The U.S. Supreme Court has granted certiorari for the case of Moore v. United States, in which the petitioner seeks to challenge the constitutionality of the Section 965 transition tax, commonly referred to as the "Toll Tax." The petitioner argues that the Toll Tax, enacted as part of the Tax Cuts and Jobs Act of 2017, violates the 16th Amendment by being a direct tax on unrealized income. Despite previous rejections of their case in lower courts, the Supreme Court's decision to hear it has raised significant questions about the potential impact on tax law.

The Section 965 transition tax required U.S. shareholders to pay a one-time tax on certain untaxed foreign earnings of specified foreign corporations, with the option to pay it in eight yearly installments. If the Supreme Court rules in favor of the petitioner and invalidates this tax, taxpayers might be eligible for refunds, but only if they filed protective refund claims before their applicable refund statute of limitations expired.

For many taxpayers who paid the Section 965 tax in full, their statute of limitations may have already closed, making it administratively impossible to seek refunds. However, taxpayers who elected to pay over eight years, filed late returns, or have open years due to audits may want to consider protective refund claims to keep their statute of limitations open in case the Supreme Court's ruling favors the plaintiffs. Despite lower courts generally upholding the tax's constitutionality, the potential ramifications of a Supreme Court decision in the opposite direction make this a noteworthy issue for taxpayers with open statute of limitations.

Affected taxpayers should consult with their tax advisors regarding the pros and cons and understand the legal ramifications before making protective refund claims.

2017년 12월에 제정된 The Tax Cuts and Jobs Act (TCJA)는 미국의 세제 시스템을 크게 수정했다. 주요 변화로는 세율 인하, 표준 공제 확대, 평생 증여세 제외 강화 등이 있다. 이와 동시에 TCJA는 비즈니스 접대 공제 및 기타 인기 항목별 공제와 같은 몇 가지 세제 혜택을 없앴다.

개인세 및 사업세와 관련된 거의 24개의 TCJA 조항은 입법적으로 연장되지 않는 한 2025년 12월 31일 이후에 소멸된다. 다음은 만료되는 주요 조항과 그 잠재적인 의미에 대한 개요를 제공한다:

보너스 감가상각

2018년부터 2022년까지 적격 자산에 대해 100% 보너스 감가상각을 청구할 수 있다. TCJA는 이 조항을 단계적으로 폐지하여 2023년 80%, 2024년 60%, 2025년 40%, 2026년 20%, 이후 0%를 허용한다. 그러나 Section 179에 따라 가속 감가상각을 활용할 수 있다. 2027년 종료 전에 보너스 감가상각을 최대한 활용하는 것이 좋다.

GILTI 공제

TCJA는 저세율 해외 지역에서 무형자산에서 발생한 소득의 세제 이점을 최소화하기 위해 GILTI 규정을 도입했다. 2018년부터 2025년까지, 기업은 GILTI의 50%를 공제할 수 있어서 실질 세율이 10.5%로 낮아졌다. 그러나 2026년에는 이 공제가 37.5%로 감소하여 실질 세율이 13.125%로 높아진다.

상속세 평생 면제

TCJA에 따라 평생 증여 면제는 개인당 약 600만 달러에서 1,200만 달러로 두 배 증가했다. 재산 이전을 위한 유리한 조건이며, 2025년까지 1200만 달러를 최대한 활용한 개인들은 한도가 이전 금액으로 되돌아갈 때 어떠한 패널티도 부과받지 않을 것이다.  이러한 점을 감안할 때, 2025년 이전의 자산 처분은 상당한 재산을 가진 사람들에게 중요하다.

QBI 공제

TCJA는  C-Corps, S-Corps 및 Partnerships와 같은 기업으로부터 사업소득의 최대 20%를 공제받을 수 있도록 허용했지만, 이 공제는 2025년 이후에 단계적으로 폐지될 예정이어서 기업들이 C-Corporation 세금 상태를 선호하게 될 가능성이 있다.

주세 및 지방세 공제

이전에는 개인이 주세 및 지방세에 대해 무제한 항목별 공제를 청구할 수 있었다. TCJA는 이를 10,000달러로 제한했다. 2025년 이후, 한도가 해제되어 항목별 SALT 공제가 완전히 복원된다. 이 공제는 여전히 논란의 여지가 있는 문제로 남아 있으며, 2025년 이전에 변화가 나타날 수 있다.

Moving 비용

TCJA는 환불된 Moving 비용을 과세 대상으로 여기고, 미국 군인을 제외한 환불되지 않은 이동 경비에 대한 공제를 무효화했다. 2025년 이후에는 환불된 비용은 비과세가 되고, 환불되지 않은 비용은 공제 가능해질 것이다.

개별세율

TCJA는 최고 세율이 37%인 과세 범위를 이전 세율에서 변경했다. 추가 입법 없이, 이들은 2025년 이후 TCJA 이전 세율로 되돌아갈 것이며, 최고 세율은 39.6%이다. 양도 소득세율은 영향을 받지 않는다.

