The apparent demise of the Biden administration’s Build Back Better does not mean that new corporate taxes are entirely off the table. According to BDO USA’s 2022 Tax Outlook Survey, 43% of tax executives listed U.S. federal tax changes as their top policy concern in 2022, ahead of potential global and state and local tax changes.
The survey polled 150 senior tax executives at companies with revenues ranging from $100 million to $3 billion in November and December 2021.
“Executives are still waiting for something to happen, and I’m not sure they’re wrong,” said Todd Simmens, technical practice leader of tax policy and legislation at the Top 10 Firm and former legislative counsel to the U.S. Congress Joint Committee on Taxation.
“Some of the key provisions in BBB could still be in play. Those are things that these executives had their eye on — tax rates, minimum tax, capital gains and loopholes as well. The question now is whether there is enough support and can Congress refocus their attention. It’s unlikely that this can get done right away,” he said.
“There are currently other priorities, which means that we will have to wait a bit,” he continued. “We didn’t get Build Back Better because some key provisions were objectionable. Sen. Joe Manchin [D-West Virginia] declared the bill was dead, but he has indicated there are provisions he can support, so I think we might see smaller legislative pieces. Some of the social provisions like prescription drug pricing and energy provisions are things that senators can get on board with.”
Timing is a key factor, according to Simmens. “Congressional heads are focused elsewhere,” he said. “As the clock moves and we get closer to the November midterms, it will become more difficult to do something.”
Looking at smaller pieces of legislation, a likely place to start is the corporate minimum tax, according to Simmens: “However, the European Union did not get the unanimous consent they needed on their recent vote.”
On March 15, 2022, Poland, Sweden, Estonia and Malta voted against a compromise proposal on implementing the minimum tax in the 27 countries of the EU. Tax issues in the EU require unanimous approval. The issue will be revisited at the April meeting next month.
“The concept of a minimum tax was deemed important to respondents in the survey, but the overall corporate rate would have the largest impact,” Simmens said.
When asked which potential upcoming domestic tax policy changes would have the greatest impact on their organization, 55% chose corporate tax rate changes; 24% chose a corporate minimum tax; 14% selected employment tax; and 7% selected sales and use tax.
“The prospect of expansive tax legislation is fading,” said Simmens. “Nonetheless, tax executives are keeping one eye on developments in Washington while diligently executing tax strategies under current law to strengthen their businesses. It’s important that tax leaders consider the potential impact of new tax laws on their businesses, while taking into account the sheer unpredictability of any tax legislative activity.”
The pace of change continues to spur the evolution of the tax department, according to the survey.
“Tax executives may be adapting to the pace of change in the modern tax era, but they are contending with significant headwinds from domestic and global tax policy changes, the need for training and upskilling their own departments, and the desire to educate leadership on the value of [their] perspective and input on strategic business decisions,” the survey concluded.
