeff Kelsons opinion section 1 74 deduction is used to be for the last, since 2022 for research and experimental expenditures. You had to capitalize it and amortize it over five years if it was domestic in 15 years, if it was foreign, this hurt a lot of taxpayers that were investing heavily in R&D, especially startups, it might actually be taxable.

Well now what they're doing is they are making it starting in 1 25 completely deductible. So any expenses incurred for R&D as they call it in one twenty five and thereafter because it's permanent, it's fully deductible and if that's not enough, if you have unamortized r and d expenses from previous years from 22 or 23 or 24, you can then take them immediately so you can elect to take it all the stuff that stuck up. This is only for domestic expenditures, not foreign foreign states 15 years by the way, only for domestic. It's encouraging domestic. You can take the unamortized portion, either you can like to take it all in 25 or you can take it in 25 and 26, split it and if that's not enough, one more small businesses and meet in under certain growth free seats, thresholds can maybe not take it all. They can go back and amend the return back to 2021 if they want to get back those unamortized payments. And the reason that's there is maybe they need the money quicker. So if you file an amended return, you'll get a quicker than waiting 25 return, which will be done in 2026 to claim it. So it gives the ability for certain small businesses, I think Sarah was under like 40 million or something in gross receipts around that.

Sarah Adkisson:31 million

Jeff Kelson:Yeah, go back in, amend right away and claim it back. Or you can wait to doing your 25 return, get it all in one year or two years. So many, many options, many, many options to get back or get to deduct the 1 74 for 1 63 J, which was a provision that limits the amount of business interest expense you can take to 30% since 2022. The denominator of that 30% is EBIT earnings before interest in taxes. But from 2018 to 2021 it was ebitda. Well the adding back the the appreciation amortization, so if you denominate is bigger, 30% of a bigger number would allow for more business interest expense to be deducted. Currently that is permanent. It starts in 2025 return and if however they added a proviso, if you're capitalizing any of the interest into another asset like fixed assets or inventory, it will still have to go through this formula.

So can't still be restricted. However, that change doesn't start until 2026. So still available for 24 and 25. It's in 2026 that a capitalization of interest to know the asset will first have to go through the funnel of 1 63 J. Right now it does not. I know it's a mouthful. It's a lot here trying to cover it and go at a nice pace. So I know we're getting a ton of questions on it. We're getting a ton of questions on 1 74. Maybe I'll cover it again after, but let me get to the end here. Bonus appreciations back so you can get a hundred percent bonus for assets placed in service after January 19th, 2025. That's permanent. You can't go back like you can on the 1 74 but because right now the bonus depreciation was being phased down so it goes starting after 19, 20, 25 back to a hundred percent but no retroactive changes on that.

You can't go back in like you can in the r and d extend expensing rules for qualified film, television and life theatrical productions of qualified time recording. That's temporary that begins 1 1 26 well extends it. It also allows bonus depreciation for qualifying sound recording productions release to broadcast before 1 1 29. So these are temporary changes and for some reason the one that Sarah and I have scratch our head over corporate charitable deductions, we C corp charitable deductions always had a 10% limit. You can deduct charitable deductions up to 10% of the income. Now this change starting in 1 1 26, the first 1% doesn't count. So you get 9% if you maxed it out rather than 10%. So let's just go over this.

The EBITDA starts for one six. I'm getting so many questions, I'm just going to try to cover this again. I know this is a mouthful here. EBITDA starts and after 12 31 24 as you see there. So that would be effective on your 25 return. The only reason we put in 12 31 25 was what I explained about the capitalizing interest into other assets that will have to go through the 1 63 J formula before being capitalized starting in 1 1 26. But the EBITDA is restored for the 25 returns. And again 1 74, I'll say it again, this is the most robust section, it's the most beneficial section RD expenses are deductible starting in fall, domestic RD expenses starting in fall 1 1 25 plus as an added bonus, you can go back and claim the unamortized domestic RD expenses either all in 25 or half in 25, half and 26. Sometimes you want to match it and smaller taxpayers under 31 million can start filing amended returns for the open years and make it as if those were deductible and those open years and claim for a refund. Hopefully I try to explain it as best we can. There's a lot there we know.

