The White House recently announced an accelerated legislative timetable for tax reform, aiming at completion toward the end of the year. While questions continue to swirl around the contents of the plan, it will likely include a reduction in the corporate tax rate, perhaps to the 20 percent rate Congress and the President were reportedly seeking earlier this year. This plan was released on September 27 and is now known as the “Unified Framework for Fixing our Broken Tax Code.”
Although there could be some good news for businesses, the prospect of adjusting tax processes in response to new legislation is causing some corporate leaders to “bite their nails,” according to a recent AccountingWEB article. According to Bloomberg BNA’s Survey of Corporate Tax Departments 2017 (which requires sign-up), 85 percent of senior tax executives see the potential overhaul of the tax code as the biggest challenge they expect to face during the next 12 to 18 months. In June, Bloomberg BNA also asked respondents to identify their biggest potential compliance challenges among seven possible outcomes of a tax code overhaul. Here’s how they ranked those challenges:
- Implementation of a border adjustment tax (BAT)
- Limits on interest deductions
- Implementation of a territorial system
- Significant changes to subpart F and the foreign tax credit rules
- Changes to filing procedures or to tax forms
- IRS restructuring
- Elimination of the corporate AMT
The good news is that a BAT appears to be off the table, at least for the near future. The bad news is that the fate of potential (real) tax reform and its outcomes, whether intended or unintended, remains intensely uncertain. Furthermore, the lack of any real detail and its over-all ambiguity to date, creates even more erratic business conditions and an unreliable economic environment.
The Bloomberg BNA survey findings happen to offer a clue for at least one way tax leaders can address their concerns amid this uncertainty. The most significant internal tax-management challenge, cited by 54 percent of respondents, was a “disconnect between compliance needs” and their “existing technology.” Eliminating that disconnect with better technology would reduce some nail biting, but more importantly, it will enhance readiness and increase confidence in internal procedures.
Please remember that the Tax Matters provides information for educational purposes, not specific tax or legal advice. Always consult a qualified tax or legal advisor before taking any action based on this information.