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Analysis

The impact of US tax reform year one

Learning from the past to manage future tax reform implications

Trying to understand and manage the impact of US tax reform legislation has been a time-consuming and often difficult process for many organizations. Heading into the new year, leaders from across Deloitte Tax LLP share their perspectives on the legacy of the 2017 Tax Act to date and its potential to further reshape the economic and business landscape.

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Looking back on US tax reform effects

To say that the first full year under the new 2017 Tax Act1 has been challenging is an understatement.

Many organizations are still coping with the sheer volume of tax code changes, as well as the complexity those changes brought about. The initial elation over the 21 percent corporate tax rate was soon tempered by the reality of some of the offsets.

US tax reform year one

As we look to the year ahead, leaders from across Deloitte Tax LLP (Deloitte Tax) share their insights on the impact of US tax reform and its potential implications for the economy and the business community moving forward.

1 Unofficially cited as the Tax Cuts and Jobs Act of 2017, but officially titled as “An act to provide for reconciliation pursuant to titles II and V of the concurrent resolution on the budget for the fiscal year 2018.”

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As we look to the year ahead, leaders from across Deloitte Tax LLP (Deloitte Tax) share their insights on the impact of US tax reform and its potential implications for the economy and the business community moving forward.

tax-act-stages-of-response.jpg (1368×589)

As we look to the year ahead, leaders from across Deloitte Tax LLP (Deloitte Tax) share their insights on the impact of US tax reform and its potential implications for the economy and the business community moving forward.

tax-act-stages-of-response.jpg (1368×589)

As we look to the year ahead, leaders from across Deloitte Tax LLP (Deloitte Tax) share their insights on the impact of US tax reform and its potential implications for the economy and the business community moving forward.

tax-act-stages-of-response.jpg (1368×589)

As we look to the year ahead, leaders from across Deloitte Tax LLP (Deloitte Tax) share their insights on the impact of US tax reform and its potential implications for the economy and the business community moving forward.

Policy perspective: Tax reform implications for the economy

A year in, both supporters and critics agree it’s far too early to say conclusively whether the impact of US tax reform has met its intended goal of boosting the economy. Many of the law’s changes will take time to manifest themselves and there are several environmental factors that will make it difficult to say with certainty what the tax reform effects have been on the economy. With those important caveats in mind, we can look at key indicators—wages, workforce, business investment, and economic growth—to consider perspectives of both bill supporters and its critics.

Rochelle Kleczynski on 2019 tax reform challenges. See below for more insights.

Practice leader insights on the impact of US tax reform

From the policymakers in Washington to the public and private organizations who spent much of the year working to understand the legislation’s impact, Deloitte Tax’s practice leaders reflect on the 2017 Tax Act—the good, the challenging, and the complex.

Looking forward: Jon Traub shares insights on tax policy

Looking forward: Tax policy

As we prepare for the incoming 116th US Congress—with Democrats controlling the House of Representatives and Republicans still holding the White House and the Senate—many are wondering whether policymakers will reach across the political aisle to secure some bipartisan achievements. Looking at the platforms of incoming House Democrats and President Trump, there appear to be some areas of overlap, notably on issues tied to trade policy, prescription drug pricing, tax cuts for “the middle class,” and infrastructure investments.

Developments in the following three areas have the potential to influence economic, policy, and business developments in the coming months and years and may depend little on whether there is cooperation between the White House and Capitol Hill.

  • Regulatory policy: The use of executive orders to rollback regulations is likely to continue—potentially in areas such as labor, health, and environmental policy.
  • Treasury guidance/rulemaking: Treasury is highly motivated to provide the certainty needed for implementation of the 2017 tax law. Watch for the agency to use its regulatory authority to the maximum extent.
  • Trade: Federal law vests the president with broad powers to regulate trade, and it seems likely that President Trump is prepared to continue to use that authority in ways that may have unpredictable and far-reaching impacts on US-based business and consumers.

The year ahead is unlikely to bring much predictability to taxpayers. Closely tracking developments in Washington and at the Treasury is essential in a moving-target environment like the current one, as is analyzing the potential options and their impacts. But perhaps what is needed most in the coming months and years is flexibility and patience.

