What Life Sciences Companies Need to Know About Tax Reform

On Dec. 22, just a few weeks following the passage of the Senate’s Tax Cuts and Jobs Act, the conference version of the bill was signed into law, marking the largest change to U.S. tax policy in decades.

With most of the provisions set to go into effect this year, it’s important that the life sciences industry review the changes that occurred during the conference process to understand the impact to their companies.  
 

HERE ARE FIVE INITIAL STEPS LIFE SCIENCES COMPANIES CAN TAKE NOW:

  1. 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.
  1. 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.
  1. 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.
  1. 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 life sciences 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.
  1. Initiate tax reform conversations with your tax advisor. Tax reform of this magnitude is the biggest change we’ve seen in a generation. It will require intense focus to understand not only how the changes apply at a federal level, but also to navigate the ripple effect this is likely to have on state taxation.

To learn how to navigate the key provisions specific to the life sciences industry, see our top considerations and implications here.

Todd Berry can be reached at tberry@bdo.com.
Eric Jia-Sobota can be reached at esobota@bdo.com.

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