This document provides an overview of the long-lasting impacts of the 2017 tax reform act. It discusses changes to individual tax rates, the alternative minimum tax, and the new 20% deduction for qualified business income of pass-through entities. The document also covers changes to corporate tax rates, which were reduced to a flat 21%, the repeal of the corporate alternative minimum tax, and modifications to net operating loss deductions and research and experimentation expenditures.

1. THE LONG-LASTING
IMPACT OF TAX
REFORM

2. JOE BUBLÉ, C PA
Tax Practice Leader,
Partner
TODAY’S SPEAKERS
MODERATOR PANELISTS
DON RYU, CPA
Partner
ANDY TARQUINIO, CPA
Partner
JENNIFER SKLAR-ROMANO, JD, LL.M, MBA
Director
ERICK TORRES, CPA
Director
2

3. INDIVIDUALS
PASS-THROUGH ENTITIES
BUSINESS
TABLE OF CONTENTS
ACCOUNTING FOR
INCOME TAXES
CORPORATE
INTERNATIONAL

4. INDIVIDUALS
Presented by: Joe Bublé & Erick Torres

5. TAX RATE CHANGES
Pre-Reform
2018 Pre
Change Tax Rate Tables
Post-Reform 2018 Tax Rate Tables
Rate Single Married Rate Single Married
10% $0-$9,325 $0-$18,650 10% $0-$9,525 $0-$19,050
15%
$9,326-
$37,950
$18,651-
$75,900
12%
$9,526-
$38,700
$19,051-
$77,400
25%
$37,950-
$91,900
$75,901-
$153,100
22%
$38,701-
$82,500
$77,401-
$165,000
28%
$91,900-
$191,650
$153,101-
$233,350
24%
$82,501-
$157,500
$165,001-
$315,000
33%
$191,651-
$416,700
$233,351-
$416,700
32%
$157,501-
$200,000
$315,001-
$400,000
35%
$416,701-
$418,400
$416,700-
$470,700
35%
$200,001-
$500,000
$400,000-
$600,000
39.6% $418,401-up $470,700-up 37% $500,000 up $600,000-up 5

6. IMPACT ON NYS RESIDENT AT VARIOUS INCOME LEVELS
Income Level Federal Tax (decrease)/increase
400,000 (19,000)
500,000 (18,000)
750,000 (4,000)
1,000,000 (5,000)
2,000,000 (16,000)
3,000,000 (4,000)
Assumes $10,000 of dividends, $40,000 Real Estate Tax, Two Children
6

7. IMPACT ON NYC RESIDENT AT VARIOUS INCOME LEVELS
Income Level Federal Tax (decrease)/increase
400,000 (19,000)
500,000 (18,000)
750,000 2,000
1,000,000 9,000
2,000,000 13,000
3,000,000 40,000
Assumes $10,000 of dividends, $40,000 Real Estate Tax, Two Children
7

8. 8
Case 1 Case 2 Case 3 Case 4 Case 5 Case 6
2017 2018 2017 2018 2017 2018 2017 2018 2017 2018 2017 2018
AGI 154,000 154,000 260,500 260,500 470,500 470,500 736,000 736,000 1,045,000 1,045,000 1,562,500 1,562,500
NYS Joint 23,897 24,112 60,641 55,248 147,653 133,910 245,461 247,722 379,751 383,919 609,720 612,459
DIFFERENCE 215 (5,393) (13,743) 2,261 4,168 2,739
% DIFFERENCE 0.52% -8.89% -9.31% 0.92% 1.10% 0.45%
NYC Joint 26,961 28,408 68,626 63,520 163,032 149,831 272,226 275,172 403,592 423,499 645,651 672,097
DIFFERENCE 1,447 (5,106) (13,201) 2,946 19,907 26,446
% DIFFERENCE 5.37% -7.83% -8.10% 1.07% 4.93% 4.10%
NYS Single 31,534 29,788 72,418 71,156 151,894 159,606 253,161 274,483 391,743 411,232 640,138 670,356
DIFFERENCE (1,746) (1,262) 7,712 21,322 19,489 30,218
% DIFFERENCE -5.54% -1.74% 5.08% 8.42% 4.97% 4.72%
NYC Single 36,059 34,468 80,558 79,584 167,381 175,621 272,818 302,033 415,833 451,224 676,317 730,406
DIFFERENCE (1,591) (974) 8,240 29,215 35,391 54,089
% DIFFERENCE -4.41% -1.21% 4.92% 10.71% 8.51% 8.00%
COMPARISON OF FEDERAL, NEW YORK STATE AND
NEW YORK CITY INCOME TAX AT VARIOUS AGI LEVELS

