Tax Issues That Have Executives Biting Their Nails

Federal income tax reform is by far the biggest concern of corporate tax executives, a new survey from Bloomberg BNA reveals.

Survey of Corporate Tax Departments 2017 spotlights several key tax issues, and “corporate tax professionals are facing a wealth of challenges as they look to prepare their businesses for what could be seismic changes,” said George Farrah, editorial director of Bloomberg BNA’s Tax & Accounting division.

Indeed, 85 percent of the 250 senior tax professionals who were polled said that tax reform will cause them the most heartburn for the next 12 to 18 months.

But a potential overhaul of the tax code also raises tax compliance challenges and other issues, and the survey results indicate these seven also are areas of concern:

• Implementation of a border adjustment.
• Limits on interest deductions.
• Implementation of a territorial tax system.
• Significant changes to Subpart F and foreign tax credit rules.
• Changes to filing procedures or tax forms.
• IRS restructuring.
• Elimination of the alternative minimum tax.

Still, a variety of other tax issues have their place on executives’ worry lists as well. Here are the key takeaways regarding international tax issues, internal and tax department demands, mergers and acquisitions, and state taxes:

International Taxes
The majority (63 percent) of senior tax executives said the country-by-country reporting rules are among their biggest upcoming challenges, with 47 percent reporting that implementing the new regulations also would be a headache.

Transfer pricing methods were noted by 44 percent of respondents, while 43 percent believe tax reform will broaden transfer pricing documentation requirements.

Most tax executives from larger companies (55 percent) also noted that their organizations have spent more on international tax issues in the past two years than they had previously. At smaller companies, 46 percent of respondents also cited an increase in funding toward international tax concerns.

Internal/Tax Department Demands
The majority of tax managers (54 percent) cited a disconnect between departmental compliance needs and technology as their key organizational concern. That’s followed by budget restrictions for the use of outside counsel or other external resources, recruiting and retention of experienced staffers, and budget cuts that affect staffing.

Most tax managers (52 percent) don’t expect changes in their tax department staffing levels this year, but 40 percent indicated they’ll add personnel, while 8 percent expect staff cutbacks.

Mergers and Acquisitions
The majority (81 percent) of tax executives expect to be active in “corporate transaction opportunities,” according to the survey.

State Taxes
The majority (52 percent) of respondents have increased budgeting for state tax issues, with 63 percent of small companies leading the trend. At large companies, 49 percent have allocated more funds.