US Tax Reform: Impact to Corporate Treasury

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Overview

The 2017 Tax Reform Reconciliation Act (the “Act”) includes a broad range of tax reforms with potentially significant business implications from a strategic, operational, and financial perspective. For the CFO and Corporate Treasurer, the reforms could affect everything from capital allocation, funding strategies, and liquidity management practices, to structure and organization, presenting new opportunities and risks to the prior ways of conducting business.

With this in mind, CFOs and Corporate Treasurers should act quickly by evaluating the implications to the company and work across the enterprise to compose short- and long-term strategy and execution plans.

Primary changes resulting from the Act

  • Lower top corporate tax rates. The enacted legislation lowers the top corporate tax rate from 35-percent to 21-percent and repeals the corporate Alternative Minimum Tax (AMT).
  • Deemed repatriation. The Act subjects earnings held outside the United States and previously not subject to US tax to a mandatory repatriation ‘toll’ tax (at a rate of 15.5- percent on ‘cash and cash equivalents’ and eight-percent on non-cash assets), payable over eight years.
  • Territorial tax system. The Act provides a 100-percent dividends received deduction (DRD) for certain qualified foreign-source dividends received by US corporations from foreign subsidiaries. This single layer of tax is backstopped by restrictions around payments that might erode the US tax base (the base erosion anti-abuse tax or ‘BEAT’) and special rules around highly mobile intangibles income (global intangible low-taxed income or ‘GILTI ’).
  • New limitations on interest expense. The legislation restricts the deduction of interest expense in the United States to the sum of business interest income plus 30-percent of ‘adjustable taxable income.

Contact us

Eric Cohen
Principal Financial & Treasury Management, PwC US
Tel: +1 (646) 471 8476
Email

Rebecca Lee
Principal Washington National Tax Services, PwC US
Tel: +1 (415) 498 6271
Email

Damien McMahon
Partner Financial & Treasury Management, PwC US
Tel: +1 (408) 334 8353
Email

Peter Frank
Principal Financial & Treasury Management, PwC US
Tel: +1 (646) 471 2787
Email

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