President Donald Trump, on 22 December 2017, signed tax reform legislation (Public Law [P.L.] No. 115-97) that lowers business and individual tax rates, modernises United States (US) international tax rules, and provides the most significant overhaul of the US tax code in more than 30 years. P.L. 115-97 lowers permanently the US federal corporate income tax (CIT) rate from 35% to 21%. The new CIT rate is effective for tax years beginning after 31 December 2017. P.L. 115-97 also repeals the corporate alternative minimum tax (AMT).
P.L. 115-97 provides the most significant overhaul of US international tax rules in more than 50 years by moving the United States from a ‘worldwide’ system to a 100% dividend exemption ‘territorial’ system. As part of this change, P.L. 115-97 includes two minimum taxes aimed at safeguarding the US tax base from erosion, along with other international tax provisions. P.L. 115-97 also includes a broad range of tax reform proposals affecting businesses, including a new 20% deduction for certain pass-through business income.
In addition, P.L. 115-97 repeals or modifies many prior-law tax provisions to offset part of the cost of the tax reforms.
The Treasury Department and Internal Revenue Service (IRS) have issued extensive regulations under several key provisions of P.L. 115-97. Additional guidance is expected in 2019.