With only procedural steps remaining before the Tax Cuts and Jobs Act becomes law, the public company focus is shifting to when it will occur, and whether companies might get some relief from enormous year-end reporting burdens.
After a late-night Senate session to finalize the Tax Cuts and Jobs Act, Sen Pat Toomey, R-Pa. said the goal of tax reform included to “take what’s arguably been the worst business tax code in the world and turn it into one of the best.” The new tax package for business reduces the top corporate rate to 21 percent and alters the tax structure on U.S. corporate earnings abroad in a way meant to curb the offshoring of U.S. business activity.
That will produce “more investment, more growth, more new business, more expansion of existing business,” said Toomey. “And that means more jobs and more opportunities and a higher stander of living for the people we represent. It’s a big night.”
It also means a massive year-end compliance exercise for public companies, who are required under Generally Accepted Accounting Principles to report on the effect of newly enacted legislation in the period it is signed into law. If the Tax Cuts and Jobs Act gets the promised presidential signature by the end of 2017, that means companies will have to disclose in their year-end filings how the law will affect their financial statements.
Various sources close to the legislative process differ on the extent to which companies may ultimately face that year-end scramble. Some say it is a certainty. Some say there’s discussion emerging from the White House that President Trump could choose to sit on the bill and sign it after Dec. 31, not only to spare public companies from the reporting burden but also to ease various regulatory and budgetary consequences.
Experts also report companies and their advisers are appealing to the Securities and Exchange Commission to provide some kind of regulatory relief from the year-end reporting requirement. A spokesman for the SEC declined to comment on whether such discussions may or may not be occurring. At a year-end accounting conference in December, SEC staff members reminded companies of the year-end reporting obligation.
Joan Schumaker, a partner at EY and co-director in the Americas of the firm’s tax accounting and risk advisory services, says the SEC has acknowledged the potentially short time period between the enactment of new tax law and the end of a reporting period and is expected to provide some kind of reprieve. “Our understanding is the SEC is going to provide options that will entail relief from the full accounting reporting requirements,” Schumaker says.
The tax measure goes back to the House of Representatives for a vote on technical corrections, and then to the White House for a signature.