9. THINGS THAT ARE GONE
• Personal Exemptions
• Miscellaneous Itemized Deductions
o Tax Preparation Fees
o Investment Advisory Fees
o Employee Business Expenses
o Moving Expenses
o Entertainment Expenses (not Meals)
• Personal Casualty Losses
• Shared Responsibility Payment (2019)
• Alimony Taxability and Deduction (2019 Agreements)
• Gambling expenses in excess of net winnings
9

10. THINGS THAT HAVE CHANGED
• State and Local Income and Property Taxes $10,000 limit
• Interest Expense
o Mortgages
• Home Mortgages In Existence on December 15, 2017—no changes
• Post 12/15/17 home acquisition interest deduction limited to principal amounts of
$750,000. Second homes continue to qualify.
• Refinances post 12/15/17 grandfathered at $1 million ONLY up to debt level at date of
refinance. (No cashing out of equity).
o Home Equity Line of Credit
• Interest allowed on HELOC only to extent proceeds were used to acquire, construct or
substantially renovate property.
• EXAMPLE-$200,000 HELOC used in 2016 to buy $100,000 car and $100,000 to repair and replace
roof on home. In 2018 interest on roof repair only deductible.
10

11. THINGS THAT HAVE CHANGED
• Medical Expenses deductible to extent they exceed 7.5% of Adjusted Gross Income, down from
10%.
• Charitable Contributions to Public charities limit increased from 50% of AGI to 60% of AGI
• Standard Deduction almost doubled to $24,000 for married couple.
o Timing of Deductions
• Child Credit Increased to $2,000 per child and $500 per non-child dependent
o Credit fully available until AGI reaches $400,000 ($200,000 single).
o Up to $1,400 refundable if tax liability is zero.
• Stock Option Income recognition from grants by private companies can be deferred for five years
• Business losses limited to $500,000 per year. Any excess carried forward as Net Operating Loss.
• Net Operating Losses cannot be carried back. Can be carried forward indefinitely
o Use of losses limited to 80% of taxable income for post 2017 losses.
• Kiddie tax unearned income is taxed at the Estates & Trust rates
• 529 Account Funds can now be used for elementary, secondary, private, religious and home
schooling up to $10,000
11

12. THINGS THAT HAVE STAYED THE SAME
• The 3.8% tax on Net Investment income and the .9% Medicare tax on compensation
• Tax rates on capital gains and qualified dividends
• Exclusion on gain of a residence
• Specific identification of sale of securities
• Investment interest expense
• Pre-tax contribution limits for 401(k) plans
• Education deduction/credits
• TIP and WOTC
12

13. ALTERNATIVE MINIMUM TAX
2017
• An alternative tax system that disallows many deductions and taxes income at a lower rate (For
2017: 28% vs 39.6%).
• Taxpayer pays the higher of the two computations.
• Currently (2017 and prior) the largest disallowed expenses for AMT are state and local income and
real estate taxes and miscellaneous itemized deductions.
2018
• Rate comparison - 28% vs 37%
• AMT exemption increased
• With state and local taxes and miscellaneous itemized deductions repealed, the largest cause of
AMT eliminated
• Anticipation is that many who were hit with AMT in the past will no longer be
13

14. CORPORATE
Presented by: Don Ryu

15. CORPORATE TAX RATES
• Corporate tax rates reduced (§11)
o Before: graduated tax rates of 15%(~$50K), 25%(~$75K), 34%(~$10M), and 35%(over $10M)
o The TCJA reduces the corporate tax rate to a flat 21% for tax years beginning after 12/31/2017
The 21% tax rate also applies to Personal Service Corporations
• Fiscal year C corporations must use the blended tax rates under §15(a) to calculate the Regular Tax
under §11 (Notice 2018-38)
1. Tentative tax #1 = taxable income x graduated tax rates under pre-change §11(b)
2. Tentative tax #2 = taxable income x 21% under new §11(b)
3. Tax for the year = [Tentative tax #1 x (# of days before 1/1/2018 ÷ total # of days in FY
2018)] plus [Tentative tax #2 x (# of days after 12/31/2017 ÷ total # of days in FY 2018)]
15

