Wealth & Estate Planning

Article Sam Stephenson

The One Big Beautiful Bill Act (OBBBA), signed into law in July 2025, includes a wide range of tax and workforce provisions that will have meaningful impacts on petroleum distributors and convenience store (c-store) operators. Many of these changes create new opportunities to strengthen cash flow, invest in operations, and improve workforce retention. At the same time, some provisions may require careful planning to mitigate risks to demand and compliance. 

Tax Incentives for Business Owners 

Section 199A Deduction Expanded 
The OBBBA makes the Qualified Business Income (QBI) deduction permanent and increases it from 20% to 23% for pass-through income. This is especially beneficial for privately held petroleum distributors and c-store operators structured as partnerships, S corporations, or sole proprietorships. Owners will see meaningful tax savings at both the federal and personal level. 

Bonus Depreciation Returns 
Full expensing of qualified property is reinstated for assets placed in service after January 19, 2025. This means new fuel pumps, coolers, vehicles, and store renovations may be fully deducted in the year they are placed in service. Businesses should keep in mind that state-level depreciation rules may not conform to federal changes, creating potential differences to track. 

Expanded Section 179 Expensing 
The annual expensing limit under Section 179 increases from $1 million to $2.5 million starting in 2025. Combined with bonus depreciation, this provision gives operators greater flexibility when making significant capital investments. 

Interest Deduction Relief 
The interest limitation under Section 163(j) reverts to the more favorable EBITDA-based test, making it easier for leveraged businesses—especially those financing acquisitions or expansions—to fully deduct interest expense. 

Research, Compliance, and Reporting 

R&E Costs Immediately Deductible 
Domestic research and experimental (R&E) expenses can again be deducted immediately. For petroleum companies developing clean fuel blends or compliance technologies, this reinstated flexibility lowers the cost of innovation. 

1099 Threshold Increased 
Starting in 2026, the 1099 reporting threshold increases from $600 to $2,000. This reduces the administrative burden of issuing forms for small contractor or vendor payments—a welcome simplification for c-store operators with numerous small service providers. 

Workforce & Employee Benefits 

Payroll Overtime Deduction 
Between 2025 and 2028, individuals can claim an above-the-line deduction for qualified overtime pay (up to $12,500 for individuals, $25,000 for joint filers). Employers must report this information, with IRS guidance forthcoming. For operators managing high-turnover workforces, this may serve as an incentive for employees to accept additional hours while providing a modest retention boost. 

Student Loan Repayment Benefit 
Employers may now provide up to $5,250 annually in tax-free student loan repayment assistance per employee. This program can be an attractive benefit when recruiting and retaining younger employees in both petroleum operations and retail management. 

Estate & Succession Planning 

Estate Tax Exemption Raised 
The estate tax exemption is permanently set at $15 million per individual, indexed for inflation. For family-owned petroleum distributors and c-store chains, this significantly reduces the risk of estate taxes at transition and provides new opportunities for succession planning. 

Market Demand Considerations 

SNAP Reductions Could Impact Sales 
Cuts to Supplemental Nutrition Assistance Program (SNAP) benefits may reduce purchasing power for some c-store customers, potentially affecting in-store sales of food and beverages. Operators may need to reevaluate pricing, product mix, or promotions to offset lost demand. 

Energy-Specific Opportunities 

Clean Fuels Tax Credit Extended 
The Section 45Z clean fuels production credit is extended through 2029. With relaxed emissions thresholds, more fuels qualify for the credit, and eligibility is expanded to certain intermediary sales. This provision provides incentives for petroleum distributors to diversify into renewable and blended fuels. 

SALT Deduction Relief 

Finally, the OBBBA raises the cap on state and local tax (SALT) deductions from $10,000 to $40,000 through 2029. This provision offers significant relief for business owners in high-tax states, improving after-tax income. 

Key Takeaways 

The OBBBA represents a significant shift for petroleum companies and convenience store operators. On the positive side, business owners benefit from enhanced deductions, improved expensing provisions, and expanded workforce benefits. However, SNAP reductions and potential state-level differences in depreciation rules present new challenges to navigate. 

