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What the New Tax Law Means for Operations

By Gary Pittman and Glenn Sniezek

Major U.S. tax reform – the Tax Cuts and Jobs Act (TCJA) – was approved by Congress in December 2017. The new law will have significant global implications on foreign direct investment and corporate operations. 

According to a recent fDi Magazine article, “U.S. companies will be making major changes, such as the repatriation of cash back into the U.S. and the restructuring of their global intellectual property operations. Everything is fair game for change, from physical operations to IT to the movement of people.” 

The main impact on operations will be that there is no longer a significant incentive to hold foreign profits as cash outside of the U.S. since these profits will now be taxed and no longer will be deferred until the funds are remitted back to the U.S. via dividends or other means. Therefore, companies will most likely need to make a decision on whether to repatriate excess cash back to the U.S. rather than accumulating it offshore or spend it in the foreign country to build tangible assets which are taxed at a lower rate.

On a go forward basis, the new tax law will allow more transfers of cash to the U.S. from foreign countries as the dividends can be exempted from taxation. Furthermore, the tax law will incentivize companies to deploy capital that otherwise has been sitting on the balance sheet. 

Another impact on operations is that sales income from inventory is now determined based on where the inventory is produced rather than just a 50/50 split between foreign and U.S. sales. This could impact the decision for manufacturers on where to make their goods since there can be tax benefits/penalties based on where a product is made.  

The lower corporate tax rate of 21% will make the U.S. more competitive with some foreign countries (especially in Europe); however it will still not level the playing field with countries that have cheaper labor forces. 



Gary PittmanManaging Director

Gary Pittman has over 30 years of corporate accounting and restructuring experience and has advised both public and private companies in the oil and gas, oilfield services, and chemicals industries. He has significant experience in mergers and acquisitions, corporate turnarounds, transactional due diligence, roll-ups, spin-offs, IPOs, lease and project finance, and troubled debt restructurings and bankruptcies.

Glenn SniezekDirector

Glenn Sniezek is a Director in Dacarba’s Restructuring practice. He has over 20 years of public accounting, corporate finance and restructuring experience and has provided interim management and advisory services to both public and private companies in the energy, oilfield services, retail, manufacturing and transportation industries. Glenn has significant experience in cash management, preparation and review of financial forecasts, budgets and long-term business plans, integration and transition for mergers and acquisitions, troubled debt restructurings and bankruptcies. Mr. Sniezek earned a Bachelor’s degree in Accounting from Rutgers University.