16. Dividends Received Deduction (“DRD”)
• Dividends received by corporations (§243)
• Effective tax rates
16
Owned* Pre-Change TCJA
20% or more 80% 65%
Less than 20% 70% 50%
* “20% owned corporation” means any corporation where 20% or more of the
stock (by vote and value) is owned by the taxpayer (i.e., a corporation)
Owned* Pre-Change TCJA
20% or more 35% x (1-80%) = 7% 21% x (1-65%) = 7.35%
Less than 20% 35% x (1-70%) = 10.5% 21% x (1-50%) = 10.5%

17. Corporate Alternative Minimum Tax: Repealed
• Under the old law, a corporation’s total tax liability was the sum of the regular tax liability and the
Alternative Minimum Tax (AMT) liability
o AMT = Tentative Minimum Tax (“TMT”) > Regular Tax
o The corporate TMT was 20% of the corporation’s AMT income (“AMTI”) in excess of an exemption
($40,000 subject to phase-out) minus the corporation’s AMT FTC
o Certain small corporations with 3-year average annual gross receipts less than $7.5 million were
exempt from the AMT
o AMT NOL deduction was capped at 90% of AMTI
o The prior-year minimum tax credit was carried forward to offset the regular tax liabilities.
17

18. Corporate Alternative Minimum Tax (“AMT”): Repealed
• The AMT is repealed for tax years beginning after 12/31/2017 (§55(a))
• Fiscal year-end corporations’ AMT for the year ending after 12/31/2017
1. Tentative TMT #1 = taxable income x 20% under pre-change §55(b)(1)(B)
2. Tentative TMT #2 = taxable income x 0% under new §11(b) = Zero
3. TMT for the year = Tentative TMT #1 x (# of days before 1/1/2018 ÷ total # of days in FY 2018)
• Minimum Tax Credit Carryover
o The prior-year minimum tax credit continues to be allowed to offset the regular tax liabilities and
any unused AMT credit is refundable for tax years beginning in 2018 ~ 2021 (§53(e))
o Refundable amount = 50% of the excess of the minimum tax credit for the taxable year, over the
amount of minimum credit allowable for the year against regular tax liability
o For tax years beginning in 2021, the percentage increases to 100%
18

19. Modification of Net Operating Loss (“NOL”) Deduction
19
NOLs Generated in Tax Years Carryback Carryforward Limitation on Use
Ending on or before 12/31/2017 2 Years, with the exception of
specified liability losses (10
years) and some casualty and
disaster losses (3 years)
20 Years None
Beginning before 12/31/2017, but
Ending after 12/31/2017
Not allowed Indefinitely None
Beginning after 12/31/2017 Not allowed Indefinitely 80% of taxable
income
• The 2 year carryback will continue to apply in the case of certain losses incurred in farming
• Property and casualty insurance companies can carryback NOL 2 years and carryover 20 years. The 80%
limitation does not apply to property and casualty insurance companies

20. Domestic Production Activities Deduction (§199): Repealed
• Under the old law, taxpayers generally could claim a domestic production activities deduction equal
to 9% of the lesser of:
o the taxpayer’s qualified production activities income (“QPAI”), or
o the taxpayer’s taxable income for the tax year for property that was manufactured, produced,
grown, or extracted (“MPGE”) within the U.S.
• The domestic production activities deduction is repealed for tax years beginning after December 31,
2017
20

