Tax Reform Planning Tips for Manufacturers

As the biggest change to the tax code in a generation, the Tax Cuts and Jobs Act has significant implications for manufacturers. Here are our top three tax reform planning tips:

  1. Understand the immediate impact. Manufacturers need to identify the relevant tax provisions to their business and interpret whether the impact will be favorable or not. For instance, the new interest expense ceiling could be problematic for manufacturers that rely heavily on debt financing—but for some, the impact may be mitigated by the exclusion of floor plan financing from the cap.
  2. Collect and analyze data. Assessing the impact of tax reform requires aggregating and analyzing a substantial amount of tax and non-tax data. Having a handle on data will enable manufacturers to be nimble in response to future changes.
  3. Factor in the “butterfly effect.” Every tax change a company makes will have ripple effects throughout all departments. In turn, major business decisions—such as M&A or supply chain restructuring—have corresponding tax implications. Federal reform will also trigger changes to international and state tax provisions. Savvy manufacturers will make tax a part of every strategic initiative and leverage data analytics and tax modeling to understand their total tax liability.

Candace Lynch, Business Development Manager, BDO, USA, LLP