Effective January 1, 2024, new rules mandate certain business entities to report beneficial ownership information to the US Department of Treasury.

The Corporate Transparency Act (“CTA”), enacted as part of the National Defense Act for Fiscal Year 2021, requires the disclosure of beneficial ownership information (“BOI”) for entities from individuals owning or controlling them.

Approximately 32.6 million businesses must comply with this reporting requirement. The purpose is to aid US law enforcement in combating money laundering, terrorism financing, and other illicit activities. There is no associated fee for filing.

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While 2023 has been a relatively quiet year for new tax legislation, many provisions from pre-2023 legislation are coming into effect this year. This tax update includes some recent tax law changes that could help to reduce your taxes or avoid tax penalties.

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Topics in this Update

• Status of New Rules for Deduction of Research & Development Expenses

• Charitable Contribution Strategies

• Roth IRA Conversion

• Federal Tax Deduction for State Taxes paid by Pass-Through Entities

• Qualified Opportunity Funds

• Other Year-End Tax Planning

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Federal tax law currently provides a tax credit of up to $7,500 for purchasing certain new electric vehicles. The Inflation Reduction Act of 2022 (the Act) makes several changes to the credit, which has been renamed the Clean Vehicle Credit. Some changes are favorable, but some may make it harder to get a tax credit. Here’s what you need to know about the changes.

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In the wake of Hurricane Ian, the Federal Emergency Management Agency (FEMA) designated all counties in the states of North Carolina, South Carolina, and Florida as disaster areas. Shortly afterwards, the Internal Revenue Service and the revenue departments for North Carolina, South Carolina and Florida announced tax relief available for all taxpayers in these states. The tax relief postpones the deadline to file various individual, business, and tax-exempt organization tax returns and to make certain tax payments. For North Carolina individuals and businesses, tax filings with deadlines falling on or after September 28, 2022 and before February 15, 2023 are postponed to February 15, 2023.

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The recently enacted Inflation Reduction Act of 2022 (IRA) contains several new environment-related tax credits that may be of interest to individuals and small businesses. The IRA also extends and modifies some preexisting credits. This is the second installment of a three-part series on the IRA’s tax credits. The first installment was a summary of the key provisions in the IRA. The third part will provide more details on the clean vehicle tax credits which replace the electric vehicle tax credit.

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This summary is the first of a three-part series on the provisions in the recently passed Inflation Reduction Act of 2022 (IRA). The IRA created or extended many healthcare- and energy-related tax credits that will be “paid for” by higher taxes on some publicly traded corporations and taxes collected from increased IRS enforcement activities. The second installment of our series will cover energy tax credits other than vehicle credits. The third part will describe the new and expanded tax credits for electric vehicles.

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This update contains some of the new tax rules for this year, some tax planning ideas to possibly reduce your taxes, and reminders to address other tax rules that may require special attention for the preparation of your tax return next year.

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A Happy New Year to all. As we start the new year we thought it was a good time to look back at some of the tax law changes over the past year and to look at some of the tax changes coming this year.

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Year-end tax planning this year is more traditional than the past few years when tax increases were expected or very possible. For now, the myriad of tax increases proposed just a few months back has shrunk to only a few tax increases that primarily apply only to publicly-traded corporations and very wealthy individuals. However, there is always a chance of a major tax change as long as Congress is in session.

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Enacted NC Tax Changes in NC Budget Bill

The Budget Bill (Senate Bill 105), enacted on November 18, included several changes to North Carolina tax law – some retroactive and some prospective.

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The proposed tax provisions of President Biden’s Build Back Better Act continue to evolve as Congressional negotiations progress. At the end of last week, the tax provisions in the bill changed dramatically and continued to change this week.

A number of provisions that were in prior legislative proposals are now “out” of the current version. As a result, many of our prior recommendations are also “out” with the recent changes.

We will continue to monitor this tax legislation, but wanted to give you this update on some of the provisions that were “in” and “out” of yesterday’s draft of the bill under consideration by the House Rules Committee.

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The US House Ways and Means Committee recently released their proposals for tax increases. The tax proposals are projected to raise about $2.2 trillion over the next 10 years. The proposals would repeal many of the tax changes made in the 2017 Tax Cuts and Jobs Act, particularly for individuals with income of more than $400,000. The following is a summary.

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Employer tax credits are more available this year and could result in tens of thousands of dollars in tax savings.

Employee Retention Credit

The Employee Retention Credit (ERC) is worth up to $7,000 per employee per quarter this year (total of $28,000 per employee). The credit is worth up to $5,000 per employee in 2020. Generally, Form 941 must be amended to claim a payroll tax credit and refund.

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Recently, there were changes made to the child tax credit that will benefit many taxpayers. As part of the American Rescue Plan Act that was enacted in March 2021, the child tax credit:

• amount has increased for certain taxpayers

• is fully refundable (meaning you can receive it even if you do not owe the IRS)

• may be partially received in monthly payments

The new law also raised the age of qualifying children to 17 from 16, meaning some families will be able to take advantage of the credit longer.

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The following is a summary of our top ten list of tax provisions in the recently passed American Rescue Plan Act. The first listed change to the Premium Tax Credit and the provisions for Unemployment Benefits and the EIDL grant are effective for 2020. The others are effective beginning in 2021.

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On June 21, 2018, the Supreme Court of the United States handed down a historic decision in the sales and use tax nexus case South Dakota v. Wayfair, Inc. The 5-4 ruling overturns physical presence standards upheld in previous cases, such as Quill Corp. v. North Dakota (1992) and National Bellas Hess Inc. v. Department of Revenue of Illinois (1967), where a business had to have a physical presence in the state for the state to impose sales and use tax collection obligations on the business.

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This tax memo will briefly describe the huge new tax deduction available to business owners and owners of rental properties. The tax deduction under new Section 199A of the tax code can be up to 20% of all the qualified business income reported in your personal tax return. We plan to come out with further guidance on planning for the new tax deduction in coming months. The IRS last week issued hundreds of pages of proposed regulations that we will review.

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The Tax Cuts and Jobs Act (TCJA) has altered the tax landscape for a lot of businesses. The changes are extensive, and this summary provides a high-level overview of some of the highlights to keep you informed. Due to the sweeping nature of the changes, we’d welcome the opportunity to have a conversation with you to discuss planning opportunities for your specific situation.

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The Tax Cuts and Jobs Act added Sec. 1400Z which allows taxable gains invested in a Qualified Opportunity Fund (QOF) to be temporarily deferred and adds the potential for any appreciation in the Qualified Opportunity Fund investment to be permanently excluded from tax.

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