21. Research or Experimentation (R&E) Expenditures
• Under the old law, taxpayers could elect to currently deduct R&E expenditures or capitalize the
expenditures and amortize such expenditures ratably over a period of not less than 60 months
o Taxpayers could elect to recover them over 10 years to avoid AMT preferences and
adjustments
• For taxable years beginning after 2021,
o Specified R&E expenses are required to be capitalized and amortized ratably over a 5-year
period beginning with the midpoint of the tax year in which the specified R&E expenses were
paid or incurred or over 15 years in the case of expenditures attributable to foreign research
o Specified R&E expenditures include software development expenses, but not amounts paid for
acquisition of land or for depreciable or depletable property used in connection with the
research or experimentation. Depreciation and depletion allowances are included
o In the case of retired, abandoned, or disposed R&E property, any remaining basis must
continue to be amortized over the remaining life
• Use of this provision is treated as a change in accounting method w/o 481 adjustment
o R&E credit (§41) survives with conforming changes to definitions
21

22. PASS-THROUGH ENTITIES
Presented by: Andy Tarquinio

23. PASS-THROUGH TAX DEDUCTION: §199A
• Applies to Qualified Domestic Trade or business income
• Qualified business income includes gain from the sale of business assets for the portion of the gain
taxed at ordinary income rates
• Does not apply to Specified Service Business
• Deduction equal to lesser of:
• 20% of qualified business income, or
• The greater of:
• 50% of W-2 wages - pay W-2 wages (including officer and owner) equal to 40% of qualified business income, or
• 25% of W-2 wages plus 2.5% of the unadjusted basis of qualified property
• Deduction further limited by taxable income less capital gains
• The 20% deduction reduced highest marginal tax rates
• From 37% (top individual rate) to a 29.6% tax rate
• From 35% to a 28% tax rate
23

24. PASS-THROUGH TAX DEDUCTION: §199A (CONT’D)
• Effectively Connected with U.S. trade or business requirement
• Qualified business Income needs to be effectively connected with the conduct of a trade or
business within the U.S.
• Taxpayers only get a 20% deduction on qualified business income “earned” inside the U.S.;
subject to U.S. and foreign sourcing rules
• Does not include income or loss from investment items
• Long-term capital gains and losses;
• Dividends and dividend equivalents
• Other investment vehicles
• Interest UNLESS properly allocable to the qualified business
24

25. PASS-THROUGH TAX DEDUCTION: §199A (CONT’D)
• Qualified business income does not include:
• Payments of reasonable compensation received from an S corporation
• Guaranteed payments for services received from a partnership
• Amounts received from a partnership for services if the partner is acting other than in his
capacity as a partner
• Disqualified Specified Service Businesses
• The law disqualifies taxpayers from taking the pass-through deduction for “any trade or
business involving the performance of services in the fields of health, law, accounting, actuarial
science, performing arts, consulting, athletics, financial services, brokerage services, or
• Any trade or business where the principal asset of such trade or business is the reputation or
skill of 1 or more of its employees or owners.
• Very limited guidance in this area
25

26. NEW §199A – INCOME THRESHOLD TEST
• The exclusions for Specified Service Businesses and W-2 Wage limitations do not apply to
taxpayers who have income at or below the “Income Threshold”
• “Income Threshold” Test:
• $315,000 of taxable income if married filing jointly (mfj)
• $157,000 of taxable income if filing single
• Phase out over next $100,000 (mfj) or $50,000 (single) of taxable income
26

27. Pass-Through Deduction Illustrative Examples – Restrictions
and Limitations
27

28. NEW §199A – SPECIAL CONSIDERATIONS
• Employee vs. independent contractor
• Specified service businesses potentially disqualified because their principal asset is the skill or
reputation of their employee or owners
• Section 199A reduces taxable income, but not gross income or AGI
• Will not affect AGI based phase-ins and phase-outs
• Not expected to be deductible for state tax in states basing their income tax on federal
measures of AGI
• Section 199A does not itself modify any employment tax rules
• If the sum of all Section 199A deductions is negative, the negative amount carries forward to future
years
• There is no distinction between passive and active owners
28

29. BUSINESS
Presented by: Andy Tarquinio

30. DEPRECIATION CHANGES
Cost Recovery
Prior law depreciation recovery periods remain largely unchanged under TCJA
• 27.5 years for residential real property
• 39 years for nonresidential real property
For qualifying assets placed in service after September 27, 2017 and before January 1, 2023:
• 100% first year (“Bonus”) deduction for assets with depreciable life of 20 years or less
• Applies to new or used property
• Cannot be taken if ADS depreciation is used
• Elimination of reference to qualified leasehold improvement property, qualified restaurant
property and qualified retail improvement property….depreciable life is uncertain
30