Now is the time to evaluate how these provisions affect your tax planning, capital investment strategy, and workforce policies. By proactively adapting to these changes, petroleum distributors and c-store operators can maximize tax savings, strengthen operations, and position their businesses for long-term success.  

If you have questions related to this topic, please contact your Dean Dorton advisor.  

Article Dean Dorton

By Matt Smith, CPA | msmith@deandorton.com and Elizabeth Leatherman, J.D., CPA | eleatherman@deandorton.com

Qualified Charitable Distributions

You can make a qualified charitable distribution (QCD) by directly transferring funds from your IRA custodian to a qualified charity. QCDs can be counted toward satisfying required minimum distributions (RMDs) for taxpayers over age 70 1/2.

A taxable IRA distribution increases the recipient’s adjusted gross income (AGI), which may increase income taxes and Medicare premiums. In the case of a QCD, the distribution is not included in AGI, and no charitable gift deduction is allowed. In many cases, the substantial increase in the standard deduction levels in recent years has resulted in limited or no tax benefits from charitable contributions. Consequently, QCDs have become more useful as a tax savings tool.

Consider the following two examples in which a QCD is preferable to receiving an RMD and donating a like amount to charity.

Example 1

Facts Tax results Primary reasons for the tax savings from the QCD
  1. Single person, age 73
  2. RMD of $14,000
  3. Social security benefits of $30,000
  4. Other ordinary income of $30,000
  5. Charitable contributions of $14,000 and minimal other itemized deductions
  1. Federal and Kentucky income tax without QCD – $8,579
  2. Federal and Kentucky income tax with $14,000 QCD – $4,710
  3. Tax savings from QCD – $3,869 (45%)
  1. Minimal benefit from the charitable contribution deduction if no QCD
  2. More social security would have been taxable due to the increased AGI if no QCD

Example 2

Facts Tax results Primary reasons for the tax savings from the QCD
  1. Married couple filing jointly, each age 75
  2. RMD of $80,000
  3. Social security benefits of $50,000
  4. Capital gains and qualifying dividends of $100,000
  5. Other ordinary income of $150,000
  6. State and local tax deductions of $10,000
  7. Charitable contributions of $80,000
  1. Federal and Kentucky income tax without QCD – $62,478
  2. Federal and Kentucky income tax with $14,000 QCD – $55,710
  3. Tax savings from QCD – $7,361 (12%)
  1. Reduced benefit from the charitable contribution deduction if no QCD
  2. More investment income subject to the 3.8% net investment income tax due to the increased AGI if no QCD

In limited situations, using a QCD may cost additional taxes. Consider the following example:

Example 3

Facts Tax results Primary reasons for the tax increase if a QCD is made
  1. Married couple filing jointly, each age 75
  2. Kentucky tax-free bond interest of $35,000
  3. Capital gains and qualified dividends of $25,000
  4. Wife receives a 401(k) plan distribution of $100,000
  5. Husband has a $50,000 RMD from his IRA
  6. Itemized deductions, other than charitable contributions, of $18,000 of home mortgage interest and $10,000 of state and local taxes
  7. Charitable contributions of $50,000
  1. Federal and Kentucky income tax without QCD – $32,667
  2. Federal and Kentucky income tax with QCD – $33,805
  3. Tax cost from QCD – $1,138 (3%)
  1. Kentucky provides an exclusion from AGI of up to $31,110 of retirement plan income. Had the QCD not been made, the couple would have had a $50,000 charitable contribution deduction and would have been taxed by Kentucky on only $18,890 ($50,000 less $31,110) of the RMD

Note that our examples may suggest that all of an IRA owner’s RMD may need to be distributed to charity to take advantage of the potential benefits of qualified charitable distributions. That is not a requirement. An IRA owner may distribute only a portion of the RMD to charity as a QCD, taking the balance as a taxable distribution.

