As part of the Tax Cuts and Jobs Act, there are numerous changes that significantly affect the value of companies and intangible assets. Beyond changes to the corporate and pass-through tax rates, the TCJA contains many complexities that cannot be overlooked when valuing a business or intangible asset. One significant change is that the new law has codified a longstanding IRS position relative to the valuation of intangible assets: that goodwill, going concern, workforce-in-place, and other assets must be considered in the valuation of transferred intangible assets.
WHAT DO YOU NEED TO KNOW?
From a valuation standpoint:
There are various tax valuation nuances to be mindful of as it relates to income tax purposes that differ from valuations conducted for financial reporting, gift and estate tax reporting, etc. Here are several key factors to ensure the valuation is appropriate for income tax purposes:
HOW WILL IT AFFECT YOU?
Companies of all sizes across all industries will be affected by the TCJA, including:
The new outbound IP migration rules will impact those who migrate their U.S. IP to a non-U.S. entity, but all companies must be cognizant of the effect the new law will have on their taxes and valuations.
Examples being a significant benefit to capital intensive companies through the ability to immediately deduct certain capital expenditures to the Global Intangible Low Tax Income (GILTI) tax potentially creating an unexpected tax burden to many companies – specifically those with significant intangible assets such as pharmaceutical and technology companies.
ARE YOU GILTI?
The GILTI tax has taken many multinational companies by surprise, and could result in income generated outside of the U.S. being subject to U.S. income taxes. Thus, companies must be cognizant of the GILTI tax as part of a valuation, and should ask the following:
WHAT CAN A&M TAXAND DO FOR YOU?
If your company is a large multinational business with a complex legal entity structure or a startup in the early stages, tax reform is expected to usher in significant changes.
There are three key components in which A&M Taxand can help your companies navigate through this change:
Under the current state of tax reform, we advise our clients to be proactive and take necessary precaution. It’s best for any company to optimize the most viable and/or beneficial tax planning opportunities moving forward.
To learn more about our services, visit: https://www.alvarezandmarsal.com/expertise/tax