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Top considerations for managing future tax reform implications

Without a clear picture of how politics and policy will play out in the coming months and years, how can companies transition from a focus on tax reform to a plan for their new tax reality? Our Deloitte Tax practice leaders share their insights on developments to watch and steps to consider in 2019 and beyond.

Bring your tax people into your organization’s technology transformation efforts—whether it’s a cloud, robotic process automation, or analytics. At a time when the tax is a front-and-center business concern, this is the time for you to advance the needs and elevate the profiles of the tax department. – Nathan Andrews, Tax Management Consulting practice leader, Deloitte Tax LLP
Don’t lose sight of your planning needs, even as uncertainties remain. It’s important to keep your eye on the long-term and prepare your organization for the realities of the new tax environment. – Fiona Chambers, Passthroughs National Tax Reform leader, Deloitte Tax LLP

As they work through the conformity process, state tax policy-makers may be willing to pursue potentially transformative tax policy reforms rather than just layering on federal tax provisions. This means tax department capabilities will need a framework for anticipating and addressing change. – Valerie Dickerson, Multistate Tax group leader, Washington National Tax, Deloitte Tax LLP
Analyzing the effects of changes to meals and entertainment, travel, and mobility rules are likely to remain an area of focus as many companies try to formulate compliance policies that keep the costs of doing business in check while meeting the key needs and expectations of employees and clients. – Elizabeth Drigotas, Global Employer Services group leader, Washington National Tax, Deloitte Tax LLP
Qualified opportunity zones could emerge as a promising new investment vehicle for deferring the taxation of capital gains from a variety of sources—not just real estate. – Bob Kilinskis, Federal Tax Accounting practice leader, Washington National Tax, Deloitte Tax LLP

During the first half of 2019, we should get a clearer sense of how challenging data collection and management are likely to be for many companies. Efforts to identify and collect the right data for the new provisions and calculations may prove more effective than originally expected—or companies could find themselves with a larger problem to address. – Rochelle Kleczynski, National Tax Reform leader, Deloitte Tax LLP

Despite the attention around the impact of certain provisions, try not to view tax as “helping” or “hurting” your organization, but rather as a key consideration in your overall business strategy planning. This perspective may help you see individual tax decisions as part of the larger and more important whole. – Wolfe Tone, National Tax managing partner of Deloitte Private, Deloitte Tax LLP
The unpredictability of final regulations implementing the 2017 Tax Act and future policy developments are likely to result in continued uncertainty. In the absence of a more prescriptive approach, companies may want to focus on building flexibility in their analysis and planning, honing their proactive and reactive capabilities, and preparing their internal teams and third-party partners for the pace and intensity of work that is still to come. – Chris Trump, International practice leader, Washington National Tax practice, Deloitte Tax LLP

 

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From tax reform to tax reality

Deloitte can help you move forward through continued tax uncertainty. We provide insights, services, and technology tools to help you manage change today and plan for your eventual tax reality. Explore these resources for more information on perspectives and offering. Or connect with our practice leaders to discuss your tax challenges and goals for 2019 beyond.

Tax reform resources:

Tax reform hub
Deloitte Tax has assembled a broad array of resources and perspectives on its new tax reform hub on Deloitte.com, which features:

  • The latest in tax policy developments and featured insights
  • Deep dives on tax law changes and their potential implications
  • Industry-specific perspectives on tax reform readiness

Tax News & Views
Subscribe to Tax News & Views newsletter and have the latest tax reform developments and insights from our Tax Policy Group sent to your inbox.

TaxFirst webcast series
The impact of the 2017 tax legislation continues with the release of each proposed regulation. Our TaxFirst webcast series will provide insights and updates on regulatory guidance within days of release.

Washington National Tax practice

Our Washington National Tax practice includes former high-ranking Treasury and IRS officials, congressional staff, state officials, and professionals with the deep private sector and industry experience. Their specialized knowledge can help you identify opportunities and respond proactively to changes in the tax environment.

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