Several requirements must be followed to properly make a QCD. Please consult your tax advisor to help you determine if this could be a good tax planning tool in your situation.

This article was originally published in News & Views (Dean Dorton’s quarterly newsletter).

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Article Dean Dorton

FICA base
Annual compensation to which Social Security tax applies is $142,800 for 2021 (up from $137,700 in 2020).

Social Security benefits
Individuals who are drawing Social Security benefits before attaining full retirement age will begin to suffer reductions in payments if they have earned income exceeding $18,960 in 2021 (up from $18,240 in 2020).

Adjustments for retirement accounts
The maximum annual addition to a defined contribution plan is increased to $58,000 for 2021 (up from $57,000 for 2020), and the corresponding maximum amount of compensation that can be considered as the base for retirement plan contributions is $290,000 for 2021 (up from $285,000 for 2020).

Individual Retirement Account (IRA) limits, elective deferral limits, and catch-up contribution limits have remained the same for 2021. So, even though the total retirement plan contribution has increased to $58,000, the maximum amount individuals can elect to contribute to employer-sponsored plans remains $19,500.

Year IRAs SIMPLE IRA Plans Other Employer Plans
Annual Contribution Catch-Up Contribution Elective Deferral Catch-Up Contribution Elective Deferral Catch-Up Contribution
2020 $6,000 $1,000 $13,500 $3,000 $19,500 $6,500
2021 $6,000 $1,000 $13,500 $3,000 $19,500 $6,500

Kentucky’s pension income exclusion
The amount of retirement income excludable from tax in Kentucky remains $31,110 for 2021.

Health savings accounts
The limits on contribution deductions for 2021 are $3,600 for self-only coverage (up $50 from 2020) and $7,200 for family coverage (up $100 from 2020). The additional “catch-up” contribution allowable for those age 55 or older remains $1,000.

Health flexible spending arrangements
The maximum voluntary employee salary reduction for employer-adopted FSAs (flexible spending arrangements) is $2,750 for 2021 (unchanged from 2020).

Estate tax
Federal estate, gift, and generation-skipping taxes will apply to cumulative subject transfers exceeding $11,700,000 in 2021, up from $11,580,000 in 2020.

Gift taxes
The annual exclusion for gifts per donee remains at $15,000 for 2021. The exclusion for gifts given to non-citizen spouses is increased to $159,000 (up from $157,000 in 2020).

Nanny tax
Cash wages paid for domestic service in the employer’s home of less than $2,300 are not subject to FICA in 2021 (up from $2,200 in 2020).

This article was originally published in News & Views (Dean Dorton’s quarterly newsletter).

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Article Dean Dorton

By: Doug Dean, CPA | ddean@deandorton.com and Elizabeth Leatherman, CPA, JD | eleatherman@deandorton.com

While news about the pandemic and all the ways it is impacting us dominate our daily lives, those who give attention to the future may be able to find some attractive wealth transfer opportunities. The combination of depressed asset values and extraordinarily low interest rates suggests certain potentially effective strategies.

Brief discussions of some of these strategies follow:

Grantor Retained Annuity Trust (GRAT)

A GRAT involves a transfer to a trust with the transferor retaining an annuity payment from the trust for a specified time period, usually two to ten years. The annuity is set at an amount computed to return to the transferor the value of the asset(s) transferred to the trust (at the time the trust is funded) plus an investment return. Each month the IRS publishes an investment return rate (the “7520 rate”) that it is assumed the GRAT will realize over the GRAT’s term. For June, the rate is an exceptionally low 0.6%. Because the annuity’s value (according to the IRS) at the time the GRAT is funded is the same as the value of the property transferred to the GRAT, no gift results. However, if the return on the GRAT’s property exceeds the 7520 rate over the GRAT’s term, value (possibly considerable value) passes to the next generation or trusts for their benefit when the GRAT terminates. As you probably can discern, the greater the investment return during the GRAT’s term, the greater the amount passing transfer tax free when the GRAT terminates.

