{"id":12128,"date":"2023-07-06T21:26:37","date_gmt":"2023-07-06T21:26:37","guid":{"rendered":"https:\/\/taxops.com\/?p=12128"},"modified":"2023-07-06T22:25:57","modified_gmt":"2023-07-06T22:25:57","slug":"federal-tax-mid-year-update-2023","status":"publish","type":"post","link":"https:\/\/taxops.com\/federal-tax-mid-year-update-2023\/","title":{"rendered":"Federal Tax Mid-year Update 2023"},"content":{"rendered":"\n<figure class=\"wp-block-image size-large\"><img decoding=\"async\" width=\"1024\" height=\"536\" src=\"data:image\/gif;base64,R0lGODlhAQABAIAAAAAAAP\/\/\/yH5BAEAAAAALAAAAAABAAEAAAIBRAA7\" data-src=\"https:\/\/taxops.com\/wp-content\/uploads\/2023\/07\/Federal-Tax-Mid-year-Update-2023-1-1024x536.png\" alt=\"\" class=\"wp-image-12140 lazyload\" data-srcset=\"https:\/\/taxops.com\/wp-content\/uploads\/2023\/07\/Federal-Tax-Mid-year-Update-2023-1-1024x536.png 1024w, https:\/\/taxops.com\/wp-content\/uploads\/2023\/07\/Federal-Tax-Mid-year-Update-2023-1-980x513.png 980w, https:\/\/taxops.com\/wp-content\/uploads\/2023\/07\/Federal-Tax-Mid-year-Update-2023-1-480x251.png 480w\" sizes=\"(min-width: 0px) and (max-width: 480px) 480px, (min-width: 481px) and (max-width: 980px) 980px, (min-width: 981px) 1024px, 100vw\" \/><noscript><img decoding=\"async\" width=\"1024\" height=\"536\" src=\"https:\/\/taxops.com\/wp-content\/uploads\/2023\/07\/Federal-Tax-Mid-year-Update-2023-1-1024x536.png\" alt=\"\" class=\"wp-image-12140 lazyload\" srcset=\"https:\/\/taxops.com\/wp-content\/uploads\/2023\/07\/Federal-Tax-Mid-year-Update-2023-1-1024x536.png 1024w, https:\/\/taxops.com\/wp-content\/uploads\/2023\/07\/Federal-Tax-Mid-year-Update-2023-1-980x513.png 980w, https:\/\/taxops.com\/wp-content\/uploads\/2023\/07\/Federal-Tax-Mid-year-Update-2023-1-480x251.png 480w\" sizes=\"(min-width: 0px) and (max-width: 480px) 480px, (min-width: 481px) and (max-width: 980px) 980px, (min-width: 981px) 1024px, 100vw\" \/><\/noscript><\/figure>\n\n\n\n<p class=\"wp-block-paragraph\"><\/p>\n\n\n\n<blockquote class=\"wp-block-quote is-layout-flow wp-block-quote-is-layout-flow\">\n<p class=\"wp-block-paragraph\"><em>While Congress did not see fit to make major reforms in 2023, the tax provisions highlighted here may significantly impact your business.<\/em><\/p>\n<\/blockquote>\n\n\n\n<p class=\"wp-block-paragraph\">By <a href=\"https:\/\/taxops.com\/lindsay-haskell\/\" target=\"_blank\" rel=\"noopener\" title=\"Lindsay Haskell\">Lindsay Haskell<\/a> and <a href=\"https:\/\/taxops.com\/dan-delau\" target=\"_blank\" rel=\"noopener\" title=\"Dan DeLau\">Dan DeLau<\/a><\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Although Congress has not enacted a comprehensive tax bill similar to the Tax Cut and Jobs (TCJA) recently, there are still a number of provisions that have been implemented or apply to the current tax year that may impact your business. These provisions are worthy of your consideration, and we\u2019ve highlighted a few of these below.<\/p>\n\n\n\n<div style=\"height:23px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n\n<h3 class=\"wp-block-heading\"><strong><mark style=\"background-color:rgba(0, 0, 0, 0)\" class=\"has-inline-color has-light-green-cyan-color\">Tax Compliance Considerations<\/mark><\/strong><\/h3>\n\n\n\n<h4 class=\"wp-block-heading\"><strong>Amortization of Research and Experimental Expenditures<\/strong><\/h4>\n\n\n\n<p class=\"wp-block-paragraph\">For tax years beginning after December 31, 2021, no deduction is allowed for amounts paid or incurred for research and experimental expenditures. Previously, such amounts were 100% deductible when paid or incurred pursuant to IRC Section 174.&nbsp;<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Instead, such expenditures must now be capitalized and amortized over five years (15 years if foreign research), applying a half-year convention in the year in which the amounts are paid or incurred. This rule applies to software development expenditures as well.