Expiring provisions of the TCJA
To add more complexity to the situation, tax departments should also be tracking the expiring provisions in the Tax Cuts and Jobs Act of 2017 – or TCJA.
If Congress doesn’t act on these provisions by the end of 2021, there’s an automatic tax cliff that will result in less interest expense allowed as a deduction and will require amortization of R&D costs over 5 to 15 years. The Neal bill would address the R&D issue, not interest deductibility.
Develop your tax strategy
There is a lot for tax departments to focus on, but you don’t want to wait until passage to develop a strategy. Right now, tax departments should be thinking about three things:
1. Monitor developments
First, continue to monitor legislative developments and understand how proposed changes might impact your enterprise.
Think about your company’s goals and what tax strategies you might need to implement.
Remember there is proposed legislation happening across the globe – there are a lot of tax implications including BEPS and ESG. Stay close to any change that might impact your business.
2. Model and plan
Second, model and plan for possible changes.
At EY we have seen that the companies who are out ahead and modeling prior to passage are the ones most able to move quickly when legislation is signed into law.
Whether it’s modeling for a change in the tax rate or for your ongoing initiatives and considering pre-enactment planning, it’s critical to have a plan in place.
3. Engage in the legislative process
And third, today is the time to get engaged and be sure legislators understand your perspective. That means identifying “areas of focus” for engaging with policymakers and consider coordinating comments with similarly situated taxpayers.