The Tax Cuts and Jobs Act (TCJA) of 2017 enacts significant changes to the Internal Revenue Code that will significantly affect how taxpayers carry out their business and nonbusiness activities. For instance, the effective rate for “C” Corporations is set at 21% for tax years beginning after 2017.
An initial reading of the new act led many of us to believe that a fiscal year taxpayer only got the benefit of the lower corporate rate with its fiscal year beginning in 2018.
It turns out that there is a special section of the tax code that provides that the tax rate for corporations whose fiscal year includes January 1, 2018 is a blended rate (prorated between the old and new rate).
As a result certain individual tax planning strategies such as shifting deductions may be less attractive. Alternately, fiscal year taxpayers would benefit from a complete analysis of the implications of the new tax act including issues that impact the current as well as future years.