United States: Tax Reform: Are You Ready For The Storm?

You may want to think of tax reform as a pending storm. First, it is sorely needed; it has been a long time since we had the last real one. Second, even though we see storm clouds gathering, we are not exactly sure when it will start and when it will finish. Third, there are things you can do to prepare, and those have to be undertaken before the brunt of the storm hits. Fourth, you have to be calm and pragmatic while the storm rages about you. Finally, a lengthy cleanup and restoration process will begin as soon as the storm ends. So, prepare for tax reform the way you would prepare for a serious storm.

It's overdue

There are pieces of the current tax rules that people really like (don't believe it? Wait until legislation is introduced that repeals them), but no one even tries to defend our tax code as a whole. Still, tax reform will involve some selectivity. Just as some areas are more drought-prone than others, some parts of the Internal Revenue Code are in more need of reform than others. In particular, there is widespread agreement that the US tax rules that apply to multinational companies and international transactions need to be reformed. Similarly, there is a general recognition that the top US corporate tax rate is way too high, compared to the corporate tax rates of other countries.

Some argue that reform should focus on these areas where reform is most desperately needed. The problem is that the tax rules in one area are inextricably tied to the rules in other areas. This has political and practical consequences. Reforming one area of the tax code but not another suggests favoring one group over others. Can you see Congress and President Trump enacting tax reform for multinational companies but not for small businesses or individuals? Limited tax reform also will encounter practical issues: The corporate tax rules and the individual tax rules interact with each other, and so a change to one set of rules affects the other. Denying or providing deductions to corporations but not to pass-through entities could distort business decisions and reinforce the feelings of unfairness that are driving much of the tax reform movement.

So, even if there is greater consensus about what corporate or international tax reform should look like, it will be very difficult to limit tax changes just to those areas. Any storm large enough to quench parched areas is going to be big enough to inundate places in less need of rain. Storms can simultaneously bring too little rain to some parts and flooding to other parts. One cannot circumscribe where rain falls or where tax changes stop.

Uncertain timing

We expect Congress and President Trump to turn to tax reform early in 2017. We just do not know how long the legislative process will take. Certain key decisions will influence timing:

  • How comprehensive tax reform will be—the greater the scope, the longer it will take
  • The procedural path it will take; adopting the budget reconciliation process, which limits the number of votes needed in the Senate, will speed its consideration but impose constraints on the contents of the tax reform package
  • Whether Republican leaders will seek to build the broadest support possible or pass it with a bare majority; the broader and more bipartisan the support, the longer the process will take but the longer the finished product will last

Just as people are often too optimistic as to how quickly rain will end, it is easy to underestimate how long tax reform will take. The tax rules, whether current or reformed, will be complicated, and multiple drafts of legislation will be needed before concerns are addressed and problems remedied. Building public support and acceptance of a tax reform proposal will take time as well. So take the forecast seriously, but recognize that there will be unexpected developments. They will generally lengthen—not shorten—the process.

Getting ready

What should you be doing now? The short answer is, "everything you will have later wished you'd done." You and your tax advisor need to look carefully at your activities and your current tax situation. Sure, there will be obvious things, but if your review is too superficial, you will overlook something whose presence or absence you will later regret. You also need to review your circumstances with an eye on proposed changes. For example, no review of your tax return, no matter how thorough, will tell you how you would fare under the "border adjustment" rules proposed by House Republicans.

Then you need to monitor legislation, contact members of Congress about aspects of tax reform that you feel strongly about and work with trade associations or like-minded coalitions to retain or change those provisions. There is far greater ability to change a provision the first time it appears in legislative language than the fourth time it appears. Once voting on tax reform begins, members and staff of the House Ways and Means Committee and Senate Finance Committee, the congressional committees charged with developing tax legislation, will have limited time to meet and discuss the details of the various components, especially if tax reform is comprehensive. If you are able to raise meritorious issues and concerns in the formative process, they are much more likely to be accommodated than if the same item comes up late in the process.

What may be obvious to you is not necessarily obvious to Congress or the Treasury Department, and so the timing of making your case is just as important as the merits of your case.

