Pit & Quarry, February 2018
TAXES Breaking down the TAX CUTS JOBS ACT What the reform bill means for crushed stone sand and gravel operations BY MARK E BATTERSBY re you ready for tax reform Thanks to the recently passed Tax Cuts Jobs Act TCJA the tax rate for incorporated aggregate businesses will be A reduced from 35 percent to 21 percent for the 2018 tax year and thereafter And although the business tax cuts are for the most part permanent the tax cuts for individuals are temporary expiring in 2026 Unfortunately while regular C corporations will be taxed at a flat 21 percent tax rate the majority of small businesses operating as pass through entities such as partnerships limited liability companies S corporations and sole proprietorships will face new personal tax rates higher than the corporate tax rate PASS THROUGH BUSINESSES Pass through businesses pass their income to their owners who pay tax at the individual rate The TCJA created a 20 percent deduction that applies to the first 315000 of income half that for single taxpayers earned by aggregate producers operating as pass through businesses All businesses under the income thresholds can take advantage of the 20 percent deduction For pass through income above these new levels the TCJA places limits on who can qualify for the pass through deduction with strong safeguards to ensure that so called wage income does not receive the lower marginal tax rates for business income The TCJA created the 20 percent deduction but only for business profits in essence limiting the owners top effective marginal tax rate to no more than 296 percent Thus that 20 percent deduction applies only to business income that has been reduced by the amount of reasonable compensation paid the owner Reasonable compensation had not been defined as of press time THE CORPORATE ALTERNATIVE MINIMUM TAX Too many deductions and too many otherwise legitimate tax preferences shouldnt mean escaping taxes at least according to our lawmakers Long ago lawmakers created a unique 20 percent tax rate as part of a parallel system that limited tax benefits to prevent 64 PIT QUARRY February 2018 pitandquarry com ISTOCK COM DRAZEN LOVRIC The Tax Cuts Jobs Act appears to favor businesses over individuals with longer lived tax savings
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