The first quarter of 2023 finds businesses confronting a slew of tax and business challenges. Rising interest rates and inflation continue to plague the economy, and many companies are already girding for a potential recession.
The legislative outlook won’t make it any easier. The shift in power from the November elections is setting the stage for a debt limit showdown that could have broader implications for federal policy and the economy. Planning for these challenges should include an analysis of the tax implications, especially as the tax landscape itself continues to shift underfoot.
Congress’s failure to enact a broad year-end tax deal means some companies face new limits on deductions for investments in capital and research. At the same time, the ability to deduct interest on the debt used to finance these activities has changed. Businesses must also grapple with significant new tax provisions from the Inflation Reduction Act (IRA), often with little help from the IRS, as it races to provide guidance. The largest companies face a new minimum tax based on book income, while a new excise tax on stock buybacks will apply more broadly to public companies and M&A activity. Multinationals should be assessing the impact of new foreign tax credit rules and keeping an eye on the progress abroad toward implementing the global tax agreement, which could affect transfer pricing. Given the IRS’s huge boost in funding, enforcement action is likely to ramp up on all these issues and more.
There are new opportunities as well. A nearly $300 billion package of energy incentives offers significant benefits across a wide variety of sectors, including traditional energy, renewables, technology, manufacturing, and any business with a focus on environment, social, and governance (ESG) initiatives.
It is essential individual and business taxpayers proactively seek recommendations and solutions to achieve their 2023/24 financial objectives in order to structure the decisions they make to achieve these objectives to minimize and control the impact on their overall tax position.
If you have any questions or are interested in exploring how advanced tax planning can assist you make educated and informed financial decisions and likely moderately or significantly reduce your tax liabilities and increase tax savings, contact our office for a consultation and 2023 Tax Planning Session.
Cobalt PacWest | CPAs & Advisors
4225 Executive Square # 600
La Jolla, CA 92037