A dozen chief financial officers of leading mid-sized Atlanta companies met last week with Jeff Kummer, managing director in the Washington practice of Deloitte Tax LLP, to get their bearings for dealing with the new tax code.
“Their main concern was stability,” Mr. Kummer told Global Atlanta in a telephone interview from Washington. “They wanted to know if they were going to see a lot of future changes in legislation, Treasury regulations, tweaks and modifications.”
The administration’s changes weren’t as much of a concern as stability to the CFOs of the retail, manufacturing and information technology companies at the breakfast, he said.
An obvious benefit of the new code, he added, was the change in the corporate statutory tax rate to 21 percent from 35 percent, which he called “a definite cash benefit and a driver right up front” when it went into effect this year. “These companies will have more money in their coffers,” he said.
As a consequence they are apt to make near term investments in new branches and new operations,” he added. But political questions remain.
“What if the political roles are reversed by 2020?” was a question foremost on their minds, he said.
As a longtime Washington observer, he quickly quelled their greatest concern. Even if the Democratic Party captures the U.S. Congress and the presidency, he doubted that the corporate rate would go back to 35 percent and suggested that in his view it might be raised only as high as 25 percent.
Looking back at the Obama years, he recalled Democratic proposals to lower the corporate rate to the high twenties as well as providing for a one-time transition tax at a lower rate for repatriated foreign income.
Even the 15.5 percent tax on earnings on income held as cash and cash equivalents abroad in the new tax law is in a similar range as reforms considered under the Obama administration, he said.
While Mr. Kummer acknowledged that companies will have to follow their customers overseas, CFOs now, he said, will be more likely to bring back cash from their overseas earnings.
“We are a globally integrated economy,” he asserted, but added “that with the lower corporate tax rates it’s probably easier to keep their headquarters in the U.S.”
Nor does he think that the code will hinder inward investment, even in view of the political uncertainty. “The U.S. has the most stable currency and marketplace, the rule of law and I don’t think that the tax tail necessarily wags the dog.”
For more information, call Sofia Barbieri, senior specialist, public relations, Deloitte Services LP at 212-436-3073 or send an email to sobarbieri@deloitte.com
