Top 10 tax-planning considerations for 2023

March 2, 2023 1:57 PM

The first quarter of this year finds businesses confronting plenty of tax and business challenges. Rising interest rates and inflation continue to plague the economy, and many companies are already girding for a potential recession.

The first step to forming a tax strategy should be understanding which issues will have the most impact. Grant Thornton's new tax guide aims to help businesses and investors identify their top tax considerations for 2023, which may include:

R&E amortization

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Congress last year failed to restore expensing for research and experimentation costs, and many companies are scrambling to assess the impact of amortizing these costs for 2022 financial statements and returns.

Public stock buyback tax

Public companies with stock buyback programs, M&A activity, and stock compensation plans are racing to understand the impact of a new 1% tax on redemption transactions in 2023.

Minimum book tax

A new corporate alternative minimum tax (CAMT) based largely on financial statement income will affect large multinationals with more than $1 billion in adjusted financial statement income.

Capital investment and debt financing

Congress last year failed to address many important expiring and expired tax provisions, meaning bonus depreciation will be reduced for property placed in service in 2023 and more companies could face limits on their interest deductions on 2022 returns.

Energy credits

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The Inflation Reduction Act extended, enhanced, and created almost $300 billion worth of energy incentives, offering benefits for the renewable sector, traditional energy and many other businesses with high energy needs or ESG initiatives.

Transfer pricing

Changing global tax rules and continued supply chain disruptions will keep transfer pricing the top tax issue for many multinationals, with advance pricing agreements growing in popularity.

Technology transformation

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Technology tools keep improving every year, making this a perfect time to look at how data automation, data transformation and analytics can make tax workflows faster and easier.

IRS funding

IRS headquarters in Washington, D.C.

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The administration has an unprecedented $80 billion in new funding that will allow it to transform how taxpayers interact with the IRS and dramatically increase enforcement activity.

SALT deduction workaround

An increasing number of states have enacted regimes allowing pass-through business owners to avoid the $10,000 cap on state and local tax deductions by electing to be taxed at the entity level.

Estate and gift planning

Estate plan, living will and trust documents

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Rising interest rate and economic volatility have made transfer tax planning more challenging. Taxpayers should also remember the current favorable estate, gift and generation-skipping transfer tax lifetime exclusions, which reached $12.92 million in 2023, are scheduled to be cut in half in 2026 without any new legislation. The IRS has issued guidance allowing taxpayers to leverage the current exemptions without fear of future changes clawing back the benefit. The rules provide that the estate tax can be determined using the exemption amount allocated to gifts made during the increased exemption period or the exemption amount at the time of death, whichever is greater. Taxpayers who don't take advantage of the increased exemptions with gifts before 2026 could forfeit the benefit of the increased exemptions.

For more advice, check out Grant Thornton's tax guide for 2023.