4 Changes In-House Tech Teams Could See Under New Tax Bill
Tax attorneys told The Recorder that legal departments should be figuring out exactly how the bill affects their individual company, as there are a variety of changes in regulations.
December 21, 2017 at 06:53 PM
4 minute read
The comprehensive tax bill passed by Congress this week and awaiting President Donald Trump's signature is filled with changes to corporate tax structures, especially for multinational tech companies.
Tax attorneys told The Recorder that legal departments should be figuring out exactly how the bill affects their individual company, as there are a variety of changes in regulations. But there are some changes that most major tech companies can count on.
Here are four developments in-house lawyers at technology companies should start preparing for, as the legislation—if signed by Trump—will be effective at the start of 2018:
1. Money overseas: The new tax plan could incentivize tech companies such as Apple, which has operations in Ireland and other foreign countries, to bring money abroad back to the United States. Companies that kept money overseas to avoid higher U.S. tax rates may bring that money back to take advantage of the now much lower corporate tax rate. The law also will make it more difficult for U.S. companies to avoid paying taxes on money made abroad. “Tech and pharmaceuticals and life science industries, they have large amounts of money offshore that will be subject to tax under the bill,” said Barton Bassett, a partner at Morgan, Lewis & Bockius who works with tech companies. “That money might be brought back and so companies will need to get their hands around what those number look like.”
2. Domestic expansion: If that money does come back, it could spur growth and expansion throughout the United States. There's two paths that could take—an organic route, where companies open up their own locations in new states, or through mergers and acquisitions. Either way, in-house staff should be prepared for a year of growth into new markets by reading up on regulations around the country. “The design of the new tax plan is that it should encourage companies already in the U.S. to keep the money in the U.S. and expand in the U.S.,” said Sam Dibble, a California-based partner at Baker Botts.
3. Compensation changes: C-suite executives could see the way they're compensated change under the new tax plan. Changes to tax law will prohibit companies from deducting more than $1 million in payments to their executive management team, including the CEO and, in another new change, the CFO. “Certainly [in-house counsel will] want to look at executive's compensation plans and understand the changes,” Dibble said. “And make sure that the executives understand the compensation changes.”
4. Relocating: Compensation changes won't just be felt by those at the top. Many Silicon Valley engineers' salaries fall into a range that would see taxes increase. States with higher taxes, like California, lost out in the tax plan. And that could lead companies to move away from the United States' unofficial tech capital—meaning lawyers should be looking into tech and tax regulations in other states. “The cost of living in Silicon Valley and California is already very high, even for an engineer,” Dibble said. “The general thought was we have to be in Silicon Valley because that's where the talent is. But the financial difference between being a highly paid employee in Texas or Washington state, where there's a growing tech presence and smaller overhead, means it may be easier for corporations to relocate people. Employees may want to move.”
The new bill has implications for tech companies of every size, inside and outside of Silicon Valley. While these four potential issues are something to look out for in 2018, tax lawyers say the most important action in-house lawyers can take is sitting down, reading the bill and seeing how their company specifically will be impacted. Then, communicate those changes with other departments and start planning.
“The biggest issue is getting in front of your modeling and determining now how the law is going to impact your business,” Bassett said. “This isn't something you want to wait until next year to figure out.”
This content has been archived. It is available through our partners, LexisNexis® and Bloomberg Law.
To view this content, please continue to their sites.
Not a Lexis Subscriber?
Subscribe Now
Not a Bloomberg Law Subscriber?