Riding out the storm

How you deal with legislative developments depends on your previous preparation. There are certain things we know in advance, such as that there will be a strong push to reduce corporate tax rates. However, there is much that we will not know until the tax reform process develops further, such as which deductions, exclusions and credits corporations will lose as the price of obtaining those lower rates. The extent of this "broadening" of the corporate tax base will depend not just on the size of the corporate rate reduction but also whether tax reform (or at least corporate tax reform) will be revenue-neutral. Although President-elect Trump's campaign plan was a tax cut, congressional tax reform proposals have typically been revenue-neutral.

Not only do we not know whether tax reform will be revenue neutral, we do not even know how revenue neutrality will be measured. Traditionally, revenue neutrality meant that revenue-raising and revenue-losing changes balanced each other out, and the number of winners and losers were roughly equal. However, "dynamic scoring" would allow a tax package that loses revenue under conventional scoring to be considered revenue neutral due to the increased revenue expected from economic growth generated by the tax reform package.

Further, the more creative Congress is with the baseline for measuring revenue neutrality (e.g., whether expiring provisions are assumed to be extended or whether Obamacare tax provisions are assumed to be repealed), more winners than losers can be created in an ostensibly revenue-neutral bill. This may have an Alice-in-Wonderland quality to it, but in a world where sound bites and talking points predominate, these esoteric decisions can make a difference in whether tax reform stalls or proceeds in Congress.

Because comprehensive tax reform will include changes that you consider favorable and that you consider unfavorable, you will need to keep track of whether the legislation is going in the right direction from your perspective. Whether there is public support for a tax reform package will determine whether it gets sent to President Trump for his signature or Congress has to start anew.

After the storm

After the rain stops and the wind dies down, one inevitably finds things are not where they are supposed to be. The amount of cleanup and repairs depends not just on the intensity of the storm but also on the pre-storm preparations.

Whether tax reform is comprehensive or limited, the number of moving pieces and interactions between the various components means that follow-up legislation will be necessary not just to correct mistakes but also to address unintended interactions. In addition, if comprehensive tax reform is enacted, the Treasury Department will be spending years revising old regulations and issuing new regulations to implement the changes. Some of the implementing guidance will be technical and straightforward, but in many cases Congress enacts a statutory framework and leaves the details to be developed in regulatory guidance. In those cases, battles fought in the legislative arena will be re-fought in the regulatory environment. Thus, legislative gains and losses can be reversed (or strengthened) in the regulatory process, making continued participation in the process important. Enactment of tax reform legislation is the end of the first phase, not the end of the process.


In tax reform as in storms, there is always an element of luck: What is spared and what is decimated can never be predicted with certainty. You can't control chance, but you can prepare in advance, modify your strategy as new developments arise and promptly and carefully deal with the after-effects. Successful tax reform requires individuals and companies to participate in the process. Someone will be telling Congress and the Trump administration what you want and what is best for you. It might as well be you.

Dentons is the world's first polycentric global law firm. A top 20 firm on the Acritas 2015 Global Elite Brand Index, the Firm is committed to challenging the status quo in delivering consistent and uncompromising quality and value in new and inventive ways. Driven to provide clients a competitive edge, and connected to the communities where its clients want to do business, Dentons knows that understanding local cultures is crucial to successfully completing a deal, resolving a dispute or solving a business challenge. Now the world's largest law firm, Dentons' global team builds agile, tailored solutions to meet the local, national and global needs of private and public clients of any size in more than 125 locations serving 50-plus countries. www.dentons.com.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Events from this Firm
24 Oct 2017, Seminar, Washington, DC, United States

The Dentons Forum for Women Executives invites you to join us for a luncheon featuring guest speaker Liza Mundy, journalist and author. Ms. Mundy recently released her latest book, Code Girls, the riveting untold story of more than 10,000 spirited young American women who cracked German and Japanese codes to help win World War II.

27 Oct 2017, Seminar, New York, United States

Please join us for a milestone event, our 10th annual CLE Seminar for In-House Counsel.

1 Nov 2017, Seminar, Washington, DC, United States

Celebrate the 58th anniversary of Dentons' Government Contracts practice

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.