&nbsp;&nbsp;<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Rev. Proc. 2023-08 clarifies that no Form 3115,<em> Application for Change in Accounting Method,<\/em> is required to adopt the new amortization requirement. Instead, you can include a statement in your &nbsp;tax return.<\/p>\n\n\n\n<h4 class=\"wp-block-heading\"><strong>Meals Deduction at Restaurants is Subject to 50% Limitation<\/strong><\/h4>\n\n\n\n<p class=\"wp-block-paragraph\">For the 2021 and 2022 calendar years, the cost of food and beverages provided by a restaurant were fully deductible. Beginning on January 1, 2023, these expenditures are once again subject to the IRC Section 274(n) 50% deduction limitation.&nbsp;<\/p>\n\n\n\n<h4 class=\"wp-block-heading\"><strong>Bonus Depreciation Phaseout<\/strong><\/h4>\n\n\n\n<p class=\"wp-block-paragraph\">Eligible property has been subject to 100% bonus depreciation since the TCJA was enacted. The 100% write-off expired December 31, 2022. From now on, a 20% reduction in the percentage allowed applies each year until the provision phases out entirely in 2027, as follows:&nbsp;<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 2023 \u2013 80%<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 2024 \u2013 60%<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 2025 \u2013 40%<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 2026 \u2013 20%<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 2027 and future \u2013 0%<\/p>\n\n\n\n<h4 class=\"wp-block-heading\"><strong>Automatic Accounting Method Changes \u2013 Rev. Proc. 2023-24<\/strong><\/h4>\n\n\n\n<p class=\"wp-block-paragraph\">Recently, the IRS provided an updated list of tax accounting method changes to which the automatic change procedures apply, further modifying Rev. Roc. 2015-13. The revenue procedure outlines 29 clarifications and modifications, many applying to depreciation and amortization as well as to uniform capitalization methods.\u00a0 When completing Form 3115, <em>Application for Change in Accounting Method<\/em>, you must provide an automatic change number from the revenue procedure to ensure acceptance of the change.\u00a0\u00a0<\/p>\n\n\n\n<div style=\"height:23px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n\n<h3 class=\"wp-block-heading\"><strong><mark style=\"background-color:rgba(0, 0, 0, 0)\" class=\"has-inline-color has-light-green-cyan-color\">Tax Provision Considerations<\/mark><\/strong><\/h3>\n\n\n\n<h4 class=\"wp-block-heading\"><strong>Proposed Accounting Standard Update<\/strong><\/h4>\n\n\n\n<p class=\"wp-block-paragraph\">On March 15, 2023 the Financial Accounting Standards Board proposed additional annual disclosures for public companies. These disclosures include specific categories in the presentation of any rate reconciliation, along with additional information for reconciling items equal to 5% or more of applicable statutory rate (1.05% or more based on a 21% statutory rate). Specifically, the proposal identifies disclosure of the following items:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>State and local income tax, net of federal (national) income tax effect<\/li>\n\n\n\n<li>Foreign tax effects<\/li>\n\n\n\n<li>Enactment of new tax laws<\/li>\n\n\n\n<li>Effect of cross-border tax laws<\/li>\n\n\n\n<li>Tax credits<\/li>\n\n\n\n<li>Valuation allowances<\/li>\n\n\n\n<li>Nontaxable or nondeductible items<\/li>\n\n\n\n<li>Changes in unrecognized tax benefits<\/li>\n<\/ul>\n\n\n\n<p class=\"wp-block-paragraph\">Additionally, the proposed ASU would require a public business entity to provide a tabular reconciliation annually by using both percentages and dollars (or applicable other reporting currency). Currently, ASC 740-10-50-12\u00a0requires a public business entity to disclose a reconciliation of the reported amount of income tax expense (or benefit) from continuing operations to the amount of income tax expense (or benefit) that would result from multiplying the pretax income (or loss) from continuing operations by the domestic federal statutory tax rate.