In December 2017, the president signed into law H.R. 1, originally known as the Tax Cuts and Jobs Act. The new law (Public Law No. 115-97) represents the culmination of a lengthy process in pursuit of business tax reform over the course of more than 20 years.
The legislation includes substantial changes to the taxation of individuals, businesses in all industries, multinational enterprises, and others. Overall, it provides a net tax reduction of approximately $1.456 trillion over the 10-year “budget window” (according to the estimates provided by the Joint Committee on Taxation (JCT) that do not take into account macroeconomic/dynamic effects.
While we’re all aware of the politics surrounding this tax reform act, CFOs have been left to wonder how this will affect their own corporate tax practices.
In February 2018, The CFO Leadership Council and KPMG partnered to host ‘Tax Reform 101,’ a members-only webinar that reviewed pieces of the legislation that directly affect corporations, and actions that CFOs can and should take to prepare themselves.
Most notably, we learned:
- While there is a domestic tax corporate rate reduction to 21%, multiple changes have been made to the way you consider maximizing your deductions, interest expenses, and net operating losses.
- Further, the new domestic corporate tax rate, as well as other provisions within the bill, will have financial accounting implications, as different taxes will have to be re-evaluated and re-measured.
- This tax reform plan may also affect compensation packages (Section 162(m)) that are in excess of $1M, as well as performance-based compensation, deductibility of Meals & Entertainment, other small benefits, and more.
- And while there is a major shift in how we consider our domestic corporate taxes, this reform also presents a paradigm shift in how you consider international taxes, including your global branch offices, non-U.S. subsidiary profits, and more.
The expert team at KPMG was also kind enough to provide the following action steps for CFOs to consider:
KPMG offers a full handbook, titled Tax Reform – KPMG Report on New Tax Law, for CFOs who need a thorough reference for the tax changes coming. To download this handbook, as well as access an archive of all of our past CFOLC webinars, please go here.
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About The CFO Leadership Council
The CFO Leadership Council is dedicated to empowering senior financial executives to
realize success in their careers. We have 23 chapters in the US & Canada and will host 200+ live educational programs in 2018. (View calendar here) The topics will provide insights, best practices, and practical advice to help develop your leadership skill set. Find a chapter near you and join the conversation!