31. DEPRECIATION CHANGES
Section 179
• Effective for tax years beginning after December 31, 2017
• Increased from $510,000 to $1,000,000
• Phase out increased from $2,030,000 to $2,500,000
• Advantages associated with Sec 179 deduction versus 100% bonus depreciation
• Sec 179 is a “permanent” change in the law
• Generally allowed for state and local income tax purposes
31

32. GENERAL BUSINESS PROVISIONS
Business Interest Expense Limitations:
• Net interest limited to 30% of adjusted taxable income:
• Adjusted taxable income:
o 2018 – 2021: adjusted taxable income ~ equal to EBITDA
o 2022+: adjusted taxable income ~ equal to EBIT
• Unlimited carryforward
• Exceptions: Utilities, electing real estate, floor plan financing and businesses with <$25 million in
receipts (subject to related party aggregation rules)
• Special rules for partners and partnerships
• Lots of unanswered questions as to how we transition from old to new law
• Potential limitations on debt used for expansion and acquisition
• Potential opportunity to use equity vs. debt financing: issuance of preferred LLC interest with high
yield returns in lieu of issuing debt
32

33. GENERAL BUSINESS PROVISIONS
Business Interest Expense Limitations and Real Estate:
Special election for real property trades or businesses – most real estate owners will elect out of
the new interest expenses limitations:
o Irrevocable election
o Change in depreciable lives – 30 years for residential real property and 40 years for
nonresidential real property
o Bonus depreciation no longer available
• Pass-Through Entities – limitation applies at the entity level
• Things to consider…..
o Make election year after purchase of large real estate asset
o Entities with real estate and non-real estate activities - Can they opt out entirely?
o Does opt out election affect existing assets being depreciated?
33

34. CARRIED “PROFITS” INTEREST
More good news for real estate...
• An interest in the profits of a partnership in exchange for services
• Generally, the receipt of a profits interest is not treated as taxable compensation
• The holder of the profits interest is thereafter treated as a partner and gets flow through
treatment including an allocable share of capital gain income
• Under old law, if you were to sell this partnership profits interest after 1 year you would get long-
term capital gain treatment
• Under TCJA, the sale of a partnership profits interest in an “Applicable trade or Business”, the
holding period to obtain long-term capital gains treatment has been increased to three years
34

35. GENERAL BUSINESS PROVISIONS
• Increased gross receipts threshold to $25 million
o Cash method of accounting
o Accounting for inventories
o UNICAP
o Accounting for small construction contracts
• Like-Kind Exchange limitation
• Exclusion of Entertainment Expense deduction
• The deduction for 50% of food and beverage expenses associated with a trade or business is
retained
35

36. INTERNATIONAL
Presented by: Jennifer Sklar-Romano

37. MODIFIED TERRITORIAL TAX REGIME
• Corporate shareholders of specified foreign corporations(‘SFC”) are allowed a full deduction against
the foreign source portion of dividends received
o 100% DRD
o Applies only to C corporations
o Individual and Pass-Through owners are still subject to the existing worldwide tax regime
• SFC
o A 10% owned foreign corporation
o Does not include a PFIC that is not a CFC
• Foreign tax credits are disallowed for any dividend to which the DRD applies
• Subpart F income rules continue to apply
• Exception for hybrid dividends - CFC received a tax deduction or other tax benefit in the foreign
jurisdiction
37

38. MANDATORY REPATRIATION TAX
• Effective for last tax year of foreign corporations ending before January 1, 2018
• Pre-2018 Accumulated Deferred Earnings MUST be included as Subpart F income
o Applies to ALL U.S. shareholders, not just C corporations
o Income pick-up in 2017 for calendar year taxpayers
o Payment due with extensions
• U.S. shareholder is generally a 10% owner of a CFC
• Deferral allowed for S corporation shareholders until a triggering event occurs
• Payment is due over 8 years with no interest
o 8% for the first 5 years, then 15%, 20% and 25% for the remaining years
• Rate of tax for C corporations
o 15.5% on cash and equivalents
o 8% on the balance
38

