To discuss opportunities or questions, please call 215-972-CFRM (2376) or email us at [email protected]

This tax tool was developed in May 2017 to help readers comprehend the magnitude of change one might expect with tax reform as it was being proposed with border-adjustment in early 2017. With the "Big Six" having set aside border-adjustment tax in their Joint Statement on Tax Reform on July 27, 2017, we eagerly await how, or if, the Big Six will deliver "historic tax reform" with "a viable approach for ensuring a level playing field between American and foreign companies and workers, while protecting American jobs and the U.S. tax base." Is a territorial tax system in our future?

The Joint Statement on Tax Reform can be found here: https://www.treasury.gov/press-center/press-releases/Pages/sm0134.aspx

House Ways and Means Committee "Blueprint" for America – Tax Calculator

How could the border-adjustment tax affect your business?

Understanding the various forms of tax reform being proposed helps prepare you for quicker adaptation to potential changes in the marketplace your business competes in.

* To begin using this tool, please use 2016 actual or 2017 projected figures under current tax law.

Please choose the type of entity you are taxed as. If there is a related rental LLC, please only use the operating entity.
Taxable income calculated under current tax law. For C-Corps, use the taxable income before the dividend received deduction and the domestic production activities deduction ("DPAD").
Sales sourced directly to a foreign country including related party sales. Foreign sales are any sales shipped to a location outside of the U.S.
Purchases of direct foreign imports used in the production of inventory and included in inventory asset/COGS.
Please enter the 2016 actual fixed capital expenditures ("CAPEX"), or the 2017 projected CAPEX.
Federal tax depreciation included in the taxable income above. This amount includes Section 179, page 1 tax depreciation, cost of goods sold depreciation, and bonus depreciation.
Does your entity pay a commission and then receive a dividend from an 1120-IC-DISC entity?
Does your entity utilize the domestic production activities deduction? If you are an S-Corp or Partnership, do your shareholders/partners receive the DPAD deduction from the entity?
Net the interest income and interest expense on your C-Corp tax return included in taxable income above. For S-Corp and Partnership tax returns, the interest expense is listed on page 1 of the return and the interest income is on schedule K. (For a partnership this is page 4 of the 1065) (For an S-Corp, this is page 3 of the 1120S)

A Better Way

On June 24, 2016 GOP members of the House Ways and Means Committee released their vision for tax reform. Often referred to as the "House Blueprint," this tax model has served as the foundation for significant and on-going debate about potential tax reform. Learn more about the House Blueprint.

Border-Adjustment

In addition to lower tax rates, immediate expensing of capital expenditures ("CAPEX"), and the elimination of the deduction for interest expense, border-adjustment is a major, and hotly contested, component of the House Blueprint.

Proactive Thinking

While competing ideas for tax reform are being proposed by various parties, to-date the House Blueprint is the only plan that has been presented in enough detail to attempt a comparative tax calculation. However, even the House Blueprint only goes so far, requiring certain assumptions be made when calculating tax estimates. As such, this tax calculation represents an illustrative estimate of how your business could be affected if the House Blueprint was enacted.

Disclaimers and Assumptions (show)
Your estimate of comparative tax (cost) or benefit:
$

The number above is representative of your potential federal tax (cost) or benefit under the House Blueprint, as compared to current federal income tax laws. Due to the speculative nature of how, and if, various components of the House Blueprint would be implemented by Congress, this estimate is based on assumptions in conjunction with the House Blueprint.

This calculation is an estimate only. It is intended to stimulate your thinking about how significantly your business could be affected by the kind of tax reform being debated in the U.S. today. This calculation is designed to facilitate potential planning opportunities for business and financial leaders doing their due diligence to understand how tax reform proposals could affect their organizations. The nature of the tax reform ideas being debated today in, and between, the Administration and Congress could be more impactful and material than anything that has passed Congress since the 1986 tax reform.

Understanding the impact of tax reform on your business could propel you ahead of your competitors

Connect with our team at the Center for the Return of Manufacturing to learn more about how we can help you prepare your organization for future change in tax legislation and operational regulation.

Type of Entity:
Taxable Income (Not including DPAD):
Revenue from Foreign Sales:
Foreign Sourced Inventory Purchases:
Annual CAPEX:
Tax Depreciation included in Taxable Income:
IC-DISC:
DPAD:
Net Interest:
Your estimate of comparative tax (cost) or benefit:
$

The number above is representative of your potential federal tax (cost) or benefit under the House Blueprint, as compared to current federal income tax laws. Due to the speculative nature of how, and if, various components of the House Blueprint would be implemented by Congress, this estimate is based on assumptions in conjunction with the House Blueprint.

This calculation is an estimate only. It is intended to stimulate your thinking about how significantly your business could be affected by the kind of tax reform being debated in the U.S. today. This calculation is designed to facilitate potential planning opportunities for business and financial leaders doing their due diligence to understand how tax reform proposals could affect their organizations. The nature of the tax reform ideas being debated today in, and between, the Administration and Congress could be more impactful and material than anything that has passed Congress since the 1986 tax reform.

Disclaimers/Assumptions

  • Enter in the appropriate boxes the 2016 tax return information or 2017 projected information. For consistency use only one of the two options to portray the most accurate estimate.

Tax Rates

  • C-Corp Federal rate of 34%
  • S-Corp/Partnership rate of 39.6% (assessed at shareholder/partner level). This assumes the owners in the S-Corp/Partnership are not passive shareholders/partners, and are subject to the highest individual tax rate.

Proposed Rates Under House Plan

  • C-Corp rate of 20%.
  • S-Corp/Partnership rate of 25%. This assumes a different tax rate for flow-through income reported on the shareholder/partner returns when compared to the individual income tax rate (12%, 25%, 33%) as proposed under the Blueprint.

Other

  • The "Revenue from Foreign Sales" assumes no U.S. territory or boycott countries are included.
  • Assumes the tax basis in personal and real property placed in service prior to potential tax law change will not be grandfathered in and the remaining basis is non-depreciable.
  • Assumes no carryover of any IRC Sec. 179 deductions.
  • For entities currently claiming DPAD, assumes all sales are DPAD qualifying and the entity meets the 95% test for DPAD. Also assumes the owners don't have an income limitation on their individual returns and the entity doesn't have a W-2 wage limitation.
  • Assumes DPAD will be repealed under the new tax plan.
  • For entities with an IC-DISC commission payment, assumes no deferral of income and commission expense equal to dividend income. If the IC-DISC box checked "yes" assumes 4% of foreign sales is the estimated commission expense and dividend income.
  • Assumes the IC-DISC will be repealed under the new tax plan.
  • Assumes entity has no net operating losses ("NOL") to utilize.