Larry's Tax Law

In this last installment of our multi-part series on the One Big Beautiful Bill Act (the “OBBBA”), my colleague, George Bonini, and I discuss three provisions of the OBBBA that impact many businesses, particularly those in manufacturing and capital-intensive industries.

Bonus Depreciation

As a result of the Tax Cuts and Jobs Act of 2017 (“TCJA”), businesses were permitted to immediately deduct (or expense) 100% of the cost of certain qualifying property placed into service during the taxable year instead of depreciating the property over several years. The deduction, commonly referred to as bonus depreciation, was scheduled to phase down by 20% each year starting in 2023 and be fully eliminated by the end of 2026. 

The concept of bonus depreciation is not new to our tax laws.  Various iterations of the concept have been in the Internal Revenue Code (“Code”) for decades.  In general, the impetus for bonus depreciation is twofold, namely: (i) to stimulate business investment in qualified property such as machinery and equipment; and (ii) to enhance the cash flow of businesses, allowing greater investment in operations, including expanding the workforce. 

Under Code Section 168(k), to qualify for the TCJA’s bonus depreciation, property acquired by the taxpayer must constitute “Qualified Property.”  Subject to specified exceptions, Qualified Property under the TCJA includes property that the Code assigns a depreciation recovery period of 20 years or less.

In this eighth installment of my multi-part series on the One Big Beautiful Bill Act (the “Act”), I discuss provisions of the Act that impact the taxation of worker moving expenses.^[1]

Background

Historically, provided certain requirements were satisfied, Code Section 217 allowed a deduction for moving expenses paid or incurred by an employee or self-employed person in connection with his or her work.  For this purpose, moving expenses are generally defined as reasonable expenses incurred in moving household and personal effects and travel costs (excluding meals). 

The requirements for the deduction are straightforward but stringent.

In this fourth installment of my multi-part series on the One Big Beautiful Bill Act (the “Act”), Steve Nofziger and I discuss a provision of the Act that impacts pass-through business entities and their owners, Code Section 199A.[1]

Background

Code Section 199A, commonly referred to as the Qualified Business Income (“QBI”) deduction, was enacted during President Trump’s first term in office as part of the Tax Cuts and Jobs Act (“TCJA”).  As you may recall, the TCJA changed the C corporation tax rate landscape that came with a top tax rate of 35% to a flat rate structure pegged at 21%.  Meanwhile, pass-through entities (S corporations, partnerships and sole proprietorships), which are predominately owned by individuals, were left with a graduated tax rate structure that quickly rises to a rate of 37%.  

To create more of an even playing field between pass-through entities and C corporations, the TCJA created a new deduction for pass-through entities with the enactment of Code Section 199A.  This provision allows owners of certain pass-through entities a 20% deduction of “qualified business income” (“QBI”).

Like many provisions of the TCJA, Code Section 199A was scheduled to sunset at the end of 2025.  The Act, signed into law by President Trump on July 4, 2025, made Code Section 199A a so-called permanent provision.  It also made several changes to its deduction framework.

In this third installment of my multi-part series on the One Big Beautiful Bill Act (the “Act”), I discuss a provision of the Act that may not impact a large segment of the population, but which is interesting and worthy of coverage.

Section 70114 of the Act only impacts gamblers.  It amends Code Section 165(d). 

Background

Over the years, I authored numerous articles about the taxation of gambling.  In 1987, I authored a lengthy law review article, The Evolution of the Phrase Trade or Business: Flint v. Stone Trace Company to Commissioner v. Groetzinger – An Analysis with Respect to the Full-Time Gambler and the Investor, 23 Gonzaga Law Review 513 (1987/1988).   In that article, I examined, in part, whether a full-time gambler, for tax purposes, is in the trade or business of gambling.  If the answer to that question is yes, two results follow (one result that is good and one result that is not so good):  (1) the gambler is able to deduct under Section 162 of the Code all of the ordinary, necessary and reasonable expenses incurred in carrying on the business; and (2) the net income of the gambler, if any, is subject to self-employment tax under Section 1401 of the Code. 

In 2014, on this blog, I provided a discussion about the taxation of a full-time gambler.  In that article, I provided some updates and additional insights on that topic.   

A brief overview of the applicable law is necessary for this discussion.  Code Section 162(a) generally allows a deduction for "all the ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business".  Code Section 165(d), originally enacted as Section 23(g) of the Revenue Act of 1934, however, provides that "[l]osses from wagering transactions shall be allowed only to the extent of the gains from such transactions."

