The Potential Impacts of Tax Reform to REITs and Real Estate & Construction Companies
On December 22, President Trump signed the tax reform bill, “An Act to Provide for Reconciliation Pursuant to Titles II and V of the Concurrent Resolution on the Budget for Fiscal Year 2018," into law, marking the largest change to U.S. tax policy since the 1980s.
With most of the provisions already in effect, it’s important that real estate and construction executives review the changes that occurred during the conference process to understand the impact to their companies.
To help them navigate the key provisions affecting the real estate and construction industries, we’ve summarized the top considerations and implications below.
Tackling Tax Reform: 5 Initial Steps Companies Can Take Now
- Assess impact. Tax professionals will likely need to review the bill text manually and measure their company’s specific circumstances against it to assess the impact of each provision, as well as the holistic effect on their company’s bottom line.
- Assemble a team. While the heaviest burden may fall on accountants, companies and their finance teams will have an important role to play to gather all the necessary data.
- Dig into the data. Assessing the impact of tax reform requires a substantial amount of data to be readily available. Companies need to move from modeling the impact of tax reform to focusing on data collection and computations as soon as possible.
- Establish priorities. When considering which aspects of tax reform to tackle first, focus on the areas that could have the greatest impact on your company. For REITs, real estate and construction companies, landmark provisions include: changes that could influence entity choice (reduced corporate tax rates and lower taxes on pass-through business income) and the elimination of NOL carrybacks. As a preliminary step, taxpayers operating in the real estate and construction industries should consider their overall choice of entity to minimize tax liabilities under the new law.
- Initiate tax reform conversations with your tax advisor. Tax reform of this magnitude is the biggest change we’ve seen in a generation, and will require intense focus to understand not only how the changes apply at a federal level, but also navigate the ripple effect this is likely to have on state taxation as well.
Please look for future communications from Smith & Howard's tax group on additional details of the new tax bill. Keep in mind that it is important to speak with your tax professional before taking any action. If you have any questions about how the new tax bill can affect your company, contact a Smith & Howard tax professional at 404-874-6244 or fill out the form below.