Throughout the 2016 election cycle tax reform was a hot topic. Candidate Trump vowed to reduce the corporate tax rate from the current 35% to 15%. In recent weeks, President Trump has begun delivering on his tax reform campaign promises. In addition to the benefits of a reduced corporate tax rate, there could also be a one-time cash flow opportunity for asset-intensive companies, if they’re willing to plan.
Financial Executives International (FEI), a leading advocate for the views of corporate financial management, recently published an article by Bloomberg Tax’s director of software product management, Diane Tinney. It covers proposed tax reform and ways to maximize cash flow, particularly as it relates to a business’s deferred tax liabilities (DTLs).
DTLs are often tied to fixed assets depreciation — when the corporate tax rate goes down, so does the value of the DTLs. At the same time, income and earnings increase, potentially leaving an asset-intensive business with a very big reduction in tax expenses. This could be problematic if the company isn’t prepared for the tax reduction.
One way to avoid such an issue is to keep a constant eye on tax reform, proactively identifying ways to accelerate depreciation before the DTLs are revalued at the lower rate. Another, more practical way is to use Fixed Assets™ software from Bloomberg Tax that does just that, and manages fixed assets for you. It is a one-source solution for managing, depreciating, and tracking fixed assets throughout an asset’s life cycle.
Fixed Assets also allows tax professionals to explore the impacts of different tax scenarios on a company’s bottom line, giving the business the opportunity to adjust their tax strategy before it’s too late. This type of proactive approach can help businesses maximize cash and minimize liability in the face of tax reform.
To gain more valuable insight into the benefits of staying ahead of tax reform changes, read Diane Tinney’s entire article, "Tax Reform Cash Opportunity for Asset-Intensive Companies" at Financial Executives International. Plus, visit Fixed Assets to learn how companies of any size can dramatically reduce the effort required to effectively and accurately manage, depreciate, and track fixed assets.