Autumn has arrived, and we still don’t know much about the specifics of U.S. tax reform. So what can we say about it? Not much, at least not definitively, but there are five general statements we can make about tax reform and how it might affect companies:
Tax reform takes a long time.Reform requires a carefully coordinated effort among the House, Senate and President. In fact, tax policy historians state from experience if the President is not a champion for tax reform, it is unlikely to occur. President Trump has sent a clear message that he supports tax reform, and Congress also seems committed. From this perspective, odds look good that some type of tax reform will happen, but it remains to be seen how soon. President Trump appears to be pushing hard to get Congress to get it done quickly.
Yogi Berra remains relevant.As Yogi Berra once said, “It ain’t over until ‘til it’s over.” At this point, tax reform hasn’t even really started yet. Yes, the President has laid out his high-level agenda and has indicated his support. And yes, there was a House “blueprint,” to get the talk going, but since the blueprint is not a bill, the clock hasn’t started.
There will be winners and losers.Tax reform has the potential to set up conflicts by industry, business type and/or size and could even pit businesses against individuals. In addition, there could be different outcomes for U.S.-based companies depending on where their parent companies are located.
History probably will not repeat itself.Past tax reform achievements are no indication of future success. What has worked in the past may not work today based on current economics, global politics and tax policy, public perception and other key factors.
The devil is in the details.While there seems to be consensus on the need for tax reform, and at least some agreement on a set of overarching principles (like a lower corporate tax rate), so far no one has been able to agree on the specific changes needed to achieve these and other outcomes. There isn’t even agreement yet on what the new, lower corporate tax rate will be, although we have been promised some more details before month’s end.
There are many proponents of achieving tax reform this year, but given the time we have left, the likelihood that everyone can agree on how to get there seems optimistic at best. This uncertainty is affecting corporate tax departments and their ability to plan and advise their businesses. While tax professionals remain hopeful that tax reform will occur this year, they remain in a wait-and-see mode, at least for now.
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.
Bernadette Pinamont is Chief Tax Officer – Income Tax providing insight regarding in-house corporate tax operations, working on the development of the company's income tax solutions. Bernadette is a seasoned tax executive and holds a B.S in Accounting and Juris Doctor from Seton Hall University. She is a licensed attorney and CPA.