Subscribe Now
NOT FOR REPRINT
© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
You Might Like
View AllPa. Judicial Nominee Advances While Trump Demands GOP Unity Against Biden Picks
4 minute readThe Unraveling of Sean Combs: How Legislation from the #MeToo Movement Brought Diddy Down
'Radical Left Judges'?: Trump Demands GOP Unity Against Biden's Judicial Picks
4 minute readBiden Has Few Ways to Protect His Environmental Legacy, Say Lawyers, Advocates
Trending Stories
- 1Gibson Dunn Sued By Crypto Client After Lateral Hire Causes Conflict of Interest
- 2Trump's Solicitor General Expected to 'Flip' Prelogar's Positions at Supreme Court
- 3Pharmacy Lawyers See Promise in NY Regulator's Curbs on PBM Industry
- 4Outgoing USPTO Director Kathi Vidal: ‘We All Want the Country to Be in a Better Place’
- 5Supreme Court Will Review Constitutionality Of FCC's Universal Service Fund
Who Got The Work
Michael G. Bongiorno, Andrew Scott Dulberg and Elizabeth E. Driscoll from Wilmer Cutler Pickering Hale and Dorr have stepped in to represent Symbotic Inc., an A.I.-enabled technology platform that focuses on increasing supply chain efficiency, and other defendants in a pending shareholder derivative lawsuit. The case, filed Oct. 2 in Massachusetts District Court by the Brown Law Firm on behalf of Stephen Austen, accuses certain officers and directors of misleading investors in regard to Symbotic's potential for margin growth by failing to disclose that the company was not equipped to timely deploy its systems or manage expenses through project delays. The case, assigned to U.S. District Judge Nathaniel M. Gorton, is 1:24-cv-12522, Austen v. Cohen et al.
Who Got The Work
Edmund Polubinski and Marie Killmond of Davis Polk & Wardwell have entered appearances for data platform software development company MongoDB and other defendants in a pending shareholder derivative lawsuit. The action, filed Oct. 7 in New York Southern District Court by the Brown Law Firm, accuses the company's directors and/or officers of falsely expressing confidence in the company’s restructuring of its sales incentive plan and downplaying the severity of decreases in its upfront commitments. The case is 1:24-cv-07594, Roy v. Ittycheria et al.
Who Got The Work
Amy O. Bruchs and Kurt F. Ellison of Michael Best & Friedrich have entered appearances for Epic Systems Corp. in a pending employment discrimination lawsuit. The suit was filed Sept. 7 in Wisconsin Western District Court by Levine Eisberner LLC and Siri & Glimstad on behalf of a project manager who claims that he was wrongfully terminated after applying for a religious exemption to the defendant's COVID-19 vaccine mandate. The case, assigned to U.S. Magistrate Judge Anita Marie Boor, is 3:24-cv-00630, Secker, Nathan v. Epic Systems Corporation.
Who Got The Work
David X. Sullivan, Thomas J. Finn and Gregory A. Hall from McCarter & English have entered appearances for Sunrun Installation Services in a pending civil rights lawsuit. The complaint was filed Sept. 4 in Connecticut District Court by attorney Robert M. Berke on behalf of former employee George Edward Steins, who was arrested and charged with employing an unregistered home improvement salesperson. The complaint alleges that had Sunrun informed the Connecticut Department of Consumer Protection that the plaintiff's employment had ended in 2017 and that he no longer held Sunrun's home improvement contractor license, he would not have been hit with charges, which were dismissed in May 2024. The case, assigned to U.S. District Judge Jeffrey A. Meyer, is 3:24-cv-01423, Steins v. Sunrun, Inc. et al.
Who Got The Work
Greenberg Traurig shareholder Joshua L. Raskin has entered an appearance for boohoo.com UK Ltd. in a pending patent infringement lawsuit. The suit, filed Sept. 3 in Texas Eastern District Court by Rozier Hardt McDonough on behalf of Alto Dynamics, asserts five patents related to an online shopping platform. The case, assigned to U.S. District Judge Rodney Gilstrap, is 2:24-cv-00719, Alto Dynamics, LLC v. boohoo.com UK Limited.
Featured Firms
Law Offices of Gary Martin Hays & Associates, P.C.
(470) 294-1674
Law Offices of Mark E. Salomone
(857) 444-6468
Smith & Hassler
(713) 739-1250