Corporate Tax Execs Enthusiastic About New Tax Law

Implementing changes that resulted from the new tax law will be the chief tax issue for the vast majority of U.S. tax officials this year, BDO USA reported Tuesday.

In a survey of 150 tax executives at public companies with revenues of more than $1 billion, 72% of respondents said they worried about putting into effect tax code changes at the federal level, and 19% expressed the same concern about changes at the state and local levels.

At the same time, tax officials in the survey purported to like what they saw in the tax overhaul. Seventy-eight percent said they expected the new law to have a positive effect on their firm’s net income.

Their optimism was the result of several new tax provisions, in particular the 14-percentage-point reduction in the corporate rate, BDO said. Virtually all respondents reported that the reduction would have a greater effect on their business than other key changes.

The reduction also showed that some wishes can come true. In BDO’s 2017 survey, 40% of tax executives cited a lower corporate tax as the change they most wanted.

In addition, 73% of respondents in the 2018 survey said the mandatory repatriation of foreign earnings would affect their business, and 45% said the effect would very likely be significant.

Among other changes to the tax code are tweaks to various provisions relating to the federal research and development tax credit, which will especially affect the 81% of companies that already use R&D credits in some capacity.

The report said companies could expect to feel tax reform effects differently, based on factors such as their sector, legal structure, capital structure, geography and business objectives.

Businesses, it said, will need to strategize around the untested tax code to decide where wins, losses and opportunities may lie, and model how the “butterfly effect” of change may affect their company.

“Given the complexities of domestic and global tax regimes, seemingly small changes in business approach can have wide-reaching consequences to the various tax liabilities of a business,” Matthew Becker, managing partner of BDO USA’s national tax office, said in a statement.

“Examining a company’s total tax liability by considering all of its various tax dynamics is now a necessity for businesses looking to survive and thrive during this time of intense change.”

Multinational Tax Reform