Many businesses are still busy running the numbers to determine exactly how their bottom line will be impacted by the tax and spending legislation signed into law by President Donald Trump early this month.
Wherever the calculations land, there is a component to the president’s budget that ushers in a more predictable runway for corporate tax planning, Ernst & Young’s Adam Francis, a principal at the Big Four firm’s Washington Council who focuses on tax policy, told CFO Dive.
“It provides this period now of relative tax certainty for businesses going forward,” Francis said. “I think that’s a really important element of this entire exercise.”
The key driver of that changed outlook is that the legislation made permanent numerous business-friendly provisions from the 2017 Tax Cut and Jobs Act, he said. These include the so-called TCJA “big three” which allow: 100% corporate bonus depreciation related to capital investments, immediate expensing for U.S.-based corporate research and development costs and permit companies to use more favorable calculations of interest expense deductions.
Having those provisions permanent “strengthens the foundation” of the TCJA, Francis said, adding that lawmakers at the same time did not make any headway on the long-standing push to simplify the tax code. “The permanence of many of these provisions is in some respect simplification… outside of that it’s hard to see how things got more simple.”
The extensive laundry list of tax changes that the legislation ushers in range from changes on how individuals are taxed such as the new exemptions for certain tip wages to changes in complicated tax formulas that will affect multinationals.
For example, the 40% Global intangible low-taxed income deduction for tax years beginning after Dec. 31, 2025, was generally seen as a positive for businesses while some proponents of a push to reduce the Base erosion and anti-abuse tax threshold were disappointed the changes were not signed into law, Francis said.
Then to some tax relief could effectively stem from what didn’t get into the budget. For example, Francis noted that the corporate tax that was a source of anxiety for businesses as it was debated during the presidential election was left standing at 21%, untouched by the lawmakers.
Separately, the Trump administration’s negotiators also leaned on the bill to push its case against the 15% global minimum tax spearheaded by the Organization for Economic Co-operation and Development by adding a retaliatory tax into the bill, Francis said.
Contained in Section 899 of one of the drafts of legislation, the proposed levy would have responded to taxes deemed “unfair” by imposing U.S. tax rates of as high as 50% on entities and individuals from “discriminatory foreign countries,” according to a June 2 EY report.
Ultimately the Treasury Department and Congress killed the so-called “revenge tax” after it rattled Wall Street and global business leaders, CNN reported on June 27. U.S. Treasury Secretary Scott Bessent announced that he asked Republicans to scrap the retaliatory tax after Washington reached an agreement with the Group of Seven industrial nations under which the global minimum tax would not apply to U.S. companies, Reuters reported.
The retaliatory tax was used as a kind of “big stick” in the negotiations, Francis said. “It’s interesting because this was a very hot legislative topic...but we think it has resulted in some agreements that will be favorable to U.S. multinationals.”
