Early today, President Trump signed H.R. 1 (New Act), the new tax bill amending the Internal Revenue Code to reduce tax rates, modify policies, credits, and deductions for individuals and businesses “to provide for reconciliation pursuant to titles II and V of the concurrent resolution on the budget for fiscal year 2018” into law. Initially observers expected the President to delay the signing until early January 2018 to avoid triggering certain PAYGO provisions in the funding bill and to avoid required spending cuts. However, news outlets reported that a waiver to these provisions was included in the continuing resolution bill that was passed yesterday afternoon, allowing the President to sign the New Act into law today without having to incur cuts to entitlement programs.
While all of the effective dates in the New Act remain unchanged, the financial reporting aspects may have been affected by enacting the bill today. ASC 740 requires that GAAP filers recognize the full financial effect of an enacted rate change on their deferred tax items in the interim period that the changes are enacted. The date of enactment is generally the date the President signs the bill. Absent any waiver, SEC filers will need to take this into account in their fourth quarter or year-end financial reporting. Importantly, this also would require companies to recognize any liability associated with the new transition tax on accumulated foreign earnings described in the New Act.
For a more detailed discussion of the bill and its impact, please visit our webinar that was hosted on December 21st.