As Benjamin Franklin famously noted, death and taxes are the only certainties in this world, affecting everyone and everything. It’s as true now as it was in 1789, which is what makes Congress’ tax reform, known as the Tax Cuts and Jobs Act (TCJA), a monumental piece of legislation. The new law is the largest overhaul of the U.S. tax code in more than a generation, and its effects are reverberating throughout the economy and will continue to do so for years to come. Overall, the changes are expected to result in an approximately $950 billion net decrease in business sector tax liability and to increase the national GDP by 1.2 percent over the first five years, demonstrating the TCJA’s anticipated far-reaching impact across all sectors.
Kramer Levin’s Tax group has been working with our clients across the entire spectrum of our practice groups in analyzing the impact of tax reform on their businesses and on material transactions. For example, the reduction in corporate rates to 21 percent and the top noncorporate rates to 37 percent (and in many instances to 29.6 percent) affects the most basic decision as to whether to operate through a corporation or a tax partnership. Similarly, the 80 percent limitation on interest deductibility affects whether to raise equity or debt capital. State and local governments are adopting various changes in response to the new federal laws as well. Further, the move to a partial territorial system, with base-erosion backstops and incentives to retain intellectual property onshore, has fundamentally changed planning in the international context.
The above considerations come into play when structuring internal corporate reorganizations, acquisitions, dispositions, joint ventures, and a host of other corporate and noncorporate transactions. While the tax code has undergone massive changes, one theme remains constant: Kramer Levin’s cross-practice teams work to provide practical solutions to help clients accomplish their goals within the constantly shifting landscape.