PBN 2018 Tax Reform Summit: Long-term impact of new tax law unclear

LYNN O'MARRA , principal at BlumShapiro, speaks at the Providence Business News 2018 Tax Reform Summit. / PBN PHOTO/MIKE SKORSKI
LYNN O'MARRA , principal at BlumShapiro, speaks at the Providence Business News 2018 Tax Reform Summit. / PBN PHOTO/MIKE SKORSKI

WARWICK – Take advantage of what you can from the new tax law today and then adapt to future changes as they happen.

That was largely the message heralded during the Providence Business News 2018 Tax Reform Summit on Tuesday. The event, held in partnership with the accounting firm BlumShapiro at the Crown Plaza Providence-Warwick in Warwick, was attended by more than 200 business owners, tax professionals, lawyers and other interested individuals.

“We’ve spent the last three months digesting and analyzing tax reform and there’s a significant amount that’s still hanging out in the wind that we don’t know yet,” said Jay Sattler, managing partner at BlumShapiro.

Sattler was an event panelist.

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“As you look at this, you can tell it was written at the 11th hour over the course of maybe a couple days,” he added. “It’s amazing some of the issues … that they didn’t address and didn’t define.”

Sattler was referring to U.S. Congress, which last month passed sweeping new tax law. The language of the law includes some clear-cut provisions, such as the corporate tax rate being lowered to 21 percent from 35 percent.

But other parts are less clear and will remain so until the Internal Revenue Service write regulations interpreting the hastily put-together legislation in coming months and years.

“What we’re going to find is that regulations are going to come out on a topic-by-topic basis,” Sattler said. “The more complicated issues might not come out for six months. They might not come out for a year.”

The summit touched on a variety of tax-related topics that change based on sector, income levels and geographic locations.

From an international perspective, the panelists seemed bullish about the United States shifting to a territorial tax system and allowing a one-time repatriation of corporate cash held abroad. The changes could make the United States more competitive with other countries and result in an influx of repatriated cash, according to the presenters.

“Some people are calling this a tax holiday because it’s going to allow companies to bring earnings back to the United States,” said Alan Osmolowski, BlumShapiro partner.

The provision has already yielded results. Apple, for instance, announced it would bring back the majority of $252 billion in cash it held abroad, and make a one-time tax payment of $38 billion on the repatriated cash.

Overall, the new tax law offers business owners – big and small – potential avenues to boost bottom-line figures. Companies across the country are already touting the benefit, and many are sharing some of that wealth with employees and charitable foundations.

From an individual standpoint, however, the outlook is not as rosy.

“Don’t be surprised if some of us in the middle see no tax cut,” said Lynn O’Marra, principal at BlumShapiro.

O’Marra discussed a variety of ways the new tax law could impact individuals and families.

The results, she said, could vary based on income, marital status, number of children and how state and local governments might adjust local tax codes to make up for any reductions realized in federal tax revenue.

Many of provisions under the new tax law also sunset after 2025 – an arbitrary time set for purposes of accounting – and the end result is an added $1.5 trillion to the national deficit, according to federal budget officials.

How the deficit will be shored up is largely unclear, but there’s widespread concern it will eventually result in the raising of future local and state taxes and the cutting of safety-net programs.

Both largely hurt low-income individuals and families.

Keynote speaker Mark W. Everson, vice chairman of alliantgroup and former IRS commissioner, made some reference to the future problems, saying it was among his top concerns.

“The question – I think – is related to income inequality,” said Everson, who worked in the Ronald Regan and George W. Bush administrations. “Will the rich do even better through this and will that continue to broaden the gap [between the rich and poor]? … I caution everyone about the deficit.”

The group of presenters, which also included a second keynote speaker Dean Zerbe, alliantgroup’s national director, recommended business owners start making the needed adjustments now. Certain provisions of new law require reporting as early as April.

How the overall impact changes over time, however, is still being sorted out.

“It came together quickly, and there wasn’t a great deal of transparency,” Everson said. “It’s going to make for a bumpy road going forward.”

Eli Sherman is a PBN staff writer. Email him at Sherman@PBN.com, or follow him on Twitter @Eli_Sherman.

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