Anticipated Tax Reform under President Trump’s Second Term

We now have a winner in one of the most hotly contested elections in our lifetimes. Donald J. Trump has become the second president in the history of the United States to win two non-consecutive terms. What does this mean for tax policy?

TCJA: International Tax

The marquee legislation of Trump’s first term from a tax perspective was the Tax Cuts and Jobs Act (TCJA). This was the most sweeping tax legislation since the 1986 Tax Reform Act. It radically reformed the Internal Revenue Code and, in particular, the landscape of the international tax world.

Two significant items in TCJA were the enactment of the foreign-derived intangible income deduction (FDII) and the global intangible low-taxed income (GILTI) inclusion. Each of these had a deduction amount related to them via Section 250. The FDII deduction is currently 37.5%, and the GILTI deduction is 50% of the inclusion amount.

Both deduction percentages are set to be reduced for tax years beginning after December 31, 2025. We anticipate that the existing percentages will either be made permanent at their current rates or modified to further promote domestic manufacturing.

TCJA: Other Provisions

Outside of the international tax realm, here are some other provisions that may change or be made permanent:

• The qualified business income deduction may be made permanent (set to expire on December 31, 2025)
• Repeal of the R&D capitalization requirement
• Increase bonus depreciation amounts
• Keep the capital gains rate at its present lower amounts
• Lower individual income tax rates without any sunset provisions
• Extend or make permanent the higher estate and gift tax exemptions and lower the rates

Other Tax Possibilities

During his campaign, President-Elect Trump indicated he wanted to lower the corporate tax rate for domestic manufacturers to 15%. Some form of this is likely to be pushed forward. Provisions of the Affordable Care Act, such as the credits for premiums, may also be revisited.

Change is Almost Certain

While it is uncertain which of the items above may be enacted, it is almost certain there will be new tax legislation. This is particularly likely as the Republican party appears poised to control both chambers of Congress and the Presidency. Tax professionals should prepare for an eventful first year of 2025.

If you or a client have any questions regarding the implications of these election results for their business, please do not hesitate to reach out to our Global Business Services team.