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Tax Reform’s Possible Impacts

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There is potential for comprehensive tax reform this year, and businesses should be aware of the possible impacts.

The House GOP tax reform blueprint proposes a “destination-based cash flow tax,” under which only income earned in the US is taxed. Border adjustments, a novel feature of the blueprint, would tax imports but exempt exports, pitting exporters against importers.

Companies purchasing foreign goods and services, like retailers and certain refiners, will be disadvantaged. Capital investments would be 100-percent deductible, benefiting capital intensive businesses, such as manufacturing. But interest would not be deductible, disadvantaging leveraged businesses, such as real estate.

Lisa Zarlenga, Partner, Steptoe & Johnson LLP

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