By: Mark Clemens
Orange County Office Managing Partner
KPMG
Orange County businesses are facing a proposed shift in the tax landscape that could redefine their growth strategies. Dubbed the “tax policy trifecta” by KPMG, this convergence of challenges demands close monitoring, planning and potential execution:
1. The Impending “Tax Cliff” Key provisions from the 2017 Tax Cuts and Jobs Act (TCJA) are on the brink of expiration, potentially impacting businesses both locally and nationwide. The House’s new tax bill aims to cement the TCJA’s benefits, including lower individual tax rates and the 20% deduction for qualified business income, while introducing fresh incentives for working families and small businesses. With the bill now in the Senate’s hands, staying informed is crucial, especially for high-cost states like California. The current version of the new bill has income-level phase outs of any SALT deduction and proposes to eliminate the pass-through entity tax (PTET) election, which could be a double-whammy for certain California residents.
2. The Global Minimum Tax, the OECD’s global minimum tax, or Pillar Two, adds another layer of complexity. Despite the U.S. not fully embracing it, 86% of U.S. executives in a recent KPMG survey voiced concerns over increased compliance burdens. The evolving nature of this deal could have significant implications for businesses, making it essential to monitor developments closely.
3. Regulatory Changes and Tariffs Regulatory shifts, including tariffs, are creating change for businesses of all sizes. Hopefully, the uncertainty is settling down as progress continues on reaching reciprocal trade deals. However, companies must remain focused on exploring long-term risk mitigation strategies, such as diversifying suppliers or altering production processes, to navigate the changing landscape of customs and duties taxes.
To thrive amidst these changes, Orange County CFOs and business leaders must leverage technology and data. By utilizing AI-powered modeling tools and integrated data platforms, they can extract actionable insights, anticipate risks, and make informed decisions swiftly.
