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• The law reduces the marginal tax rates on pass-through companies.

• ISRI successfully fought to retain the important IC-DISC provision for exporters.
  • …this helps scrap recyclers export to more than 150 countries
• ISRI fought to have the expensing allowance expanded to 100 percent.
  • …this includes all capital equipment
  • …but expires in 5 years
• ISRI successfully fought to retain the RISE Act, (which it helped get enacted in 2008).
  • …it provides for an expensing allowance of 50 percent for ‘qualified recycling equipment’
  • …should the 100% expensing allowance expire after 5 years the Rise Act with its 50 percent expensing allowance will remain available.

Federal Tax Reform and the States

Enactment of federal tax reform late last year has states scrambling to figure out what it would mean for them.

What this means: A number of jurisdictions are considering bills to allow taxpayers to convert newly nondeductible tax payments into deductible charitable contributions made to certain state-sponsored charities.

Projected windfall revenues are in store for some states while others face an unexpected decline in federal support. It is the states’ reaction to the new federal limitation of state and local tax (SALT) deductions that has captured most of the media attention.

• Examples of these kinds of bills can be found in California, Maryland, and the District of Columbia
  • …this idea is also catching on in states that do not have a state-level income tax
• The most extreme legislative proposal so far comes from California
  • …a proposed constitutional amendment would levy a 10 percent surtax on corporations with annual revenues of more than $1 million
  • …the bill's sponsors say that the proposed constitutional amendment is necessary in order to ensure that the state's big businesses are paying their fair share

• The proposal would also apply to S corporations, not all of which benefit from the new federal tax regime
  • …under this proposal, small business owners with sufficient California income could be subject to combined state and federal marginal tax rates as high as 60.3 percent.

Race to the Courts – A Constitutional Issue?

Some states are also pursuing judicial remedies in addition to their legislative efforts. A coalition of three northeastern Democratic governors have announced their plans to file suit alleging that Congress' decision to cap the SALT deduction violates the Constitution.

• The general legal consensus suggests that this is a spurious argument
  • …the federal government, it is argued, has authority to define what constitutes the federal tax base
  • …these suits are better thought of as a political action than a serious policy challenge.

Wait and See: These are just the first reactions to what will ultimately prove to be a multi-year effort to reshape state tax systems in light of the challenges — and opportunities — associated with federal tax reform.

The Trump Administration Is Asking ReMA …

… for examples of how scrap processors and equipment providers have, or will, take advantage of the recently enacted tax reforms.  If you have awarded bonuses to employees, purchased new equipment or are planning to purchase equipment, please contact ReMA to let us know. The more evidence of our contribution to the economy we can demonstrate, the better we can help advance your issues and concerns with the Trump Administration and Congress. This is especially important as trade issues are being discussed.  Please contact Billy Johnson at billyjohnson@isri.org or (202) 662-8548 with any examples of increased investment, bonuses, or other activities as a result of the tax reform law. 

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