How Tax Reform Will Affect Oil and Gas

On December 20, Congress passed the conference version of 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,” marking the largest change to U.S. tax policy since the 1980’s.

With most of the provisions set to go into effect in 2018, it’s important that the oil and gas industry review the changes that occurred during the conference process to understand the impact to their companies.

To help executives navigate the key provisions affecting the energy industry, we’ve summarized top considerations and implications below.

Tackling Tax Reform: 5 Initial Steps Oil and Gas Companies Can Take Now 

1. Assess impact. Tax professionals will likely need to review the bill text manually, 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.
2. 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.
3. 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 focus on data collection and computations as soon as possible.
4. Establish priorities. When considering what to undertake in the limited time before year’s end, focus on the areas that could have the greatest impact on your company. For multinational oil and gas companies, landmark provisions include: international tax changes, changes that could influence entity choice (reduced corporate tax rates and lower taxes on pass-through business income), and the elimination of net operating loss (NOL) carrybacks.
5. 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 the navigate the ripple effect this is likely to have on state taxation as well.

As always, it is important to talk with your tax professional before taking any action. Please look for future communications from Smith and Howard’s tax group on additional details of the new tax bill. If you have any questions about how the new tax bill can affect your company, contact a member of our tax team at 404-874-6244 or fill out the form below.