Framework for U.S. Tax Reform - Another Step Forward | KPMG | CA

Framework for U.S. Tax Reform - Another Step Forward

Framework for U.S. Tax Reform - Another Step Forward

The U.S. has released a nine-page framework for its upcoming tax reform.


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The document, which was published on September 27, 2017, is short and high level, and for the most part does not mention effective dates or technical details. Due to the lengthy U.S. legislative process, there will likely be further details and modifications added to the framework. It remains uncertain whether significant tax legislation will be enacted in the near future. Nonetheless, it gives key insights into how the U.S. is planning to reform it business and personal tax systems. Some key details regarding the framework's proposals for U.S. corporate tax, multinational tax and personal tax are detailed below.


U.S. corporate tax
The framework includes several proposals that will affect U.S. businesses, including the following:

  • A 20% corporate tax rate
  • Eliminating the alternative minimum tax for corporations
  • Limiting the maximum tax rate to 25% for "small" and "family-owned" businesses conducted as sole proprietorships, partnerships and S corporations
  • New rules to allow businesses to immediately expense costs for qualifying new investments in depreciable assets (other than "structures") for at least five years
  • Partially limiting the deduction for net interest expense incurred by C corporations.


Multinational U.S. businesses
Regarding multinational business, the framework proposes: 

  • Introducing a new tax for a U.S. multinational corporation's foreign profits, at a reduced rate, on a global basis to prevent U.S. tax-base erosion
  • Treating foreign earnings that have accumulated overseas under the current system as repatriated
    • Foreign earnings held in illiquid assets will be subject to a lower rate than foreign earnings held in cash or cash equivalents and payment of the tax liability will be spread out over several years.


Personal tax
The framework proposes the following changes to personal income tax:

  • Creating three individual levels of individual tax rates: 12%, 25% and 35%
    • A fourth top bracket may be added, as well as a potential measure to index personal tax brackets to inflation
  • Increasing the level of permitted standard and itemized deductions while repealing personal exemptions and many itemized deductions (the deductions for home mortgage interest and charitable contributions would be retained)
  • Repealing the alternative minimum tax
  • Repealing the estate tax and the generation-skipping transfer (GST) tax 
  • Increasing the child tax credit
  • Introducing a nonrefundable $500 non-child dependent credit. 
  • Retention of tax benefits that "encourage work, higher education and retirement." 
  • Repealing various exemptions, deductions, and credits to allow lower rates.


For more information, contact your KPMG adviser.


Information is current to October 10, 2017. The information contained in this publication is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act upon such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's National Tax Centre at 416.777.8500

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