The 2017 tax reform reconciliation act (the Act) – the most significant overhaul of the US tax code (the Code) since 1986 – lowers corporate and individual rates, implements a territorial taxation system, limits the interest rate deduction for corporations, creates new taxes, and adds numerous new rules. Non-US headquartered companies doing business in the United States (US inbound companies) need to understand which provisions are relevant to their businesses and how these provisions will impact the cost of doing business.
The Act creates favorable investment conditions for many non-US headquartered companies doing business within the United States through the lower corporate income tax rate and the ability to fully expense certain property. These benefits, however, may be offset at least in part by other provisions in the Act, such as the BEAT, the reduction in the interest expense deduction, and the repatriation toll charge for companies operating in a sandwich structure. US inbound companies will have to closely review their business operations and structures to determine how they may be impacted by the Act and whether appropriate restructuring could create a better return on investment.