39. MANDATORY REPATRIATION TAX
• Rate of tax for individuals
o 17.54% and 9.05%, respectively
o 3.8% Net Investment Income Tax applies as well for actual distributions
• E&P measurement date
o Positive E&P - Greater of E&P on Nov. 2, 2017 or Dec.31, 2017
o E&P Deficit – Nov. 2, 2017
• Fiscal year CFCs could get a one-year break - Proposed Regs. 1.898-1(c)(1)
• E&P deficits are to be netted against positive E&P
• Disallowance for specific portion of foreign tax credit
• Can elect to preserve NOLs
• Consideration of making a Sec. 962(d) election to be taxed as a corporation
• State tax ramifications
o Very limited guidance from states
o States that have provided guidance are not permitting the 8-year payout
39

40. MANDATORY REPATRIATION TAX
• Recent Guidance
• Reporting toll tax on the tax return (e.g., 965 Transition Tax Statement)
• Paying toll tax (e.g., separate payments)
• Making various elections (e.g., installment payments, S corp. shareholder deferral)
• Application of 2017 estimated payments to toll tax liability
• Relief from estimated tax penalties
o Required installments of estimated tax need not include amounts attributable to toll tax
o IRS will waive underpayment penalties with respect to taxpayer’s toll tax liability,
regardless of whether the taxpayer elects to pay in installments
• Treatment of domestic pass-through entities (DPE) as US shareholders
o Toll tax determined at DPE level, however, DPE owners are subject to toll tax
o Each DPE owner must take into account its share of the toll tax liability, regardless of
whether such DPE owner is also a US shareholder
o For example, if A owns 5% of DPE and DPE owns 10% of SFC, A will have a toll tax
liability even though A does not own at least 10% of SFC
40

41. MODIFICATIONS TO SUBPART F REGIME
• Expansion of U.S. Shareholder definition to include value as well as vote
o Effective for tax years of foreign corporations beginning after December 31, 2017
o Significant impact in expanding the universe of U.S. shareholders subject to the Subpart F
income rules
• Downward attribution from foreign persons to related U.S. persons
o Effective for tax years of foreign corporations beginning before January 1, 2018
 Expands the scope of entities (and entity owners) subject to the toll tax
o For purposes of determining CFC status, a U.S. corporation, partnership, estate, or trust can be
attributed ownership of a foreign corporation from a foreign shareholder, partner, or beneficiary
o Subpart F and Section 956 income inclusions continue to be limited to U.S. shareholder’s stock
held directly, or indirectly through foreign entities
• Repeal of 30-day minimum holding period
o Effective for tax years of foreign corporations beginning after December 31, 2017
o Subpart F income inclusion required if foreign corporation is a CFC at any time during the tax
year
41

42. GLOBAL INTANGIBLE LOW-TAXED INCOME
(GILTI)
• Aimed at counteracting the incentive created by the participation exemption to shift profits offshore
• Applies to U.S. shareholders of CFCs
• Treated similar to Subpart F income (NOT really Subpart F income)
• In general, GILTI is equal to a CFC’s gross income in excess of 10% of the adjusted tax basis of its
depreciable tangible assets, excluding ECI, Subpart F income, high-taxed income, and related party
dividends
• U.S. corporate shareholders are allowed a deduction for 50% of GILTI, resulting in an effective tax
rate of 10.5% (50% x 21%)
• U.S. corporate shareholders are allowed an 80% deemed paid foreign tax credit to offset the U.S.
corporate tax, potentially resulting in a 0% effective tax rate
42

43. FOREIGN-DERIVED INTANGIBLE INCOME (FDII)
• Aimed at incentivizing U.S. corporations to provide goods and services to foreign markets
• In general, FDII is the foreign source portion of a U.S. corporation’s gross income in excess of 10%
of the adjusted tax basis of its depreciable tangible assets, excluding Subpart F income, dividends
from CFCs, and foreign branch income
• U.S. corporations are allowed a deduction for 37.5% of FDII, resulting in an effective tax rate of
13.125% (rather than 21%)
• Foreign taxes imposed on FDII are available as a foreign tax credit, potentially resulting in a 0%
effective tax rate
43