법인세율

TCJA는 법인세율을 35%에서 21%로 인하했다. 영구적인 전환이라는 프레임을 가지고 있지만, 재정 수요를 해결하기 위한 향후 조정 가능성에 대한 논의가 계속되고 있다.
전반적으로, 이러한 변화는 미래 지향적인 조세 계획의 중요성을 강조한다.

The Tax Cuts and Jobs Act (TCJA), enacted in December 2017, significantly modified the U.S. tax system. Major shifts included tax rate reductions, expanded standard deductions, and an enhanced lifetime gift tax exclusion. Simultaneously, the TCJA eliminated several tax breaks, such as business entertainment deductions and other popular itemized deductions.

Nearly two dozen TCJA provisions related to personal and business taxes will lapse after December 31, 2025, unless they are legislatively extended. The following provides an overview of key expiring provisions and their potential implications:

Bonus Depreciation

Businesses could claim 100% bonus depreciation on eligible property from 2018 to 2022. The TCJA phases out this provision, allowing 80% in 2023, 60% in 2024, 40% in 2025, 20% in 2026, and zero thereafter. However, businesses can still utilize accelerated depreciation under Section 179. Taking full advantage of bonus depreciation before its 2027 termination is advisable.

GILTI Deduction

The TCJA introduced the GILTI regulations to minimize the tax advantages of deriving income from intangible assets in low-tax overseas regions. Between 2018 and 2025, companies could deduct 50% of GILTI, resulting in a 10.5% effective tax rate.  In 2026, this deduction drops to 37.5%, leading to a 13.125% effective rate.

Estate Tax Lifetime Exemption

The lifetime gift exemption doubled from about $6 million to $12 million per individual under the TCJA. Beneficial for wealth transfer, individuals who maximized the $12 million by 2025 will face no penalties when the limit reverts to its previous amount. Given this, asset disposition before 2025 is crucial for those with substantial estates.

QBI Deduction

The TCJA allowed a deduction of up to 20% of business income from entities like Schedule C businesses, S-Corps, and Partnerships. However, this deduction is scheduled to be phased out post-2025, potentially prompting businesses to prefer C-Corporation tax status.

State and Local Tax Deduction

Previously, individuals could claim an unlimited itemized deduction for state and local taxes. The TCJA capped this at $10,000. Post-2025, the cap will lift, reinstating full SALT deductions for itemizers. This deduction remains a contentious issue, and changes might emerge before 2025.  In the meantime, taxpayers with pass-through entity interest should consider utilizing pass-through entity tax election.

Moving Expense

The TCJA deemed reimbursed moving costs taxable and negated the deduction for non-reimbursed moving expenses, excluding U.S. military personnel. Post-2025, reimbursed expenses will become non-taxable, and non-reimbursed expenses will be deductible.

Individual Tax Rate

The TCJA changed tax brackets, highest rate being 37%, from previous rates. Without further legislation, these will revert to their pre-TCJA rates post-2025, highest rate being 39.6%. Capital gains tax rates remain unaffected.

Corporate Tax Rate

The TCJA slashed the corporate tax rate from 35% to 21%. Though framed as a permanent shift, there are ongoing discussions about possible future adjustments to address fiscal needs.

Overall, these changes underscore the importance of forward-thinking tax planning.

For US citizens and domiciliaries, the lifetime estate and gift tax exemption for 2023 is $12.9M ($25.8M for married couples). Estate in excess of the exemption amount would be subject to 40% tax upon transfer.  After 2025, the exemption will fall back to $5M ($10M for married couples), adjusted for inflation, unless Congress enacts to extend the higher amount. The odds of any extension depend on which party controls the White House and Congress after the 2024 election.
Rather than banking on these uncertain chances, numerous affluent individuals are currently taking advantage of the existing lifetime estate and gift tax exemption. Moreover, some strategies employed by these individuals enable them to remove the assets from their estate without relinquishing control, utility, or the income to be generated by these assets.  Additionally, many of these strategies involve setting up a separate entity, a vehicle used to hold and transfer assets, which provides asset protection from potential creditors.  Let's introduce some of the strategies that the wealthy individuals use to preserve and safeguard their legacy.

Family Limited Partnership (FLP)

A Family Limited Partnership (FLP) is a legal entity used by families to manage and control their assets, including businesses, real estate, and investments. The structure involves the creation of general and limited partnership interests.  One of the primary benefits of using an FLP for estate tax planning is the ability to take advantage of valuation discounts. When transferring limited partnership interests to heirs, the value of those interests can often be discounted for lack of marketability and lack of control. This means that the assets inside the FLP might be worth, say, $1 million, but when transferred as a limited partnership interest, they might be valued for estate tax purposes at a discounted value, such as $700,000. This can significantly reduce the taxable estate.  Yet the grantors, as general partners of the FLP, retain the control over the assets in the FLP.

Grantor Retained Annuity Trust (GRAT)

A Grantor Retained Annuity Trust (GRAT) is an advanced estate planning tool designed to transfer appreciating assets to beneficiaries while minimizing estate or gift tax impact. The grantor transfers assets into the GRAT and retains the right to receive an annuity payment for a fixed term of years. At the end of the term, any remaining assets in the GRAT pass to the beneficiaries (usually family members) tax-free, as long as the grantor survives the term.

