Tax reform under the impending Trump administration looks likely for 2017. “A Better Way,” a blueprint for tax reform introduced by Speaker of the House Paul Ryan on June 24, may well be the starting point. The blueprint contains very general proposals for tax reform, rather than specific statutory language.

This article addresses some of the main proposals for changing business-related tax provisions.

Reduce Rates and Expand the Tax Base

Under Ryan’s blueprint, the corporate tax rate would drop from the current top rate of 35 percent down to a flat 20 percent. Moreover, the corporate alternative minimum tax would be eliminated. The double taxation of corporate earnings (i.e., at the corporate and shareholder levels) would be reduced because individuals would be taxed on dividends (as well as interest and capital gains) and half the regular rates.

Recognizing that millions of the small businesses in the United States are sole proprietorships or flow-through entities, such as partnerships, LLCs or S corporations, business income derived by individuals through these corporate structures would be subject to a top rate of 25 percent.

The tradeoff for these reduced rates is the elimination of many deductions and tax credits. For example, subject to possible exceptions for financial companies, such as banks and insurance companies, the deduction for interest would be limited to interest income derived by a taxpayer. Additionally, the domestic production deduction would be eliminated.

Encourage Job Creation and Business Growth

In order to foster the creation of jobs and investment in business, the blueprint would provide for immediate tax write-off for the cost of tangible or intangible business property. Business property no longer would be depreciated/amortized over time.

Net operating losses no longer could be carried back under the blueprint, but could be carried forward indefinitely, and would be increased by an index to account for inflation.

A special business credit would be allowed to encourage research and development in the United States.

Move to a Territorial Base of Taxation

Controversy over tax inversions has grabbed many headlines in the last year. Amid proposed legislation that would curb more inversions, and IRS self-help in the form of regulations designed to thwart the tax benefits of structuring them, the blueprint would overhaul the international aspects of the tax code by moving to a territorial basis of taxation to remove the incentive to invert.

Under the proposed blueprint, dividends from foreign corporations would not be taxable to a U.S. corporate parent. In addition, U.S. corporations would be subject to tax at greatly reduced rates on dividends from foreign subsidiaries on earnings accumulated prior to the effective date of the law. Ideally, these changes, coupled with the reduced corporate income tax rate, would remove the incentive to invert, because business could be expanded outside the United States without the burden of a U.S. corporate income tax on dividends or deemed dividends. It should be noted that the blueprint does not specifically exempt gains from the sale of foreign subsidiaries.