Top six tax issues for businesses to watch

Almost every business decision has tax, and potentially, reputational implications. In fact, with up to 40 cents of every dollar at stake, it’s a competitive necessity for CFOs, board members and tax departments to keep an eye on key international, federal and state tax issues.

Although income taxes usually grab the headlines, the reality is they make up only a fraction of the tax spent for any business. That’s why it’s important for business leaders to consider the following top six tax issues and weigh the impact on their bottom line and their reputation.

1.  Understand opportunities connected with the new repair regulations

Issue:

• Virtually every business must comply with the recently finalized so-called “Repair Regulations”, which established the federal tax standards for costs related to tangible property. Asset intensive industries are particularly affected.

Action step:

• Some taxpayers would be wise to review their capitalization policies to take advantage of certain tax “safe-harbors”.  Others should consider filing accounting-method changes to take advantage of certain provisions in the final regulations.

1. Consider taxation of cloud-related activities

Issue:

• The movement of computing services and resources to “the cloud” is expected to continue to drive business transformations during 2014.

Action step:

• It’s critical that tax issues are considered early for the company’s cloud strategy. Not doing so may lead to missed incentives and planning opportunities as well as increased potential for risk and unforeseen liabilities down the road.

1. Focus on unclaimed property liabilities

Issue:

• Potentially significant and costly audit assessments for corporate unclaimed property, coupled with an expanded definition of property reportable as unclaimed, make this an issue to watch in 2014.

Action step:

• Companies in all industries – particularly those with numerous customers and/or vendors, such as retailers, financial institutions, insurance companies and energy suppliers – need to evaluate their policies.

1. Assess far-reaching consequences of the implementation of the Foreign Account Tax Compliance Act (FATCA)

Issue:

• Implementation has evolved since the enactment of FATCA, but it is clear that implications surrounding this new regime are wide-ranging for foreign institutions, U.S. financial institutions, and non-financial entities that make reportable payments to non-U.S. entities. 
• There is also new documentation requirements needed for any foreign vendor. 

Action step:

• Companies will need to assess their FATCA status and obligations.

1. Understand concerns over base erosion and profit shifting (BEPS)

Issue:

• Globally, increased concern about international tax planning and transfer pricing strategies (otherwise referred to as base erosion and profit shifting (BEPS)) has triggered a public debate about the tax affairs of multinational companies and a call to action at the highest levels of governments.

Action step:

• Companies need to be aware of public perceptions, guard against reputational risks, and prepare for the reality of changing tax laws.

1. Monitor U.S. and international business tax reform developments

Issue:

Domestically, there continues to be a strong desire among some members of Congress, the Obama Administration and the business community for a tax system that is simpler, competitive and conducive to economic growth. The current debate on government funding and the debt limit has temporarily delayed tax reform.

Action step:

Companies will need to keep a watch on the issue as it will remain “on the table.”