On July 1, 2025, the One Big Beautiful Bill Act, H.R.1 – 199^th Congress (2025-2026) (the “Act”) was passed in the U.S. Senate (“Senate”).  On July 3, 2025, it was passed in the U.S. House of Representatives (“House”) and presented to President Trump to be signed into law.  On July 4, 2025, the President signed the Act into law.

I intend to present several installments on my blog featuring some of the most important tax provisions of the Act, allowing us to break down these provisions in detail.  This first installment is a continuation of my coverage of the SALT deduction provision of the Act.

As reported on May 16, 2025, the SALT cap proposal contained in the legislation that was pending in the U.S. House of Representatives (“House”) aimed at, among other things, dealing with the expiring provisions of the Tax Cuts and Jobs Act (“TCJA”) was not well received by lawmakers from high-income tax states such as Oregon, New York, Hawaii and California.  That proposal increased the SALT cap from $10,000 to $30,000, but it contained a downward adjustment for taxpayers with “modified adjusted gross income” over $400,000.  For this purpose, modified adjusted gross income is adjusted gross income plus any amounts excluded from income under Code Sections 911, 931 and 933.  Under that proposal, the $30,000 cap is reduced by 20% of a taxpayer’s modified adjusted gross income to the extent it exceeds $400,000 ($200,000 in the case of a married taxpayer filing separately).  However, the SALT cap cannot be reduced below $10,000 ($5,000 in the case of a married taxpayer filing separately).

It appears the SALT cap proposal may have been the last item holding up the passage of the bill by members of the House.  After hours of debate and discussion, the proposal was modified, and the House passed the bill on May 22, 2025.  It now sits in the U.S. Senate (“Senate”), where it is expected this provision of the bill, among others, will face fierce debate.

Background

Prior to the Tax Cuts and Jobs Act (“TCJA”), there was no direct limitation on an individual taxpayer’s deduction of his or her state and local taxes (“SALT”) on the federal individual income tax return.  Of course, for high-income taxpayers, the SALT deduction often triggered the alternative minimum tax.

As of 2018, as a result of the TCJA, the SALT deduction for individuals was capped at $10,000 per year for both single and married taxpayers filing jointly ($5,000 for married taxpayers filing separately).  Hence, the cap contains an inherent “marriage penalty.” 

The SALT cap was added to the TCJA, in part, as a compromise for an increase in the standard deduction (almost doubling it from pre-TCJA days). It is, however, set to sunset at the end of this year.

This fourth installment of my multi-part series on Subchapter S is focused on suspended losses of an S corporation.  While the rules seem straightforward, their application can be tricky, especially given legislative changes made in recent years.

Background

In general, S corporation shareholders, like the owners of entities taxed as partnerships, are allocated their share of the entity’s losses for the taxable year.  A number of rules, however, may limit the ability of the owners to deduct these losses.

Last fall, the IRS announced, with respect to pass-through entities (LLCs or other entities taxed as partnerships or S corporations), that, if state law allows or requires the entity itself to pay state and local taxes (which normally pass through and are paid by the ultimate owners of the entity), the entity will not be subject to the $10,000 state and local taxes deductibility cap (the “SALT Cap”). 

On February 4, 2021, Senate Bill 727 (“SB 727”) was introduced in the Oregon Legislature.  SB 727 is Oregon’s response to the IRS announcement (see discussion below).

On June 17, 2021, after some amendments, SB 727 was passed by the Senate and referred to the House.  Nine days later, the House passed the legislation without changes.  On June 19, 2021, Oregon Governor Kate Brown signed SB 727 into law, effective September 25, 2021.  In general, it applies to tax years beginning on or after January 1, 2022.  Interestingly, SB 727 sunsets at the end of 2023.

In relevant part, SB 727 allows pass-through entities to make an annual election to pay Oregon state and local taxes at the entity level.  For pass-through entities that make the election, their owners will potentially be able to deduct more than $10,000 of Oregon state and local taxes on the federal income tax return.  However, it gets even better—SB 727 includes a refundable credit feature that may result in further tax savings for some owners of pass-through entities.

The Oregon Society of Certified Public Accountants (OSCPA) will be hosting its 2021 Annual Real Estate Conference as a live webcast on Wednesday, June 9, 2021. I’ve been a frequent speaker at the OSCPA’s conferences over the past 30+ years. This year, I am looking forward to present on “Section 1031 Exchanges: A Look At Recent Developments and Other Tax Deferral Alternatives.”