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Tax Reform is here. Now what?

January 17, 2018

Photo from vedc.org; some rights reserved.

Two words: Tax Reform.  Public Law 115-97, formerly known as H.R. 1 and commonly known as the Tax Cuts & Jobs Act – is indeed the talk of the town. And by ‘town’, we don’t just mean the corporate boardrooms and executive suites of midtown Manhattan. We mean almost every town; and for good reason! Both critics and supporters alike agree on one thing: with the law’s passage, fundamental change to the US tax code – and by extension to the US economy – has occurred.

Our focus here won’t be on the specifics of the legislation; Lexis Securities Mosaic brings you the most insightful legal commentary from top law firms, so you have the benefit of their work for that kind of analysis. Instead, we’d like to point your attention to what comes next.  And quite frankly, we just don’t know – nothing is certain. That uncertainty is reflected in risk factor disclosure on the new law so far in recent filings by public corporations. A simple text search on Lexis Securities Mosaic for ‘Tax Reform’ in SEC-disclosed Risk Factors makes this – if nothing else – clear. “Tax reform may significantly affect our operations and shareholders” is a typical refrain from companies spanning the gamut of US industries. Such generic, noncommittal language ostensibly allows companies to fulfill their regulatory obligation to disclose risk without really disclosing anything substantive at all.

Yet companies are well aware of the specific risks, and many are actively hedging; as are many individual taxpayers; as are foreign governments and international corporations and financiers.  We also know the next shoe to drop will likely center around action congress and federal regulators take with respect to the potential ballooning effects the new law is poised to have on federal budget (read: PAYGO). We’ll be watching this space. And we’ll keep you posted. Two words: Happy 2018.

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