This is the second article in our series covering important information from the National Accounting and Finance Council’s Annual Conference. Of particular interest to our group was a discussion around future tax legislation presented by David Bauer, Vice President of State and Tax Policy at ATA. It is widely believed that 2025 will be a very active year for tax legislation, and Mr. Bauer covered several potential scenarios.
The Tax Cuts and Jobs Act of 2017 (TCJA) was a major piece of tax legislation. The corporate tax provisions were permanent changes to the tax code from the TCJA, but most of the individual provisions will ultimately sunset on January 1, 2026, or have already begun to phase out. Accordingly, we believe that 2025 will be an active year for tax legislation. Regardless of who ultimately wins The White House in November, both parties will have tax legislation high on their priority list.
Below is a listing of tax legislation that will be impacting taxpayers currently or in 2026:
- Expiration of the 20% Qualified Business Income Deduction (“QBI”) in 2026 from the TCJA.
- Addback and amortization of research and experimental costs over 5 years for tax purposes (Section 174)
- Bonus depreciation phases out
- Individual tax rates and brackets will revert to the 2017 amounts (max rate is 39.6%)
- Itemized deductions will be restored
- Standard deduction amount reverts to reduced 2017 amounts
- Individual Alternative Minimum Tax expands
- Estate tax exemption reverts to 2017 amounts, adjusted for inflation
Mr. Bauer discussed how the outcome of any future tax legislation will be determined by which political party controls the Presidency and Congress. If one party wins the presidency and wins both houses of Congress, their priorities will take precedent. What might that look like?
If Republicans control the government, the priorities might include:
- Make permanent or extend TCJA provisions including:
o 20% Qualified Business Income Deduction
o Increase the estate tax exemption
o Lower individual tax rates - Repeal portions of the Inflation Reduction Act
- Scale back IRS enforcement funding
- Raise taxes on elite higher education
- Corporate tax rate reduction from the current 21%
If the Democrats control the government, the priorities might include:
- Increased Child Tax Credit
- Remove $10,000 SALT at the individual taxpayer level
- Increase corporate tax rate from 21% to 28% or somewhere in between
- Expand Inflation Reduction Act Energy Credits
- Allow TCJA top tax brackets to expire so that top rate would return to 39.6%
How would a divided government impact the possibility of tax legislation in 2025? It would certainly make the deal much harder to negotiate before the expiration of the TCJA provisions on January 1, 2026. However, there will be incentives for both sides to come together outside of an election year.
Tax legislation in a divided government could look something like this:
- The deal will be negotiated late into 2025
- TCJA middle class tax cuts will likely be extended
- Efforts will be made to promote domestic research, manufacturing, and capital expenditures
- Reduce incentives for foreign investment in the U.S., especially from China
- We may see a short-term extension of the TCJA, similar to the two-year extension of the Bush era tax cuts in 2010.
One subject that is not mentioned in these discussions is the topic of fiscal deficits. As the total U.S. Government debt continues to increase and become a larger share of GDP, this subject will have to come to the forefront.
In summary, it is believed that major changes will be coming to the tax code by January 1, 2026, either because of new legislation or because the provisions of the TCJA will be allowed to expire. Schneider Downs will monitor the progress and report on the tax legislative developments as they occur over the next 18 months.
About Schneider Downs Transportation & Logistics Services
The Schneider Downs Transportation & Logistics industry group includes assurance, tax, technology and management consulting professionals who combine their individual expertise to serve transportation and logistics companies throughout the United States. We possess the capabilities and industry expertise to provide our clients with state-of-the-art technologies and timely communication of the most current and pervasive legislative and regulatory changes impacting the industry.
To learn more, visit our Transportation & Logistics Industry Group page.
