The President and Congress are off and running with their agenda for change. How will small businesses fare in this flurry of activity? Likely some changes will be favorable while others may present challenges. And some changes may be difficult to deal with in the short run but present opportunities in the long run. For example, if tariffs are placed that affect what you pay for inventory, it can be problematic in the short run. However, domestic manufacturers may wind up providing similar items for you, hopefully at even lower prices. There are many, many areas that could see changes. Here are some brief thoughts on what might or probably will happen in a few areas.
End to BOI reporting
The Corporate Transparency Act (CTA) created Beneficial Ownership Information reporting for businesses that are not exempt from this requirement. The constitutionality of this reporting was challenged in court, resulting in the imposition of a nationwide injunction. An appellate court lifted it but then reinstated it. On December 23, 2024, the DOJ filed an emergency application with the U.S. Supreme Court asking that the injunction be lifted while an appellate court determines whether the CTA, which created BOI reporting, is constitutional. On January 23, 2025, the Supreme Court issued a stay, effectively lifting the nationwide injunction, but there are other cases pending. In view of ongoing litigation, as of January 24, 2025 (the day after the Supreme Court ruling) FinCEN still says registration is voluntary.
This legal wrangling can all become moot if Congress enacts Big Brother Overreach Act (H.R. 425), which would repeal the CTA. Many small business advocacy groups, include the SBE Council and NFIB, support this.
Rollback on administrative changes related to workers
Small businesses face an ever-increasing list of rules with which they have to comply or face penalties. These rules are created by federal departments and agencies (in addition to state and local rules not discussed here). The prior administration supported a number of rules that may be reversed under the current administration. Here’s a sampling of rules that could be changed:
- DoL’s final rule on worker classification. It revised the analysis for determining whether a worker is an employee or independent contractor under the Fair Labor Standards Act, replacing a rule that was created under the first Trump Administration. A return to the former analysis could occur.
- FTC’s ban on noncompete agreements. Currently, there is an injunction in effect, pending the outcome of an appellate court ruling. The FTC’s rule could be withdrawn.
- NLRB’s final rule on fair choice-employee voice gave ability to establish a bargaining relationship through voluntary recognition and more. The rule essentially reversed 3 policies under the first Trump Administration. A return to the former policies could occur.
Tax changes
Federal tax changes are coming. Exactly what they’ll be and when they’ll be finalized remains to be seen. There is a hope to have this done in April, but I’m not optimistic; Congress has a track record of last-minute actions. Will we see legislation by the fall? In December?
New rules. It seems that Congress is largely focused on extending the tax rules created by the Tax Cuts and Jobs Act of 2017, which are scheduled to expire at the end of 2025. Still, there are rumblings about additional changes. For example, there’s a proposal to drop the corporate tax rate from the current 21% to 15%. Would pass-through entities want to become C corporations to take advantage of this low rate on profits? Another proposal would end the tax on tips. Taxes aside, could this rule increase minimum wage costs to employers?
Retroactive changes. Several current tax rules that changed in recent years have attracted criticism and could be returned to their former selves. Examples:
- Bonus depreciation. This first-year write-off for the cost of equipment and machinery, qualified improvement property, and some other qualified property, was 100% of the cost before 2023. It declined to 80% in 2023 and 60% in 2024; it’s 40% in 2025. It could be back to 100%, perhaps even retroactive to earlier years.
- Write-off for R&D costs. Before 2021, the cost of research and experimentation, commonly referred to as R&D costs, could be expensed (i.e., deducted in full up front). Starting in 2022, such costs must be deducted ratably over a period of not less than 5 years. There’s a push to return to expensing. Again, if this comes to pass, will it be retroactive?
Fewer audits. By executive order, there’s a hiring freeze at the IRS. This could mean less personnel available to conduct audits. But that doesn’t mean business owners can become lax about their taxes. There will certainly continue to be some audits and owners need to do everything possible to avoid being selected for examination or, if unlucky in this regard, at least be sure to have all the necessary documentation to back up positions taken on a return.
Final thought
“The secret of change is to focus all of your energy not on fighting the old, but on building the new” — Socrates
Be prepared to adapt to changes that are sure to come. Hopefully, they’ll make it easier (and less costly) to run your business and help you to become more profitable.
For related information on federal legislation, see this list of blogs here.
