A Look Ahead: How the Latest Trends and the New Administration May Affect Chester County Businesses and Taxes in 2025

As the transition of leadership looms large, what is on the minds of the region’s business leaders?  Here’s a snapshot of some of the business trends, tax opportunities, and political policies that may impact business.

The Economy:

While “brain rot” may have been dubbed the 2024 Oxford University Dictionary Word of the Year, “tariffs” is the word that keeps many business leaders up at night. Designed as an incentive for consumers to opt for domestically manufactured goods, tariffs could put upward pressure on prices and interest rates and, at worst, spark a trade war that pushes growth and inflation higher. Companies should also keep watch on how the new administration’s proposed tax policies will affect tax liabilities. In some cases, good news may be on the horizon.

Office and Workforce Changes:

• Beyond politics, artificial intelligence (AI) has rapidly found its way into just about every industry sector, and its relevance for building efficiency, customer experience, data analysis and problem solving has been widely proven. The questions are how to leverage AI to the company’s advantage and what consequences will AI bring to the company, its customers and employees.
• Who knew that one day business casual would mean a sweatshirt, PJ bottoms and slippers? Remote work has flipped the dress code and the entire workplace culture on its head. And, it also has tax consequences. In Pennsylvania, for instance, if you have an out-of-state-employee that works from home, the employer is not required to withhold on the employee’s compensation. Businesses must keep a close eye on shifting logistics to stay in compliance.
• In 2024, shoppers spent a record-breaking $10 billion on Black Friday, and Cyber Monday topped $13 billion. It’s serious business, and states are becoming much more territorial about not leaving sales tax dollars on the table. In Pennsylvania, an online retailer that stores inventory at an in-state distribution center is currently required to collect PA sales tax, even if they sell through a third-party marketplace. As scrutiny grows, retailers should understand the sales thresholds, tax laws and restrictions to avoid penalties and setbacks.

Tax Issues and Opportunities:

• IRC Section 1031 Real Estate Exchange should prevail under Trump’s administration. Available to business owners or property owners (not personal property), IRC Section 1031 Real Estate Exchanges can be beneficial to real estate investors by enabling them to defer capital gains taxes on the sale of a property when the proceeds are reinvested into a similar property. While there is potential for substantial savings due to deferral of capital gains taxes, there are strict guidelines, which can be addressed by consulting a tax advisor.
• The new congress will hopefully address the Research and Experimentation (R&D) Tax Credit in 2025. R&D expenses have been capitalized and amortized since January 1, 2022. The R&D Tax Credit provides eligible companies with dollar-for-dollar cash savings for qualifying research activities, thus reducing their tax liabilities significantly. A company that develops new or improved products, processes, patents, or software could qualify and, if eligible, may be able to apply approximately 6% to 8% of annual qualifying R&D expenses against federal income tax liability.

Changing technology, employee circumstances, retail terms, and fiscal policies all can have tax implications for businesses. Staying abreast of trends and their potential financial consequences will keep businesses ahead of the curve, benefit from opportunities, and avoid pitfalls that can affect their fiscal health.

Rob Feenan, CPA, is a Taxation Shareholder at Fischer Cunnane Certified Public Accountants & Consultants who provides clients with comprehensive tax planning with an emphasis on tax minimization. He draws on more than 25 years of experience at multinational and regional accounting firms and serves clients over a wide range of industries. For support or questions, reach Rob at 610-431-1003 or email rfeenan@fischercunnane.com