As a further update to the US Tax Act, SEC has provided a 1-year window to provide a reasonable estimate with continual true-ups for a 1-year period to finalize the complex tax accounting effects. Note that APB 23 is still alive, which has prompted several questions on its application against the background of the deemed repatriation transition tax.
The Act will significantly change earnings disclosures in the near future and the US debt market where debt may be more expensive due to interest limitations.
EY’s update provides details and relevant links for reference.
As the time for US seems to tick ever closer, EY’s Global Tax Alert highlights the tax accounting implications that would take effect on the “enactment date.”
Key items for consideration:
- Tax attributes re: one-time repatriation/taxation of foreign earnings
- Capital expensing impact
- State tax impact, dependent on if they automatically follow federal tax law
- APB 23, how will this be affected?
Although such items are hypothetical at the moment, some items may require additional planning to have the data available for the requisite disclosures. Thus, the time for planning and consideration is the present.
With the (unexpected) victory for President-elect Trump, coupled with a majority in both the House and Senate, it is highly likely US tax reform is near. There is a close correlation with Trump’s Plan and the Republican’s Blueprint tax reform initiative, although transitional details (Foreign Tax Credits, Earnings & Profits, etc.) still need to be completed. The US tax rate may no longer be one of the highest in the world, and the tax economics of moving business initiatives, and repatriating cash, to the US are welcome thoughts for US based multinationals. However, attention needs to be focused on the details, including Q4 2016 actions that may provide more efficiencies for the expected 2017 US tax reform.
EY’s Global Tax Alert, and the Blueprint are included for reference.