Next one, extend limit. Okay, this one got very complicated or it's not complicated. It was very simple to understand but it changed so many times that people have misunderstood. So for a period since 2018, section 4 61 L or excess business loss carryovers excess business losses are limited to a number. I think it's like 575,000 in one year and the excess is carried over is NOL. The reason why that's so important is net operating losses can offset non-business income and business income where if it carried forward as an excess business loss, it would only be available to offset future excess business, future business income. So that might prevent a lot of taxpayers from deducting it in the following year and being hung up for a long time. How it all came out is sorting 1 1 25, it's back to normal, back to how it was. You can deduct it up two to 5 75 and any excess carries over not as an excess business loss but as a net operating loss.

So it is back to how it was increases. The Terry one thing, the 1 79 deduction I want to cover, I dunno if it's on here. Section 1 79 is a provision that you can immediately expense depreciable assets and people would say, well why do you need to do that? You already have bonus. The reason is, and by the way, they increased it to two and a half million and assuming for assets placed no more than $4 million and the reason why 1 79 is beneficial, it's just most states don't allow bonus depreciation and 1 79 most states allow. So for taxpayers that have a lot of state returns, the 1 79 is normally deductible bonuses not some other provisions we have increases. The employer provided childcare credit. Oh by the way the 4 61 L, the excess business law starts 25. So it just continues. It doesn't necessarily sort but it's made permanent that it carries forward as an NOL increases the provided childcare credit to 25%, 40% of eligible small business of course up to 500 and it's adjusted annually for inflation after 12 31 26.

This is permanent. So the employer provided childcare credit can be to 25 and 40% in certain small businesses. Here's another headline, breaking news section 1202, which is qualified small business stock which allows investors in C corporations to exclude up to $10 million each in gain if they hold the stock five years and about 15 other metrics, it increases it now instead of 10 million, it's 15 million of exclusion and instead of being limited to $50 million in gross assets now and it's 75 million, so increased it by 50% and it allows for an exclusion of gain starting after three years. It's not a hundred percent after three years, they give you 50% after three years, 75% after four years and 100% stays after five years. It's not retroactive. It's only for investments made after the date of enactments. Anybody who already has A-Q-S-B-S doesn't get this added to them, added to their exclusion buts for new investments after the date, which was last week.

So it's a fair game. Now advanced manufacturing investment credit number 48 decreases up 10 percentage points to 35%. Certain financial lenders can exclude 25% of their interest income if it's derived from loan secured by rural agricultural real property. So there's a break to investors, to lenders like banks who lend against those properties. It allows the net income tax and to sale qualified farm land two qualified farmland to be paid over four years and equal amounts. So that's been getting a lot of attention and that's after the date of enactment enhances the income housing credit by increasing the state housing credits ceiling to 12.5%, allowing additional buildings financed with tax exempt bonds to qualify for housing credits. At least 25%. The aggregate basis of building is financed to qualified bonds. This one very, you got to dig in on this one, but they have made improvements to the tax situations of investing in low income housing. Let's put it that way. You can read it. Qualified opportunity zone. That's that ability to take some of your capital gains and to put it into a qualified zone and either defer it or in some cases step up the basis it extends to.

Sarah Adkisson:There's a typo on this. This is actually permanent.

Jeff Kelson:This is permanent, yeah.

Sarah Adkisson:Need the house version

Jeff Kelson:10 year rolling track designations. Beginning 1/1/27 notes is the definition of low income community communities create staggered holding periods so you get 10% step up and creates qualified rural opportunity funds for 30%. So it emboldens it in many respects. We are going to have future webinars that are going to drill down more into financial services 1202 real estate. We're just trying to give you the whole kit and caboodle right now because it's brand new. Here's one that's getting so little attention and Sarah and I are kind of perplexed because we think it's big, it's not good news but it creates new penalties for employee retention, tax credit, promoters, there were a bunch of those and more importantly, it disa allowss ERC claims made after January 31st, 2024. The IRS had already given an indication of that back at that time and extends the statute of limitation to six years from the latest of three events.

So basically the IRS can go back six years, meaning if you filed your claim they can go back six years from that date or the date of the return. It gives them a lot of leeway, a lot of time to audit the ERC claims that came in. Gigantic amount of claims that the IRS couldn't process fast enough. So what this bill does is it disallows the claims filed after January 31st, 24 puts new promoter penalties and extensive statute of limitations to six years instead of three years in most cases only for one quarter. It was five years but now it's six for every quarter from the latest of three dates. So it gives IRSA lot of time to get their arms around this. Okay, I know a lot. We're going to go into 1202, I touched on this. So here you go again. Increases the gain exclusion to 15 million is currently 10 increases the gross asset test when you invest in a qualified small business, you have to meet certain gross asset tests at that time and prior it raises it to 75 and 50 million.