The following table shows the amount that can be transferred at the GRAT’s termination using the June 7520 rate; two and, alternatively, ten year GRAT terms; a GRAT funded with $1 million; and an assumed 10% total return on the GRAT’s property over the GRAT term:

GRAT Term Annual Annuity Total Annuity Payments Value at Termination
2 years $504,515 $1,009,030 $150,518
10 years $103,329 $1,033,290 $946,941

Gifts

If you believe currently depressed asset values are not representative of future higher values, making gifts now may be a good means of efficiently transferring wealth. Gifts have the effect of transferring future appreciation from the donor’s taxable estate. Gifts not exceeding $15,000 per donee per year (annual exclusion gifts) do not consume transfer tax exemptions. Gifts with values exceeding those qualifying for the annual exclusion reduce the exemption available, which for this year is $11.58 million. This exemption is indexed for inflation through 2025, then under current law is reduced by one-half beginning in 2026. Owners of substantial wealth will want to consider the prospects of a reduced exemption in their transfer tax planning.

When an owner decides to make a gift, an important consideration is what property to transfer. Among the main considerations are:

  • transferring assets believed to have the greatest appreciation potential;
  • transferring assets with relatively low gain (in order to benefit under current law from a stepped-up-basis for assets retained until death rather than transferred by lifetime gift); and
  • the impact on the owner’s income of giving away assets with different yields.

Low Interest Loans or Sales

Just as the 7520 rate is extraordinarily low currently (0.6% in June), so are the Applicable Federal Rates (AFRs) for loans. Effectively, loans made at or above the AFR rate will not result in any imputed interest that would be treated as a gift. For AFR purposes, tax law provides three categories of term loans: short (less than three years), mid (three to nine years), and long (nine or more years). For loans made in June (AFR rates are subject to monthly adjustments), the AFRs are:

Short 0.18%
Mid 0.43%
Long 1.01%

With interest rates being so low and asset values being depressed, loans the proceeds of which the borrower (usually a descendant of the lender or a new or existing trust for a descendant) can use to make investments or reduce higher cost debt have the potential to efficiently transfer wealth.

Just as low-interest loans may be an attractive wealth transfer strategy, so also can be a sale to a family member. Capital gain from a sale of appreciated property may be an obstacle to this strategy, but a sale to a trust which has a feature that makes it a grantor trust for income tax purposes can overcome this obstacle.

These are just some of the features of a few strategies that deserve consideration under current circumstances. We are glad to discuss your planning with you.

Doug Dean, CPA | ddean@deandorton.com
Elizabeth Leatherman, CPA, JD | eleatherman@deandorton.com

Article Dean Dorton

The Department of Labor (DOL) issued a final rule on May 21, 2020 that establishes a new voluntary safe harbor for retirement plan administrators who want to use electronic media, as a default, to furnish covered documents to covered individuals, rather than sending potentially large volumes of paper documents through the mail. Retirement plan administrators who comply with the safe harbor will satisfy their statutory duty under ERISA to furnish covered documents to covered individuals. The new safe harbor permits the following two optional methods for electronic delivery:

  • Website Posting. Plan administrators may post covered documents on a website if appropriate notification of internet availability is furnished to the electronic addresses of covered individuals.
  • Email Delivery. Alternatively, plan administrators may send covered documents directly to the electronic addresses of covered individuals, with the covered documents either in the body of the email or as an attachment to the email.

The new safe harbor is effective 60 days after its publication in the Federal Register (July 20, 2020). Plans that rely on the new safe harbor will be able to eliminate significant materials, printing, and mailing costs associated with furnishing printed disclosures. In addition, the DOL as an enforcement policy, will not take any enforcement action against a plan administrator that relies on this safe harbor before that date, which provides flexibility and may reduce administrative burden on employers and pension plan service providers during this unprecedented time.

DOL Final Rule

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Assessing your business to be ready for a comeback.