44. BASE EROSION ANTI-ABUSE TAX (BEAT)
• Aimed at preventing companies from stripping out U.S. earnings via deductible payments to foreign
affiliates
o Targets companies that significantly reduce their U.S. tax liability with base eroding payments
to foreign related parties
• Applies to C corporations with average annual gross receipts of at least $500,000,000 for the three
preceding tax years and a “base erosion percentage” of at least 3%
o Domestic corporations and foreign corporations generating ECI
• BEAT is equivalent to the excess of 10% ( 5% for 2018) of “modified taxable income” (generally,
regular taxable income plus the base eroding payments such as interest and royalties) over its
regular tax liability as reduced by credits
44

45. SALE OF PARTNERSHIP INTEREST
• Rev. Rul. 91-32 position codified in response to taxpayer-friendly Tax Court decision in Grecian
Mining case (currently under Appeal by the IRS)
• Nonresidents selling an interest in a U.S. partnership will be taxable on the gain as deemed
attributable to ECI
o FIRPTA rules continue to apply to real estate held by the U.S. partnership
• Hypothetical sale mandated as if the U.S. partnership sold all of its assets
• 10% WHT imposed on gross proceeds
• Effective for sales after Nov. 26, 2017, however, WHT requirement only applies for dispositions after
Dec. 31,2017
45

46. ACCOUNTING FOR INCOME
TAXES
Presented by: Don Ryu

47. HOW TAX LAW CHANGES MAY IMPACT THE TAX PROVISION
47
Tax Law Changes Potential Impacts
Significant corporate tax rate reduction Current payable & expense and deferred
tax assets & liabilities
Business interest expense limitation &
carryforward
Effective tax rate and estimated AETR
Increased and decreased business
expense deductions (e.g., M&E, 162(m),
Depreciation, etc.)
Valuation allowance
Changes to NOL carrybacks and
carryforwards
Tax receivable for potential refund of AMT
Credit
Elimination of AMT Naked credits as additional source of
income
Toll tax, GILTI, BEAT

48. FINANCIAL STATEMENT IMPACT OF TAX LAW CHANGES
• Remeasurement of Existing DTAs and DTLs is required
o The effect of a change in the tax law – i.e., cumulative adjustment – is recognized on the date of
enactment, discretely as income tax expense from continuing operations
• In case of Calendar Year-end Companies, DTAs and DTLs
o Expected to reverse on or after 1/1/2018 – adjusted to 21%
o Expected to reverse before 1/1/2018 – not adjusted to 21%
• Interim Reporting by Fiscal Year-end Companies
o The tax effect is included in the estimated Annualized Effective Tax Rate (AETR) commencing in
the period of enactment
o The companies must recognize the effect as a discrete item in the interim period of the enactment
and must not apportion among interim periods remaining in the current fiscal year through an
adjustment of the AETR
o Blended rate -- Fiscal year-end companies must prorate the corporate tax rate by the number of
days before and after 1/1/2018 (§15(a)(2), Notice 2018-38)
48

49. FINANCIAL STATEMENT IMPACT OF
TAX LAW CHANGES (CONT’D)
• Revaluing deferred items included in Other Comprehensive Income
o The effect of tax law change on the deferred tax balances attributable to items of pretax
comprehensive income or loss other than continuing operations is also allocated to continuing
operations.
o Example: Currency translation adjustments
o ASU 2018-02 (issued on 1/18/2018) allows an entity to elect to reclassify the “stranded tax
effects” resulting from the TCJA from accumulated other comprehensive income (AOCI) to
retained earnings.
o The ASU is effective for all companies for fiscal years, and interim periods within those fiscal
periods, beginning after 12/15/18
o Early adoption is permitted
o for public companies for which financial statements have not yet been issued, and
o for all other entities for which financial statements have not been made available for
issuance
49

