Business tax reform and trends: survey views
Views on the prospects for federal tax reform
In The Tax Council - EY Tax Reform Business Barometer, we assess business tax professionals’ current views on the prospects for and key aspects of federal tax reform1. The Barometer measures the expected likelihood of the different stages and key elements of federal tax reform and tracks trends in the views of business tax professionals as the US Congress debates and develops tax reform.
This month’s Barometer includes questions addressing expiring business tax provisions and inversions. This is the seventh Barometer. It tracks the views reported between September 29 and October 8, 2014.2
- Business tax professionals continue to think tax reform will most likely be comprehensive, affecting both individual and corporate taxation. No respondents believe tax reform will be individual only.
- Most respondents (64%) expect tax reform will be revenue neutral, rather than raise revenue, a new finding in the October Barometer. Twenty-eight percent believe it will raise revenue, and 8% think it will reduce revenue.
- Respondents gave a median expectation of one-in-two that the House Ways and Means Committee chair will release a specific tax reform plan by the end of 2015. Tax professionals provided medians of 40% and 25% that the Ways and Means Committee will mark-up tax reform legislation and that the Ways and Means Committee will pass this legislation, respectively, and fewer believe the House will pass tax reform legislation.
- Respondents thought it more likely (48% median likelihood) that the Senate Finance Committee chair will release a specific tax reform plan by the end of 2015. However, they have a low expectation (10%) that the full Senate will pass tax reform legislation by the end of 2015.
- Seventy-three percent of tax professionals believe that if the major expired tax provisions are extended this year, they will likely be extended for two years. Seventeen percent expect an extension length of one year, while fewer believe the extension will be longer.
- The House of Representatives has approved extending some expired provisions on a permanent basis. Seventy-seven percent of respondents believe that the Senate is likely to approve extending the research and experimentation (R&E) tax credit on a permanent basis. Fewer think that the Section 179 property expensing election and certain charitable provisions will also be approved (41% and 27%, respectively) on a permanent basis.
- Business tax professionals tend to believe that the attention focused on inversions will make tax reform more likely (63%).
- Respondents continue to believe that tax reform will occur within the next several years (74% likelihood that tax reform will happen in 2018 or earlier). Respondents gave a 55% likelihood that tax reform will happen in 2017 or earlier, and they believe 2017 is the most likely year for tax reform with a 27% likelihood.
The Barometer is a monthly survey of approximately 100 leading US tax executives and practitioners that tracks trends in the views of business tax professionals while tax reform is debated and developed in the US Congress. The survey results are based on an online survey conducted by our Quantitative Economics and Statistics practice.
Note: The TTC/EY Tax Reform Barometer defines tax reform as legislation that substantially broadens the tax base or changes the tax rate for either corporate or individual taxpayers.
Prospects and timing of federal tax reform
This Barometer also assesses business tax professionals’ views on congressional actions through calendar year 2015. The median response was a 50% likelihood that the incoming Ways and Means Committee chair will release a specific tax reform plan before the end of next year.
Median expectations for tax reform action by end of 2015
Expectations for timing of tax reform enactment
Other tax policy issues
Respondents were also asked about their organizations’ modeling of potential federal tax reform effects. Sixty-five percent of respondents indicated that their association was modeling the effects on their organization’s federal tax liability, which is consistent with the results In February 2014 when the Barometer asked this question.
More respondents this month said they are modeling the effects of tax reform on their industry and customers and on the US economy (37% and 30%, respectively).
The prospects for federal tax reform and the expectations of leading US tax executives and practitioners will probably continue to change through the end of 2014 and into 2015. The Barometer will continue to gauge changes in the expectations for tax reform.
1 The TTC/EY Tax Reform Business Barometer defines tax reform as legislation that substantially broadens the tax base or changes the tax rate for either corporate or individual taxpayers.
2 One hundred eleven leading US tax executives and practitioners completed this month’s Barometer. Results are based on an online survey conducted by EY’s Quantitative Economics and Statistics practice.