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The Devil is in the Details: Practitioners and academic researchers discuss businesses’ responses to TCJA

On June 6, the UNC Tax Center and the Urban-Brookings Tax Policy Center (TPC) hosted a joint conference, “Effects of Corporate and Business Provisions of the Tax Cuts and Jobs Act of 2017” (TCJA). The conference focused on how the federal tax reform measure has affected tax planning decisions and the economy in the year and a half since its implementation.

UNC Tax Center Associate Director Courtney Edwards moderated the opening session, which focused on what the empirical evidence indicates has actually happened since tax reform. Benjamin Page, senior fellow with the TPC, outlined broad, macro-level outcomes of the TCJA, and noted that, to date, the act has resulted in modest but short-lived investment increases. Jeff Hoopes, UNC Tax Center research director, discussed stock market responses to the passage of tax reform. He noted that, while reactions have been overwhelmingly positive for U.S. and many foreign firms, the market response for Chinese-listed firms has been negative. Hoopes also reviewed post-passage trends in share repurchases, dividends and special dividends. He cautioned that, although share repurchases seem to have increased since tax reform, interpreting that increase is tricky. Finally, Daniel Lynch, assistant professor of accounting and information systems with the University of Wisconsin School of Business, reviewed the results of a study he conducted that found companies dramatically increased their pension contributions in 2017 in response to tax reform. Lynch’s research suggests that firms reacted to the TCJA’s tax rate decrease by shifting some expenses forward in time.

The conference’s second panel, moderated by Steve Rosenthal, a TPC senior fellow, featured a mix of practitioners and academics, including Lily Batchelder, Frederick I. and Grace Stokes Professor of Law at New York University Law School; Reuven Avi-Yonah, director of the international tax LLM program at University of Michigan Law School; Jeff Maydew, chair of the Global Tax Planning and Transactions Practice Group at Baker McKenzie; and Nancy Millett, head of Deloitte’s U.S. Inbound Services group. The panelists focused on the international provisions of the TCJA, and how companies are responding to them. The panel concurred that taxpayers face myriad difficulties as they sort through how to respond not only to the act’s existing provisions, but also adjunct regulations still being issued by the U.S. Treasury. As one panelist put it, when it comes to adapting to the changes necessitated by the TCJA, “the devil is in the details.”

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