Tax reform remains a burning platform for financial services

QuickLook Blog

Deloitte Tax LLP hosted its 10th Annual Financial Services Global Tax Planning Conference in New York City in June. Spanning two days, six plenaries, and 40 breakout sessions, the conference attracts hundreds of attendees from around the world, all eager to gain and share insights. Read our top conference take-aways.

August 7, 2018

A blog post by John Rieger, national tax managing partner, Financial Services Industry, Deloitte Tax LLP and Ted Dougherty, national tax managing partner, Deloitte Tax LLP

In keeping with prior years of our Financial Services Global Tax Planning Conference, day one content focused on financial institutions including banks, broker-dealers, and insurance companies, while day two content applied to the investment management and real estate sectors.

This year's event was particularly high energy as a result of the amount of change in the tax world. While tax departments are grappling with a number of complex issues right now—international regulations, reporting requirements, operating model pressures, and technology advancements—chief among them is US tax reform and its far-reaching impacts.

Read below for a run-down of our top conference takeaways.

The regulation roller coaster continues

While some of the financial services industry-related regulations have started to unwind under the Trump administration, global compliance standards may continue to be a potentially heavy burden on financial services companies. The lowering of Dodd-Frank Stress Testing (DFAST) thresholds may be the first of other potential Dodd-Frank regulation rollbacks (the fate of the Comprehensive Capital Analysis and Review/CCAR has yet to be determined) that could impact banks and financial firms and potentially spur growth in the industry. That said, the enforcement of foreign compliance statutes like the Foreign Account Tax Compliance Act (FATCA) and Common Reporting Standards (CRS) will likely keep firms on their toes to comply.

city towers

Tax reform sentiment is generally mixed and confusion abounds

The sizable corporate tax rate reduction, and tax reform overall, is viewed as a shot in the arm to financial institutions structured as C corporations. Generally speaking, the hedge fund and private equity sectors have been negatively impacted by the new rules, while real estate companies seem to have fared well. The myriad of provisions that lack detailed Internal Revenue Service (IRS)/Treasury guidance may leave many companies wondering how much the rate changes will be offset by deduction limitations, new income categories, etc. Figuring this out in time to meet near-term reporting requirements, and then understanding how it impacts longer-term strategy, is likely to be challenging. Taxpayers should be prepared for modeling, debating, and calling on specialists within and outside their organization to help them make the appropriate decisions.

all directions

The uncertainty can have an upside

Guidance from the IRS and Treasury has trickled out to date—and is likely to continue its slow drip thanks to IRS funding concerns and the new Office of Management and Budget review requirements for certain rules. In the meantime, taxpayers should continue to model and explore potential tax positions—including some that may not have appeared tax efficient under previous tax law. Consider whether your family office or partnership should convert to a C corp—a complicated and time-consuming analysis under the new tax rules. Acquisitive companies with foreign parent structures may want to explore establishing a US top/parent company given the new international provisions and interest deduction limitations.

navigate complexity

Flexible approaches are key

Existing systems like general ledger are not designed to track and process the data that may be required for many of the new provisions in the tax reform law. Companies will need to build frameworks that can flex to changing data sources, formulas, interconnections, and modeling scenarios—and can be updated as guidance is released. Insights offered in conference breakout sessions addressed process and technology focused on the following:

  • Identify the data you have now, work with it, and fine-tune it over time
  • Build a framework that is flexible and can accommodate multiple toggles and scenarios for comparison
  • Build in a financial reporting component that shows cash reporting and deferred tax impacts
  • Create a dashboard to visualize what you are modeling, impacts on the base model and the longer-term picture, and enables you to report out to business leader
overcome obstacles

Stay open-minded and be adaptable

In the midst of all this change and uncertainty, decisions still need to be made and deadlines met. With so many new rules and regulations—and so many ways to tackle them—taxpayers should focus on doing what they can with the information and tools they have available now. Modeling, staying on top of guidance and updates, and being prepared to pivot can help companies navigate the complex compliance challenges in this new world of tax.

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As used in this document, “Deloitte” means Deloitte Tax LLP, a subsidiary of Deloitte LLP. Please see for a detailed description of our legal structure. Certain services may not be available to attest clients under the rules and regulations of public accounting.

This document contains general information only and Deloitte is not, by means of this document, rendering accounting, business, financial, investment, legal, tax, or other professional advice or services. This document is not a substitute for such professional advice or services, nor should it be used as a basis for any decision or action that may affect your business. Before making any decision or taking any action that may affect your business, you should consult a qualified professional advisor. Deloitte shall not be responsible for any loss sustained by any person who relies on this document.

QuickLook is a weekly blog from the Deloitte Center for Financial Services about technology, innovation, growth, regulation, and other challenges facing the industry. The views expressed in this blog are those of the blogger and not official statements by Deloitte or any of its affiliates or member firms.

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