Sweeping New Tax Changes Enacted: What Taxpayers and their Advisors Need to Know About the American Jobs Creation Act of 2004

On October 22, 2004, the President signed into law one of the most significant packages of tax legislation in decades, the American Jobs Creation Act of 2004 (or Jobs Act). With the enactment of this new legislation, a U.S. regime of tax subsidies that has been deemed illegal by the World Trade Organization has been repealed and, in its place, a broad array of domestic and foreign tax provisions have been enacted that should provide very significant tax benefits for many U.S. businesses, particularly those engaged in either domestic production activities or cross-border trade. These favorable tax provisions will be accompanied, however, by the most sweeping anti-tax shelter provisions enacted in decades. Furthermore, many taxpayers may encounter significant complexity as they navigate the numerous transitional issues that the Jobs Act implicates.

In order to make taxpayers aware of the most important provisions of the Jobs Act, below we have set out (1) an Executive Summary of the new rules and (2) a very brief, non-technical overview of the portions of the Jobs Act most significant to the vast majority of Morgan Lewis’s clients. While the brevity of our summary will aid taxpayers in obtaining a quick overview of the new law, it should be remembered that many of these provisions are complex and will require substantial scrutiny if taxpayers hope to enjoy their benefits.

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