When Congress Passed the Tax Cuts and Jobs Act in late 2017, this created a unique opportunity. The most dynamic CPA firms will use this change to not only look at the compliance aspects of the new law, but also at the opportunities for tax planning and consulting to gain a competitive advantage in the marketplace.
The new tax law is the largest change to the tax code since 1987. This creates a rare opportunity for CPAs to discuss taxation and other issues with their clients since accounting and taxes are at the forefront of many business owners minds. For example, many companies will desire to explore the impact of converting from an S corporation to a C corporation. This provides a consulting opportunity for the CPA firm to work with their clients to look at all the implications of these changes. Most business owners are interested in this topic, but understanding the implications of this is complicated. CPA firms that actively go into the marketplace to consult on these tax law changes will have an easier time getting to new clients and being seen as the leaders in the marketplace.
Additionally, the new tax law creates opportunities to allow for CPA firms to further create a Competitive Advantage in the marketplace. Outside of the changes to tax rates, some of the most critical changes in the new law relating to depreciation. Starting with property acquired after September 27, 2017, there are new bonus depreciation rules, including the extension of bonus depreciation to used property. There also can be uncertainty and confusion as to the status of “Qualified Improvement Property” as it relates to bonus depreciation. This creates an opportunity for CPAs to work with taxpayers to ensure they are taking full advantage of these opportunities.
However, just understanding the bonus depreciation provisions is not enough. With the Tangible Property regulations being issued in a few years back, the increase to bonus depreciation, and the changes to 179 expensing rules, all of these provisions must be looked at in connection with each other. A truly competitive firm will work with their clients to ensure they are taking full advantage of these provisions. Take for example a taxpayer renovating an existing manufacturing facility. The taxpayer needs to understand that qualified improvement property is 179 eligible, but might not be bonus eligible. The will also need to know what work can be considered a repair, and what property is 100% bonus eligible.
Additionally, after September 27th, 2017 cost segregation studies become even more valuable. Eligible assets acquired and placed in service after that date, with some restrictions, are subject to 100% bonus depreciation. With this increase of the bonus depreciation percentage and the inclusion of used property, a study becomes even more critical for taxpayers. However, with the new rules, it is also important for the cost segregation provider to understand the changes as well. Few CPA firms are large enough to build a cost segregation practice in-house, that is large enough to study the changes, and be ready to react to the opportunities that these changes create. Most firms will need to partner with specialty firms to assist in these opportunities. CPA firms that do work with partner firms to provide depreciation and cost segregation studies will need to make sure that their providers have a good understanding of the changes present in this new law.
The change in the tax law has created many opportunities the CPA firms that can manage this change will have a competitive advantage in the marketplace. In many cases, CPA firms will have to work with specialists to take advantage of some of the opportunities, but by choosing the right advisors for Cost Segregation and other areas CPA firms can take advantage of the changes to build for the future.