I don’t want to be the guy who is always trying to make lemonade when life throws a lemon. I also do not want to minimize the severity of the COVID-19 pandemic. However, I do have to point out that the COVID-19 pandemic presents many businesses a unique opportunity to restart in a stronger position than they were in prior to the pandemic. The business environment that will exist once the effects of COVID-19 are diminished and social restrictions are lifted may be different from what you were accustomed to. Businesses need to start preparing to capitalize on new opportunities to grow and strengthen their operations. Businesses that have the self-awareness, proper team, and clear focus can position themselves to thrive as the world finds a new normal. Here are ten ideas to make your business better.

10 Ways to Make Your Business Better PDF
1. Be honest about your business strategic strengths and weaknesses

Where does your business thrive? In what areas should your business deliver world class / best-in-class service? Where is your business only average, or below average? Were staple revenue streams showing some signs of decline?  What pain points have you felt for years but have never dealt with (those will still be there post-pandemic)? Are there additional revenue streams, products/services that need to become a focal point? Is your overall business being handicapped by under performing segments? If operations have been idled due to the pandemic, consider the possibility that some segments of your operations should be closed indefinitely. Businesses should use this economic slowdown to understand the points of leverage they have over their competitors and those that will be differentiators post-pandemic.

2. Understand the business environment and what has changed

The post-pandemic business environment may look very different from the pre-pandemic business environment. The world made a very rapid adjustment to social distancing. Millions of workers have been logged into their workspace from home for weeks now, many for the first time ever, and many are surprised to find they like it. Flights have been grounded forcing the sales-force and consultants to interact with their clients and teams virtually. The one-on-one interaction that many businesses were accustomed to has been replaced by telecommuting. Businesses may find that they no longer need the corporate office space that was once idolized, nor do they need the robust retail space to serve customers that have grown even more accustomed to online retail.

Businesses reliant upon gathering of individuals (hospitality, entertainment, travel, food service, sports to name a few) need to be aware that social distancing has forced customers into their homes for significant amounts of time, with limited trips of any kind, and an inward focus on natural community to meet many needs. Also, the realization that many basic goods and services can be met online (think telehealth, religious services from the family living room, Google Classroom and food delivery) has fostered a consumer “cocooning” effect. Consumers have accepted being restricted to their home. Also, expected post-pandemic health anxiety (avoidance of handshaking, large groups, unnecessary business travel), as seen in post-pandemic China, further adds complexity to the consumer environment businesses will face.

3. Understand your opportunities – customers/services

After doing a thorough analysis of your business (pre-pandemic) and giving consideration towards what the post-pandemic business environment will look like, businesses need to carefully examine their opportunities. How can they re-engage with both existing and new customers? Businesses seeking to enhance their value and market share need to align their obtainable strengths (the differentiators that set them apart from competitors) with the opportunities that will be in high demand post-pandemic. Understanding opportunities in the post-pandemic economic may mean:

  • Shifting from physical presence to an online retail presence
  • Reassigning team members to emphasize new or different services or products
  • Recruiting people to the business with skill sets that have never been required
  • New strategic alliances to protect the supply chain, secure access to capital
  • A marketing shift to create a new public persona

Businesses must also consider that the economy may re-open in stages. Each stage may have its own opportunities and life cycle. Businesses must consider its timing as it pursues post-pandemic opportunities and plan accordingly.

4. Know your team

Most businesses are only as good as the team they employ. To maximize identified strengths or potential strengths, to navigate the post-pandemic business environment and to capitalize on upcoming opportunities businesses must have a strong cadre of team members to support the mission. Businesses must identify the key roles that will be crucial for their success, identify the skills required for those roles, and do an inventory of their organizational structure to identify any roles or skills that are lacking. Businesses also need to consider opportunities to shift pre-pandemic responsibilities between team members to capitalize on under-utilized skills or abilities. Businesses may need to consider outsourcing non-essential activities such as accounting, human resources, and marketing to free internal resources and gain access to external resources. Lastly, businesses need to consider their succession plan.  Do you have a plan in place to transition key roles and responsibilities if needed? Is your business protected from the unexpected loss of a key team member?

