August 8, 2019

M&A Tax: Post-Reform Uncertainties Create Challenges for Dealmakers

This PwC blog discusses some of the uncertainties arising out of 2017’s tax reform legislation that continue to create challenges for dealmakers.  Here’s the intro:

The sweeping US tax overhaul that has been in effect for well over a year was intended to simplify America’s tax code. It has prompted businesses to factor the changes into their growth strategies and scenario planning, particularly in light of ongoing trade tensions.

But the 2017 tax reform act continues to be a complex law to digest, requiring specialists to manage ongoing developments around key areas, including: tax implications on tariffs, employee compensation, state tax laws, and capital availability. Uncertainties around these areas likely will linger for some time, and how dealmakers respond going forward could impact the quality and value of their next deal.

For instance, many consumer market companies today are evaluating their supply chains and pricing approaches to be cost-effective and tax-efficient. As they contemplate relocating sourcing, manufacturing and distribution, they will need to consider carefully the law’s international provisions, including the global intangible low-taxed income (GILTI), the base erosion and anti-abuse tax (BEAT), and the foreign derived intangible income (FDII) deduction. Moreover, it will be critical to examine pitfalls around interest limitations while leveraging tax reform’s opportunities at the federal, state and local levels.

John Jenkins