Both the gain, exclusion and gross asset test. Then adjusted for inflation starting in 2027, making a lot of beneficial changes to the QSBS and it creates a new halting period. I went through this quickly but now you can see it in the chart. If you hold it three years, you can still exclude 50% of the gain four years, 75, 5 years, 100. But be careful because of how it's taxed. It's not exactly a 50% tax break or 75% tax break. It can be because I guess the taxable portions tax at 28%. So if you hold it three years, you're sort of saving 30% of the taxes in four years I think came up with 60% of the taxes but still break that you didn't have under the prior QSBS rules and you can still do the section 10 45 deferrals, which can allow you to tack the holding period onto another qualified small business stock that you purchased within 60 days.

They didn't change that. Again, I said it about 10 times, but the changes be effective for stock issued after the date of enact. I've seen a lot of questions on it. Stock issued after last week. Stock issued starting this week. Okay, when will the QSBS changes take effect retroactive to 1/1/25 after the date of enactment tax years beginning after 12/31/25 or tax years beginning after 12/31/26. So as you're answering this, I'm reading some questions, is exclusion time of sale based on the inflation adjusted amount? 15 with the time of the initial investment? I think time of the initial investment. I think it's for investments made in the future. The claim disallowance, its January, employee retention credits is January 31, 24. Place a old and it is

Sarah Adkisson:Is for claims made under section 31 34. So there are some earlier claims that will be okay if you made them

Jeff Kelson:Right. So there's two code sections on the employee retention credit and one's for two quarters and the other one's I think for five quarters or something like that. So right each one of these, if you drill down, there's complication. We're just trying to give you an overview and highlight the important points. Let's see what they got. A lot of questions on date. Okay, we got 45% correct. Again, it's for investment. All these changes to the QSBS section 1202 stock is after the date of enactment, which was what Friday. So it's starting this week, not retroactive but still I think you're going to see a lot more play around qualifying as A-Q-S-B-S and what are the mandates to be a domestic C corporation.

Sarah Adkisson:I suspect there's going to be a lot of questions about 1202 in general going forward.

Jeff Kelson:I'm taking through the changes to the clean energy, correct?

Sarah Adkisson:Yes. All right, so we've had a fair number of questions about this. So there were a lot of changes made to the energy credits under the Inflation reduction Act. This was one of the biggest areas of negotiation. This is what kept it going into the early hours of the day was negotiations with Lisa Murkowski in Alaska over some of these, among other provisions. So a lot of changes were made here. The clean energy production tax credit, that's 45 y and the investment tax credit, 48 E for solar and wind projects. Those are going to be completely disallowed unless they were placed in service on or before December 31st, 2027. That does not begins construction. It is placed in service now the credit for geothermal, hydropower and nuclear power, those are going to remain in place through December 31st, 2031. Those are permanent provisions. The advanced manufacturing credit under 45 x that is going to be phased out beginning December 31st, 2030.

It does terminate a credit for any wind energy components produced or sold after December 31st, 2027. For whatever reason, solar components made it through this one unscathed. I'm not sure why. One thing I will say is that the different components, some of them also have different phase out schedules. It was, there's a lot of different components that are listed there, but generally it begins to phase out after December 31st, 2030. That is also a permanent provision. The nuclear facilities credit under 45 U did not get a whole lot of changes. It made it through pretty much sale through. It's going to expire after December 31st, 2032. That is also permanent. The Clean Fuel production credit under 45 Z is extended through December 31st, 2027. I believe the original version they were going to terminated after 2027, not 2029. So one thing is that the fuel must be produced in North America, so that does include Canada and Mexico, but it must be produced in north, sorry, north America, I was just in North Carolina. That's also a permanent provision. So it terminates permanently after 12 31 20 29, but that fuel requirement goes into effect after 1231 of 2025. The advanced energy projects credit allocation is frozen so the credit remains, but the allocation is frozen at current levels as of the date of enactment. It will still be available through 12 31 20 31. The 45 Q carbon oxide sequestration credit.

