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It's moreso a way of setting up a AMT based on GAAP NI above $100 million. It's not a horrible idea IMO as a lot of these companies take massive deductions on stock comp which provides them with massive deductions. I do work on the corp tax side in case you're wondering. Plus a company that's generating $100 million in NI is pretty profitable and no longer what I'd call a struggling start up.
Rising Star
Stock comp deductions are different for tax purposes and align with when the employee picks up the income on their 1040. This is not a loophole.
There’s positives and negatives to that all over the place. But my main ones is it gets rid of bonus depreciation which is a big incentive for investment. Deferred income which the company may not have becomes taxable. But at the same time accrued expenses become deductible. could create repatriation problems.
Rising Star
Taxation of deferred income would actually be decelerated. For tax purposes, taxation of revenues can only be deferred up to 2 years, for GAAP it can be deferred much longer.
If people have to pay AMT, then so does everyone else.
You want a simple tax code? Just tax cash. Cash in is income. Cash out is deduction. Net number multiplied by 20% is your tax. Done.
And let's do the same for US GAAP. Two accounts on the Assets section and one in the Liabilities section and one in the Equity section. I.e., (1) Cash (2) Other Assets. (3) Total Liabilities (4) Total Equity. For the P&L just report Cash Receipts and Cash Disbursements to arrive at Net Income. Done.
You're welcome.
This would really depend on the ability of corporations to carry forward any AMT tax credits as individuals can. Companies can’t go on forever with massive GAAP income without paying federal income tax, so those benefits would just be harvested later. In the case that they can’t be carried forward, companies can just revise estimates such as depreciation to ensure their GAAP profits are low enough so that no AMT will apply.
I guess I should say minimize AMT. My biggest problem with this proposal is that these huge differences in taxable vs GAAP income is just due to the rules of GAAP. Who’s to say what the actual economic value of stock based compensation is? GAAP says one thing and the IRC says another, so of course we get different results. If these two arbitrary sets of rules happened to coincide, Amazon would remain everyone’s darling and nobody would know any different.