The present value of the remainder interest (what is expected to be left for beneficiaries) is subject to gift tax. However, by setting the annuity payments appropriately, the present value of the remainder interest can be minimized or even "zeroed out." This means the grantor can transfer a potentially significant future value without utilizing any of their lifetime gift tax exemption.

Grantor Retained Unitrust (GRUT)

A Grantor Retained Unitrust (GRUT) is another sophisticated estate planning tool similar in some respects to the Grantor Retained Annuity Trust (GRAT) discussed previously. However, while the GRAT provides for a fixed annuity payment, the GRUT provides for a payment that varies based on a fixed percentage of the trust's annually recalculated value.

When a grantor establishes a GRUT, they transfer assets to the trust and retain the right to receive an annual payment, which is a fixed percentage of the trust's current value. This payment is recalculated each year based on the new value of the trust assets. At the end of the trust term, any remaining assets are transferred to the named beneficiaries, typically the grantor's heirs.

When the GRUT is established, the IRS calculates the present value of the remainder interest (what's expected to be left for the beneficiaries). This amount might be subject to gift tax. However, like with the GRAT, the value of the remainder interest can be reduced by increasing the retained payment, possibly reducing the taxable gift when the GRUT is established.

Qualified Personal Residence Trust (QPRT)
A Qualified Personal Residence Trust (QPRT) is an advanced estate planning tool that can offer significant estate tax savings. When a residence is transferred into a QPRT, the value of the gift for tax purposes is discounted based on the term during which the grantor retains the right to live in the home. This can reduce the taxable size of the grantor's estate. Additionally, any appreciation of the residence's value after the transfer is locked into the QPRT, ensuring that future appreciation remains outside of the grantor's taxable estate. If the transfer value is below the grantor's available lifetime gift tax exemption, no gift tax may be due, and by the end of the QPRT term, if the grantor is still alive, the residence will be entirely excluded from their estate for estate tax purposes.

Grantor Trust

Grantor trusts are a type of irrevocable trust where the grantor retains certain powers or rights that cause the trust's income and/or principal to be taxable to the grantor, not the trust. The primary mechanism through which grantor trusts achieve estate tax savings revolves around the separation of income tax responsibility from the transfer of assets out of the grantor's estate. Here's how grantor trusts can help save on estate taxes:

When assets are transferred to a grantor trust, their value for gift or estate tax purposes is "frozen" at the time of transfer. Any appreciation in the value of those assets after the transfer will occur outside of the grantor's estate. If the assets are expected to appreciate significantly, this can result in substantial estate tax savings.

Qualified Terminable Interest Property Trust (QTIP)

The Qualified Terminable Interest Property Trust (QTIP) serves as a strategic tool for married individuals, particularly those in second or subsequent marriages, who want to ensure that their assets are eventually passed on to their own descendants (like children from a previous marriage) while still providing for their current spouse. Here's how the QTIP achieves estate tax savings and ensures the intended beneficiaries are the grantor's descendants:

The primary advantage of a QTIP trust is its ability to use the unlimited marital deduction. When one spouse dies and leaves assets to the QTIP trust, these assets qualify for the marital deduction, meaning that they can be transferred to the trust free of estate taxes. This allows the estate to defer estate taxes that would have been due on those assets until the surviving spouse's death.

The QTIP trust provides the surviving spouse with a "life estate" interest, meaning the surviving spouse receives income from the trust assets (and under some conditions, may also receive principal). Crucially, however, the surviving spouse does not have the power to determine the final beneficiaries of the trust. The deceased spouse, when establishing the QTIP trust, dictates who the remainder beneficiaries will be after the surviving spouse's death. This design ensures that, after the surviving spouse's passing, the remaining trust assets will go to the beneficiaries specified by the first spouse (e.g., the grantor's children from a previous marriage).

In situations where there's concern that a surviving spouse might remarry and potentially divert assets away from the deceased spouse's children or other intended beneficiaries, a QTIP trust provides assurance. The trust ensures that the final beneficiaries (e.g., the grantor's descendants) will receive the assets regardless of any subsequent marriages or changes in the surviving spouse's circumstances.

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Many might recall that due to the Economic Growth and Tax Relief Reconciliation Act of 2001, the estate tax was temporarily eliminated in 2010. This led to a humorous quip among professionals, labeling it the "prime year to pass away." Alas, neither the timing of our demise nor the intricacies of governmental fiscal policies, such as estate and gift taxes, can be dictated by us. As highlighted earlier, in 2023, U.S. citizens and domiciliaries have a lifetime exemption for estate and gift taxes set at $12.9M, and $25.8M for couples. Should an estate surpass this amount, a 40% tax rate applies. Notably, after 2025, the exemption is projected to reduce to $5M ($10M for married couples), adjusted for inflation, unless the higher limit is sustained by Congress. The fate of this potential revision heavily hinges on the political landscape post the 2024 elections. Given the intricate nature of estate tax, forward-thinking strategies are essential to protect one's accumulated wealth and legacy. Collaborating with well-versed experts in estate tax, like attorneys and CPAs, can guide you in distributing your assets in alignment with your intentions and making the most of the legal advantages available.