Don’t Forget About Tax
By: Troy Gariss
Undoubtedly, the last couple years have been stressful on a personal and professional scale. Businesses continue to evaluate how to best operate in a COVID environment while managing national and local regulations. As businesses adapt, it is important that they include tax as part of their strategic planning. Below are just a couple key areas in which tax can provide value.
Scenario Planning
Tax policy was a significant discussion point of the 2020 Presidential election and continued to be a hot topic throughout 2021. Today, Congress continues to arm-wrestle over proposed legislation including applying some provisions retroactively. As a result, it is crucial that fund managers and portfolio companies are modeling the tax effects of such tax proposals and identifying business model opportunities that will either take advantage of taxpayer friendly legislation or limit unfavorable provisions.
Include Tax in Business Plans
Often times, tax expense may be the single largest expense on the profit and loss statement. However, it isn’t unusual for the tax team to be absent from any strategic business plan discussions. If included on the team early, tax advisors may be able to identify opportunities to use existing tax attributes, offer structuring advise to maximize tax savings, defer or accelerate income and expenses, find locations eligible for credits or incentives, etc. That should be considered in the business plan before the opportunity is gone.
Regarding credits and incentives, national and local governments continue to wrestle with the aftereffects of COVID-19. Although many are raising taxes to meet budget shortfalls, they also want to encourage growth. Accordingly, many state and local jurisdictions offer tax incentives and grants for companies expanding their business, hiring employees, use of renewable fuels, or making significant investments in the community. Generally, the largest benefit is available to taxpayers when implementing an early tax position and strategy, before the related event occurs.
How we can help
CLA can help you with strategic tax planning needs and identify tax incentive opportunities. Stay tuned for upcoming posts that dig into more specific opportunities.
Tyler is a principal on CLA's private equity team and provides consulting, assurance, and tax services to private equity groups, portfolio companies, and other closely held private businesses in the manufacturing, distribution, technology, retail, healthcare and business services industries with both domestic and international operations. He specializes in helping clients maximize value and reduce risk during M&A transactions through quality of earnings assessments, working capital analysis, and transaction structuring. He also assists in the oversight of private equity portfolio services, including financial statement assurance, tax, and post-acquisition integration. Outside of work, Tyler enjoys backpacking, hiking, camping, skiing, and other outdoor activities with his wife (Kelly), son (Morrison), and daughter (Arrow).
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