January 30, 2022 - Douglas Myser

Book and tax income and Congress. Congress has made a few accounting errors that in fact could change how certain accounting is done. This is usually the case when they are trying to pass bills that cost an awful lot, and use gimmicks to sell the proposal to constituents and other members of Congress. That brings up book income, and the fact that some changes will eventually make the book tax base look like the regular tax base. Capping preferences would be one way to avoid it. The book tax would also create chances for those who want to avoid paying tax. Large multi-nationals could avoid most of the minimum tax by contracting out work that requires capital equipment. The biggest difference between book and tax income is depreciation. Businesses currently can deduct 100% of the cost of equipment in the year they acquire it. But firms subject to the book tax would have to take tax depreciation over the investment's useful life. Book and tax income and Congress.

Large public companies could avoid this by contracting out activities that use capital assets to smaller corporations or firms organized as pass throughs. Because those businesses would not be subject to the book minimum tax, they could fully depreciate the equipment in the first year and pass on their lower after tax costs to their giant corporate customers. Its doubtful that any of these companies would need IRS Wage Garnishment Experts. Congress would stop this by limiting the value of tax preferences for all businesses. IF necessary, it could exempt small businesses. Business preferences are substantial and often exceed what companies can use in a given year. In 2018, the $51 billion in general business tax credits included $23 billion for research experimentation, $12 billion for energy, and $9 billion for low income housing. About $100 billion in unused tax credits was carried forward from previous years.