Uncle Sam's Tax Gift Basket: How boards can capitalize on the bonanza, avoid the traps.

• Author: Milford, Maureen
• Position: TAX TALK

The sweeping rewrite of the tax code in late 2017 is set to bestow a bonanza on U.S. corporations.

Part of the gift basket from Uncle Sam is the biggest cut in the top corporate tax rate in U.S. history, slashed from 35% to 21%. Other significant highlights of the bill provide for full write-offs on qualifying capital expenditures, a reduced rate to repatriate deferred profits earned overseas and a break on future profits earned abroad.

Because the more than 1,000-page Tax Cuts and Jobs Act (TCJA) barreled through Congress like a high-speed train, more time is needed to fully understand the ramifications for corporations.

But it's clear, directors and top managers will have to respond to the bill and take actions that will shape the future direction of their organizations. It could make for a challenging year as directors and top leaders attempt to seize opportunities and avoid any traps.

Edward P. Garden, a director of Bank of New York Mellon Corp., says his company intends to plow most of its windfall to the employees and the business.

"After it was announced the stock went down 5%," Garden adds. "But we think it's the right thing to do."

To navigate the changes, advises Steven Rosenthal, a senior fellow at the Urban-Brookings Tax Policy Center, "there are major decisions that need to be made on the structuring of business operations, the location of operations, capital structure and compensation of executives."

Five months before tax reform was introduced, only 30% of boards that responded to the National Association of Corporate Director's annual public governance survey foresaw tax reform as among the top five trends that would have the greatest effect on their company over the next year, according to the 2017-2018 survey.

Now. TCJA has changed the landscape and become "a game-change" for corporations, stresses A. Gilchrist Sparks III, past chairman of the corporate laws committee of the American Bar Association s business law section."

"This is an exciting time for boards and management as they look at the opportunities," Sparks says. "You want to make sure you take full advantage of it."

Still sorting it out

The previous rewrite of the tax system--the Tax Reform Act of 1986--took two grueling years of rewrites, hearings, political horse-trading and a few brushes with death because of a lack of votes during the process.

By the time it was signed into law, tax professionals had a pretty good idea of what the bill contained, Rosenthal...