50. SEC STAFF ACCOUNTING BULLETIN 118
• The SEC staff issued the SEC Staff Accounting Bulletin No. 118 (SAB 118) on the date of enactment
Accordingly, the SEC staff believes clarification is appropriate to address any uncertainty or diversity
of views in practice regarding the application of ASC Topic 740 in situations where a registrant does
not have the necessary information available, prepared, or analyzed (including computations) in
reasonable detail to complete the accounting under ASC Topic 740 for certain income tax effects of
the Act for the reporting period in which the Act was enacted.
o The reasonable estimate should be included in an entity’s financial statements in the first
reporting period in which the entity was able to determine the reasonable estimate.
o The reasonable estimate would be reported as a provisional amount during a measurement
period which (1) begins in the period of enactment and ends when the entity has obtained,
prepared, and analyzed the information that was needed in order to complete the accounting
requirements under ASC Topic 740 and (2) in no circumstances extend beyond one year from the
enactment date.
o The entity is required to include financial statement disclosures to provide information about the
material financial reporting impacts of the Act for which the accounting under ASC Topic 740 is
incomplete.
o FASB issued ASU 2018-05 to amend ASC to add SAB 118 in March 2018
50

51. SEC STAFF ACCOUNTING BULLETIN 118 (CONT’D)
51
• Required Disclosures under SAB 118
a. Qualitative disclosures of the income tax effects of the Act for which the accounting is incomplete;
b. Disclosures of items reported as provisional amounts;
c. Disclosures of existing current or deferred tax amounts for which the income tax effects of the Act
have not been completed;
d. The reason why the initial accounting is incomplete;
e. The additional information that is needed to be obtained, prepared, or analyzed in order to
complete the accounting requirements under ASC Topic 740;
f. The nature and amount of any measurement period adjustments recognized during the reporting
period;
g. The effect of measurement period adjustments on the effective tax rate; and
h. When the accounting for the income tax effects of the Act has been completed

52. FASB STAFF Q&A, TOPIC 740
52
• FASB Staff Q&A, Topic 740, No. 1: Whether Private Companies and Not-for-Profit Entities can Apply
SAB 118 (January 2018)
o The FASB staff would not object to private companies and not-for-profit entities applying SAB
118 – i.e., if they do, they would be in compliance with GAAP.
o If a private company or a not-for-profit entity applies SAB 118, it should:
o apply all relevant aspects of SAB 118 in its entirety, including the disclosures, and
o disclose its accounting policy of applying SAB 118 in accordance with paragraphs 235-10-
50-1 through 50-3 of the Accounting Standards Codification (ASC)
ASC 230-10-50-3 Disclosure of accounting policies shall identify and describe the accounting
principles followed by the entity and the methods of applying those principles that materially affect
the determination of financial position, cash flows, or results of operations. In general, the
disclosure shall encompass important judgments as to appropriateness of principles relating to
recognition of revenue and allocation of asset costs to current and future periods….

53. FASB STAFF Q&A, TOPIC 740 (CONT’D)
53
• FASB Staff Q&A, Topic 740
No Questions Answers
2 Should the tax liability on the deemed repatriation of
earnings be discounted?
No, 740-10-30-8 prohibits the discounting of
deferred tax amounts
3 Should AMT credit carryforwards be discounted at
December 31, 2017, because they will be refundable in
future years?
4 Should DTAs and DTLs be measured at the statutory tax
rate of the regular tax system or the lower BEAT tax rate
if the taxpayer expects to be subject to BEAT?
An entity that is subject to BEAT should measure
DTAs and DTLs using the statutory tax rate under
the regular tax system
5 Should an entity recognize deferred taxes for temporary
basis differences expected to reverse as GILTI in future
years or should the tax on GILTI be included in tax
expense in the year it is incurred?
The FASB staff believes that Topic 740 is not clear
as it relates to the accounting for GILTI, and an
entity may apply either interpretation of Topic 740

54. CONTACT US
DON RYU
(646) 979-3948
dryu@citrincooperman.com
ANDY TARQUINIO
(646) 695-7859
atarquinio@citrincooperman.com
JENNIFER SKLAR-ROMANO
(646) 979-3954
jsklar-romano@citrincooperman.com
ERICK TORRES
(631) 930-5626
etorres@citrincooperman.com
JOE BUBLÉ
(646) 695-7876
jbuble@citrincooperman.com
54

55. THANK YOU