That will still be available for facilities beginning construction before January 1st, 2033 and it does increase the credit for certain activities to $36 from $17. That is also permanent. It is for the increased credit that is effective after the date of enactment. The hydrogen production credit, that's 45 V that terminates for facilities that have begun construction after December 31st, 2027. You can see there's a lot of different effective dates and termination dates here. So that again, effective after 12/31/2027. So those are all of the really mostly the business ones, they all have very different effective dates and termination dates. Some of them have different termination dates depending on the type of energy or component. There's a lot of moving parts on this one. I know people are going to have questions, so feel free.

Now in terms of more of the personal credits or the vehicle credits, those have a much faster termination schedule used, clean vehicle credit, the clean vehicle credit and the qualified commercial clean vehicle credit all terminate at the end of September of 2025. The alternative vehicle refueling credit, the new energy efficient home credit and 1 79 D. The energy efficient commercial buildings deduction all terminate at the end of June of 2026. And then finally the energy efficient home improvement credit and the residential clean energy credit, they terminate at the end of this year. So in particular, the more individual and vehicle heavy credits are terminating much, much faster than the business credits. One thing I will say is generally speaking, direct pay and transferability will still be allowed if the credit is still allowed. They were really not touched as much, so that is kind of the one silver lining is that they didn't repeal the transferability and the direct pay outright. Obviously some of these projects will not really in actuality qualify for that if they are having to be placed in service before December 31st, 2027, but that those still are available. It did also place restrictions on these foreign entities of concern and those generally go into effect at the end of the year. I believe there were some changes made back and forth on those as well. But so those restrictions will limit some businesses in terms of taking credits if there's any investment from a foreign entity of concern, mainly China I, all right, other provisions,

Jeff Kelson:

Other provisions we're getting, just a few things I want to clarify. We were right. There's two sections on the ERC, this six year statutes on the third and fourth quarter of 2021 filings. So the other quarters don't seem to be under this, just to give that as a update. International provision's guilty, which is going to be renamed by the way, reduces it to 40% right now it's 50% is permanent. Renamed it to ready the net CFC tested income, I think it lost luster. Was that NCT? I don't know. We liked guilty, it was easy to remember, but the takeaway is they reduce it starting in 2026 from 50% to 40% extends the fitty and we like that word. Fitty is a deduction for export sales by C corporations. It reduces the deduction to 33 and a third. It used to be 37.5. So it took away some of the benefit and renames it.

Ready federal, I can't even say it, foreign derived deduction, eligible incomes or F-D-D-E-I and modifies the calculation. I'll make it harder to remember. Also extends to beat tax, otherwise known as base erosion, anti-abuse tax, at least it doesn't change the name of that and increases the rate to 10 and a half currently is 10 as permanent. All these are after 12 31 25. So slight increase in the tax rate and the beat. That's if you have $500 million in gross receipts and your C corp. It excludes service income from guilty and 50 for the US Virgin Island based services. So that's very specific. It creates a 1% excise tax of transfer funds abroad. And so if someone is putting it through a non-registered, I guess transfer agent descend it abroad, you get a 1% excise tax that's not creditable on any tax return. So if you do it on Western Union, that's fine. If you do it on a non-accredited one, they would have to collect the 1% tax and you don't get it back. That was higher 1.0. It wasn't a three and a 5% of one bill.

Sarah Adkisson:It was percent then 3.5% and then interestingly enough, 1% raises more money because at 3.5% people will change their behaviors, but at 1% they will not.

Jeff Kelson:Psychology.

Sarah Adkisson:Very interesting.

Jeff Kelson:There has been a lot of attention on the nonprofit provisions creates a tiered excise tax. So right now certain, like for instance colleges, universities pay 1.4% of that big endowment. Now they have three tiers. So depending on how much the endowment is per student, you can be paying still at the 1.4% rate. We could be paying at the 4% rate or in the biggest universities at the 8% rate. So it does increase the tax significantly in certain universities. So it's three tiers of taxes now based on the endowment per student applies the excess compensation tax. All cover employees of nonprofits and any related entities. By the way, these all start 2026. Okay, so nothing for this year starts next year at these new taxes and changes as a mouthful. Let's go on. We got a poll. The Congress meet itself imposed deadline to pass the bill by July 4th and we're getting a ton of questions. I would say maybe 15 questions on this one. 74 deductible. People understand it. So they're good questions. If you haven't filed the 2024 return yet, can you deduct it in 24 rather than waiting 25? That's a good question. To make the election, it's a good question

Sarah Adkisson:Because the bill itself says shall file amended return for affected years. I can't imagine that they would make people file an original If you're on attention. I can't imagine that they would make you file the return and then file an amended return. So I certainly hope that we will see some guidance come out on that one.