\u00a0<\/p>\n\n\n\n<div style=\"height:23px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n\n<h3 class=\"wp-block-heading\"><strong><mark style=\"background-color:rgba(0, 0, 0, 0)\" class=\"has-inline-color has-light-green-cyan-color\">Other Considerations<\/mark><\/strong><\/h3>\n\n\n\n<h4 class=\"wp-block-heading\"><strong>Partnership Carried Interests<\/strong><\/h4>\n\n\n\n<p class=\"wp-block-paragraph\">In order to receive capital gain treatment on the sale or exchange of a carried interest or profits interest in a partnership, a three-year holding period is now required.&nbsp; The rule applies for carried interests acquired on or after January 1, 2018.&nbsp;<\/p>\n\n\n\n<h4 class=\"wp-block-heading\"><strong>Underpayment of Estimated Corporate AMT Penalties Waived for 2023<\/strong><\/h4>\n\n\n\n<p class=\"wp-block-paragraph\">A 15% alternative minimum tax based on book income of corporations with adjusted financial statement income over $1 billion (based on a three-year average) was implemented for tax years beginning after December 31, 2022.&nbsp; In Notice 2023-42, the IRS essentially eliminates underpayment penalties associated with underpayments related to the AMT liability required under IRC Section 55.&nbsp;&nbsp;&nbsp;<\/p>\n\n\n\n<h4 class=\"wp-block-heading\"><strong>1% Tax on Stock Repurchases<\/strong><\/h4>\n\n\n\n<p class=\"wp-block-paragraph\">Effective for stock repurchases by a U.S. domestic public company on or after January 1, 2023, a 1% excise tax applies to the value of any stock repurchases from shareholders. The excise tax should not be accounted for as part of a company\u2019s income tax provision. Furthermore, it is not deductible for tax purposes, and so must be treated as a permanent difference in preparing a tax provision under ASC 740.\u00a0<\/p>\n\n\n\n<div style=\"height:23px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n\n<blockquote class=\"wp-block-quote is-layout-flow wp-block-quote-is-layout-flow\">\n<p class=\"has-text-align-center wp-block-paragraph\">These frequently asked questions are designed to provide a greater understanding of accounting for income taxes and how companies can manage compliance requirements.<\/p>\n\n\n\n<div style=\"height:34px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n\n<div class=\"wp-block-buttons is-content-justification-center is-layout-flex wp-container-core-buttons-is-layout-fe48e5de wp-block-buttons-is-layout-flex\">\n<div class=\"wp-block-button\"><a class=\"wp-block-button__link wp-element-button\" href=\"https:\/\/taxops.com\/wp-content\/uploads\/2023\/06\/ASC-740-FAQs.pdf\" target=\"_blank\" rel=\"noreferrer noopener\">ASC 740 Frequently Asked Questions<\/a><\/div>\n<\/div>\n<\/blockquote>\n\n\n\n<div style=\"height:23px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n\n<p class=\"wp-block-paragraph\">TCJA represented the most significant tax code overhaul in over three decades. While Congress did not see fit to make major reforms in 2023, the provisions highlighted here may significantly impact your business. Consider these provisions carefully with your TaxOps advisor to navigate these tax considerations effectively.