H.R. 1 - The Big Beautiful Bill (Simplified) - Part 11.4 - Taxes in Rural America
It's long, it's complicated, and Marjorie Taylor Greene (and probably most people she works with) hasn't read it. Let's not be one of those people. Here is a simplified version of a very complex, and very dangerous bill, that's easy to read and something we can all understand. Please share with friends and family. Thank you.
TITLE XI -- COMMITTEE ON WAYS AND MEANS, "THE ONE, BIG, BEAUTIFUL BILL"
EXTENSION OF TAX CUTS AND JOBS ACT PERFORMS FOR RURAL AMERICA AND MAIN STREET
111001 - EXTENSION OF SPECIAL DEPRECIATION ALLOWANCE FOR CERTAIN PROPERTY
Section 168 of the Internal Revenue Code of 1986 is amended to raise the deductible of the cost of property used in trade or business from 40% to 100%.
111002 - DEDUCTION OF DOMESTIC RESEARCH AND EXPERIMENTAL EXPENDITURES
Section 174 is amended so that any research or experimental expenditures no longer need to deduct costs over a five-year period, but instead can do so immediately.
111003 - MODIFIED CALCULATION OF ADJUSTED TAXABLE INCOME FOR PURPOSES OF BUSINESS INTEREST DEDUCTION
Section 163 is amended to raise the cap on the deductibility of business interest expense by no longer accounting for deductions for depreciation (cost of property like equipment and machinery), amortization (paying off debt), and depletion (reduction of resources like oil, gas, minerals, or timber). This will lead to increased tax liability for businesses because they can deduct less of their interest expense.
111004 - EXTENSION OF DEDUCTION FOR FOREIGN-DERIVED INTANGIBLE INCOME AND GLOBAL INTANGIBLE LOW-TAXED INCOME
Section 250 is amended to keep the deduction for foreign-derived intangible income (intellectual property, not physical products, i.e. patents, trademarks, and copyrights within the U.S.) at 37.5% and global intangible low-taxed income (same, but overseas) at 50%. These were both set to decrease at the end of the year, thanks to the Biden Administration, but now run the risk of favoring overseas exports rather than domestic, offshoring jobs, and reducing domestic innovation.
111005 - EXTENSION OF BASE EROSION MINIMUM TAX AMOUNT
Section 59 is amended to keep the 10% (originally set to increase to 12.5% at the end of the year) base erosion anti-abuse tax, which limits international companies from shifting profits from the U.S. to low-tax countries, for businesses who make over $500 million a year. This will disproportionately benefit the wealthiest households who own a larger share of stocks, exacerbating income and wealth inequality.
111006 - EXCEPTION TO DENIAL OF DEDUCTION FOR BUSINESS MEALS
Section 274 is amended to provide an exception to the deduction limitation, allowing for 100% deduction for meals provided where they are essential to the core of the business (i.e. restaurants providing meals to employees during work hours). However, this could potentially be exploited without oversight, leading to tax avoidance.
111101 - SPECIAL DEPRECIATION ALLOWANCE FOR QUALIFIED PRODUCTION PROPERTY
Section 168 is amended to no longer require a 39-year depreciation deduction of nonresidential properties, and instead allow taxpayers to deduct 100% of their property, including factories and large structures, immediately as long as it is in the U.S., and as long as it does not include offices, research, or software engineering activities. This will give companies a major upfront swing in income, but may leave them without extra cash several years out, and won't allow them any benefits if tax rates change.
111102 - RENEWAL AND ENHANCEMENT OF OPPORTUNITY ZONES
Section 1400Z-1 is amended to change low-income "Opportunity Zones (OZs)" (economically-destressed communities defined by the U.S. Census), which are chosen by state governors in order to provide tax benefits and encourage investors, from 80% of the area median income to 70%. And unlike before, at least 33% of OZs must be entirely in rural areas, giving opportunity for investment on a 10% step-up basis when held at least 5 years.
111103 - INCREASED DOLLAR LIMITATIONS FOR EXPENSING OF CERTAIN DEPRECIABLE BUSINESS ASSETS
Section 179 is amended to increase the amount a taxpayer may expense the cost of a qualifying property (equipment, vehicles, building improvements) from $1 million to $2.5 million. This would favor larger businesses as well as wealthier individuals who own or have stakes in the business.
111104 - REPEAL OF REVISION TO DE MINIMIS RULES FOR THIRD PARTY NETWORK TRANSACTIONS
Section 6050W is amended to reinstate the Exception for De Minimis Payments, which eliminates all 1099 tax reporting unless a payee has earned more than $20,000 in 200 separate transactions, administering a third-party settlement organization. Previously the limit was $600.
111105 - INCREASE IN THRESHOLD FOR REQUIRING INFORMATION REPORTING WITH RESPECT TO CERTAIN PAYEES.
Section 6041 is amended to increase the reporting threshold for services by an independent contractor from $600 to $2000.
111106 - REPEAL OF EXCISE TAX ON INDOOR TANNING SERVICES
This section serves to remove the 10% excise tax on indoor tanning services which was originally intended to discourage tanning and help fund healthcare.
111107 - EXCLUSION OF INTEREST ON LOANS SECURED BY RURAL OR AGRICULTURAL REAL PROPERTY
This section serves to exclude up to 25% of the interest on rural or agricultural real estate loans. This would likely favor larger agricultural operations with access to substantial capital.
111108 - TREATMENT OF CERTAIN QUALIFIED SOUND RECORDING PRODUCTIONS
Section 181 is amended to allow taxpayers to expense up to $150,000/year of the costs of sound recording production and equipment.
111109 - MODIFICATIONS TO THE LOW-INCOME HOUSING CREDIT
Section 42 is amended to raise the Low-Income Housing Tax Credit (LIHTC) 12.5% and lower bond-financing from 50% to 25%, and provide a 30% basis boost (tax credits) in Native American Communities. However, these benefits may flow to investors faster than they do low-income tenants.
111110 - INCREASED GROSS RECEIPTS THRESHOLD FOR SMALL MANUFACTURING BUSINESSES
Section 448 is amended to increase gross receipts of a manufacturing taxpayer (makes, sells, rents property) from below $25 million to $80 million in order to be exempt from business interest deductibility and accounting for inventory.
111111 - GLOBAL INTANGIBLE LOW-TAXED INCOME DETERMINED WITHOUT REGARD TO CERTAIN INCOME DERIVED FROM SERVICES PERFORMED IN THE VIRGIN ISLANDS
While most Global Intangible Low-Tax Income (GILTI) (taxable income earned from foreign profits) is taxed between 10.5% and 13.125%, the Virgin Islands (considered the world's top tax haven) will now be exempt.
111112 - EXTENSION AND MODIFICATION OF CLEAN FUEL PRODUCTION CREDIT
Section 45Z is amended to state that the previous tax credit offered for the production of transportation fuel, including aviation, now only exists for fuel made inside the U.S. However, this incentivizes only conventional biofuels industry and not necessarily clean fuels like biogenic sustainable aviation fuel.
If you would like to read the bill yourself, click the link below.
The Big, Beautiful Bill
Ellie is an author, editor, and owner of Red Pencil Transcripts, and works with filmmakers, podcasts, and journalists all over the world. She lives with her family just outside of New York City.
I will share it. Goodnight 😴😘 🌙
Thank you.