TCJA and the Impact on Your Corporate Finance Course

Published February 16, 2018

In case you haven’t had a chance to thoroughly consider the impact that the Tax Cuts and Jobs Act (TCJA) will have on your Corporate Finance course, here’s a quick list of the six biggest items to consider.

6 primary areas of change to consider:

  1. Corporate tax
  2. Bonus depreciation
  3. Limitations on interest deductions
  4. Carrybacks
  5. Dividends received tax break
  6. Repatriation

  1. Corporate tax. The new, flat-rate 21 percent corporate tax– under old law C corporations paid graduated federal income-tax rates of 15%, 25%, 34%, and 35%. Personal service corporations (PSCs) paid a flat 35% rate. The new TCJA establishes a flat 21% corporate rate, and that reduced rate also applies to PSCs.
  2. Bonus depreciation. For a limited time, businesses can take a 100 percent depreciation charge the first year for most non-real estate, MACRS-qualified investments.
  3. Limitations on interest deductions. The amount of interest that may be deducted for tax purposes is limited. Interest that cannot be deducted can be carried forward to future tax years (but not carried back).
  4. Carrybacks. Net operating loss (NOL) carrybacks have been eliminated and NOL carryforward deductions are limited in any one tax year.
  5. Dividends received tax break. The tax break on dividends received by a corporation has been reduced, meaning that the portion subject to taxation has increased.
  6. Repatriation. The distinction between U.S. and non-U.S. profits has been essentially eliminated. All “overseas” assets, both liquid and illiquid, are subject to a one-time “deemed” tax.

Of course there are more changes that will impact the Corporate Finance course but these six areas will ensure you are staying current and relevant, two things that are vitally important to student engagement.

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