DealLawyers.com Blog

In a recent interview, President-elect Trump said that seeking an agreement to extend the expiring tax provisions of the Tax Cuts and Jobs Act of 2017 is one of his top priorities for his first 100 days back in office. While that may be easier said than done, this McDermott Will alert says, if accomplished, doing so could have a significant influence on cross-border M&A.

For example, the bonus depreciation provision, which allows businesses to immediately deduct a large percentage of the cost of eligible property, would continue to incentivize capital investments by reducing upfront costs. In many M&A transactions, buyers engage in basis step-up planning to increase the tax basis of the acquired assets to their fair market value at the time of purchase, which can lead to higher depreciation deductions, further reducing taxable income and enhancing the financial attractiveness of such deals. This can be particularly relevant for non-US buyers who acquire US businesses with material hard assets that may qualify for 100% bonus depreciation.

Trump has also proposed a research and development (R&D) expensing provision, which would allow for the immediate deduction of R&D costs and continue to encourage innovation by reducing the tax burden on companies investing in new technologies.

Additionally, Trump has proposed easing the interest expense limitations, which would allow businesses to deduct a higher percentage of their interest expenses and impact companies with significant debt financing. Trump appears inclined to retain the foreign-derived intangible income (FDII) provision, providing a lower tax rate on income from exports of goods and services, and the global intangible low-taxed income (GILTI) provision, imposing a minimum tax on foreign business income. The FDII and GILTI effective tax rates are set to increase in 2026; it remains unclear whether Trump will modify such provisions.

The alert says that these extensions, taken together, could “enhance the attractiveness of US companies as acquisition targets and support outbound investments by providing a stable and favorable tax environment for cross-border M&A transactions.” The alert also describes the possible impact of other potential changes, including tariffs, lower corporate tax rates and the IP purchasing initiative.

– Meredith Ervine