Jeff Kelson:Yeah, I think we need a little, this bill was put together very quickly and these kind of questions. These are very good questions by the way. And we got like 10 in a row on 'em going down. Yeah, stay tuned. Stay tuned.

Sarah Adkisson:They sure did.

Jeff Kelson:Yeah, they did.

Sarah Adkisson:This is going to be Mike Johnson's legacy getting this done.

Jeff Kelson:Yeah, we got a lot of attention. Okay, we want to cover this. We have five minutes, but I think this is very important. This is the notable changes. We already covered it, right? The salt cap increases to 40,000 subject to certain a GI limitations and it can go back down to 10,000, which is what it was. The PTET undisturbed. I know the house is talking about limiting it to not allowing it for consulting type business professional service and the Senate was capping the deduction to 40,000 or 50% of PTE, whichever is higher all gone. Forget it. Put it out of your memory. The PE is still around as it was section 8 99. Sarah, you want to cut cover that?

Sarah Adkisson:Yes. So this was the so-called revenge tax or retaliatory tax. I liked revenge better. I think it's the point. So this would've increased the tax rate on certain taxpayers who were either citizens or residents of a country that was deemed to have a discriminatory tax. The house version, it would've increased the tax rate up to 5% each year with a cap at 20%. So if say you were already paying a 21% tax rate for each year that the discriminatory tax was in effect, it would've gone up 5%. You would've potentially ended up after four or five years at a top rate of 41%. The Senate caped that total at 15% and then this provision was removed entirely at the request of the treasury secretary to in exchange for the pillar two minimum tax of 15% not being applied to US companies. We'll see if that handshake deal holds.

Jeff Kelson:Continuing on, we talked about the remittance tax is up to 5% of 1.3 and a half ends up at 1%. As Sarah said, maybe they think more people will collect more that way. Many of the requirements of both parents married have a social security number would change, require only one parent to have a social security number. Significant reduction in excise tax on private university endowments. It was higher one point up to 21%. You saw it. It's now what, 1.44% and 8%. And the Senate did introduce a 40.8% tax on litigation funding. Those are for companies or people that buy into litigation claims. It was up to 40.8 to one point and it was reduced to 31.8% and then it was removed. So there's no changes to the tax and litigation funding. And now let's talk about notable absences. There is nothing in this bill that addresses carried interest.

It remains the same under Section 10 61, despite calls to remove it, there was a limitation for sports franchises only to allow 50%. 1 97 amortization deductions of sports contract removed. It's back to how it was. No increases to the top tax rate of millionaires stays of 37%, which has been for the last six or seven years. It remains there. So it has retained the same high tax. I mean the highest tax rate has remained at 37% and it's going to continue. There was a lot of talk in the Senate about making enhancements to health savings accounts to allow more flexibility for what they can be used for and to collect Medicare and not be disqualified from deducting it all gone. No changes to the HSA. It is what it was before. House included an excise tax and net investment income of private foundations up to 14% gone.

So remember notable absences. These are not in the bill. If you had heard something about this, this is what your raised from your mind house included parking benefits to employees and income from publicly available research and unrelated business tax for nonprofits. Got rid of that. There's no digital asset provisions. There were amendment, this is for crypto and the like. There was a lot of talk about that and some of the bills then make it to the end. And finally, strangely enough, the often extended work opportunity tax credit has been left to linger. It is not going to be extended after 25. That's a credit for businesses who employ certain people from certain veterans or felons or certain disadvantaged folks that credit has been around for a long, long time. They didn't extend it. Can it be extended in the future? Perhaps, but right now it's notable but not being extended. So that's what we got. We're right up to the end. Thank you Sarah.

Sarah Adkisson:I do just quickly want to say that one of the main reasons to remember these things that had been in the bill and were removed is that you can kind of view this as a potential list of options for this Congress potentially moving forward or for any Congress really. If they were willing to put it in this big of a bill, then they may be willing to put it in future bills as well.

^{Transcribed by Rev.com AI}