5. Know your needs – Evaluate your supply chain

Consumers have benefited from the global economy since the Reagan presidency. The global economy brought global supply chains which emphasized efficiency above all else. The COVID-19 pandemic has revealed the risks assumed by over dependence on global supply chains. Businesses will likely reconsider the emphasis on efficiency and explore options for supply chain reliability and control through domestic options. This may lead to re-shoring of international manufacturing as losses in the short term are outweighed by the risk of efficiency. This creates opportunities for local industries that have been impacted by the import economy but will require businesses reliant on international suppliers to manage costs and supply chain relationships.

6. Know your community – Key relationships

To be stronger in the post-pandemic economy, businesses need to identify those external relationships that will be key in helping the business succeed. This includes financing relationships, key stakeholders, significant vendors, legal counsel, tax/accounting, human resources, real estate and on and on. Businesses should be proactive in communicating any strategic initiatives with its key relationships to ensure alignment. This may include replacing some relationships with new participants, adding new types of relationships, and having difficult conversations with a relationship that needs to bring more value.

7. Prioritize your marketing plan

Most business’ marketing and sales funnels have been smudged, if not erased. Marketing efforts will need to be rebooted. Businesses should not assume customers will automatically return. Businesses should not assume prospective customers are exactly where they were in the sales cycle pre-pandemic.  Marketing efforts need to be tailored to a new business landscape sensitive to an economy that has been quarantined for many weeks. In some cases, businesses will need to work to re-build awareness of its services and products, especially new services or products. As always, the timing of the marketing strategy will be essential.

8. Plan for next time

The medical community has identified an unsettling trend. From 1900 to 2000, the World Health Organization identified 4 pandemics (including AIDS/HIV, which is ongoing). Since 2002, the World Health Organization has identified 5 pandemics (excluding AIDS/HIV, including COVID-19 which is ongoing). Businesses need to be prepared for future situations such as the COVID-19 pandemic. Factors to consider when building such a contingency plan:

  • Team member safety
  • Access to cash or capital
  • Continuity of services
  • Communication protocols
  • Inventory / supply stockpile
  • IT infrastructure integrity/security
  • Data availability

9. Establish the vision for what the business will be

It may be hard to see beyond the imminent threat of the COVID-19 pandemic, but successful businesses see beyond the dark horizon and envision what can become in the long term. This vision will serve as a guiding star as short and mid-term challenges are navigated. The world is changing more rapidly than it ever has. Future growth and opportunities come from seeds that are planted today. All business analogies ultimately point towards Apple, so consider Apple 20 years ago. The dotcom bubble was crashing and the Apple computer business was failing. While the traditional Apple business was in a pinch, the leadership of Apple was envisioning the iPod and iPhone, which would go on to alter life as we know. If you struggle to cast a vision for your business, start with a perspective of gratitude for the fact that your business is surviving and build your vision from there.

10. Communicate… then communicate some more

If a mighty tree falls in the woods with no one to hear, does it make a sound? I have no idea. I do know that a business with a great plan but a failure to communicate it effectively has set itself up for loss. As businesses build their plan and formalize their identity for the post-pandemic era, they must communicate effectively. Key team members and strategic partners must understand your business’ intentions. Short, mid and long-term plans need to be communicated to provide guidance in the day-to-day and to provide stability over the mid and long-term time frames. Communicate how business is going to be different going forward. Communicate new cultural guardrails and expectations. Empathize with team members as they adjust to a new normal but be rational about the facts of the situation and the opportunities ahead. Instill confidence in team members by letting them be part of the long-term plan.

These are indeed interesting times, but these are times that businesses can use to add value to their future operations. Businesses that engage the new environment, are sensitive to their current and future customer needs, and that can be agile enough to deal with the challenges the restart will bring should be positioned for long term success.

We would be thrilled to talk to you about your business. If you would like to brainstorm more about how to strengthen your business for a successful post-pandemic relaunch, please contact Justin Hubbard at jhubbard@deandorton.com.