<\/p>\n\n\n\n<div style=\"height:23px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n\n<div class=\"wp-block-buttons is-content-justification-center is-layout-flex wp-container-core-buttons-is-layout-fe48e5de wp-block-buttons-is-layout-flex\">\n<div class=\"wp-block-button\"><a class=\"wp-block-button__link has-text-align-center wp-element-button\" href=\"https:\/\/taxops.com\/contact\/\">Get in Touch<\/a><\/div>\n<\/div>\n\n\n\n<div style=\"height:43px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n\n<h3 class=\"wp-block-heading\">More Tax News<\/h3>\n\n\n<ul class=\"wp-block-latest-posts__list wp-block-latest-posts\"><li><a class=\"wp-block-latest-posts__post-title\" href=\"https:\/\/taxops.com\/auditor-independence-in-the-age-of-private-equity\/\">Auditor Independence in the Age of Private Equity: What CFOs Need to Know<\/a><\/li>\n<li><a class=\"wp-block-latest-posts__post-title\" href=\"https:\/\/taxops.com\/r-d-credits-for-software-companies\/\">R&amp;D Credits for Software Companies: Scrum Teams, Qualifiers, and Section 174 After OBBBA<\/a><\/li>\n<li><a class=\"wp-block-latest-posts__post-title\" href=\"https:\/\/taxops.com\/section-174-decoupling-what-tax-pros-need-to-know-state-by-state\/\">Section 174 Decoupling: What Tax Pros Need To Know State By State<\/a><\/li>\n<li><a class=\"wp-block-latest-posts__post-title\" href=\"https:\/\/taxops.com\/sean-espy-new-partner\/\">TaxOps Welcomes Sean Espy as Partner, Tax Minimization<\/a><\/li>\n<li><a class=\"wp-block-latest-posts__post-title\" href=\"https:\/\/taxops.com\/state-nexus-demystified-navigating-tax-compliance-after-wayfair-episode-1-2\/\">Your Tax Footprint Is Probably Bigger Than You Think: What Finance Leaders Need to Know About State Nexus<\/a><\/li>\n<\/ul>\n\n\n<div style=\"height:41px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n","protected":false},"excerpt":{"rendered":"<p>While Congress did not see fit to make major reforms in 2023, the tax provisions highlighted here may significantly impact your business. By Lindsay Haskell and Dan DeLau Although Congress has not enacted a comprehensive tax bill similar to the Tax Cut and Jobs (TCJA) recently, there are still a number of provisions that have [&hellip;]<\/p>\n","protected":false},"author":3,"featured_media":12140,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_et_pb_use_builder":"off","_et_pb_old_content":"","_et_gb_content_width":"","spt_transcript":"","footnotes":""},"categories":[230,228,226],"tags":[695,1041,823,694,1040,707,144,696,309,708,36,508,48],"class_list":["post-12128","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-asc-740","category-federal-tax","category-tax-news","tag-accounting-for-income-tax","tag-accounting-method","tag-amortization","tag-asc-740-2","tag-bonus-depreciation","tag-corporation","tag-deductions","tag-fin-48","tag-financial-statement","tag-going-public","tag-income-tax","tag-meals","tag-rd"],"aioseo_notices":[],"jetpack_featured_media_url":"https:\/\/taxops.com\/wp-content\/uploads\/2023\/07\/Federal-Tax-Mid-year-Update-2023-1.png","_links":{"self":[{"href":"https:\/\/taxops.com\/wp-json\/wp\/v2\/posts\/12128","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/taxops.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/taxops.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/taxops.com\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/taxops.com\/wp-json\/wp\/v2\/comments?post=12128"}],"version-history":[{"count":16,"href":"https:\/\/taxops.com\/wp-json\/wp\/v2\/posts\/12128\/revisions"}],"predecessor-version":[{"id":12157,"href":"https:\/\/taxops.com\/wp-json\/wp\/v2\/posts\/12128\/revisions\/12157"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/taxops.com\/wp-json\/wp\/v2\/media\/12140"}],"wp:attachment":[{"href":"https:\/\/taxops.com\/wp-json\/wp\/v2\/media?parent=12128"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/taxops.com\/wp-json\/wp\/v2\/categories?post=12128"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/taxops.com\/wp-json\/wp\/v2\/tags?post=12128"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}