Passing on December 22, 2017, the
Tax Cuts & Jobs Act has already had a major impact on business and individuals as it relates to tax planning or even changes made effecting the 2017 tax year. Tax reform will also affect many aspects of business valuation. Although comprehensive and far reaching, parts of reform stand out immediately:
(1)
100% Bonus Depreciation
(2)
Interest Expense Deductibility
(3)
21% Flat Tax Rate for C Corps
(4)
20% Deduction for Pass-Through Entities
100% Bonus Depreciation
How will the ability to expense 100% of capital expenditures effect current and future taxable income and cash flows?
Interest Expense Limitation
Due to a new 30% limitation on interest expense for many taxpayers, how will that affect taxable income? Will the limitation affect the way companies look at the cost of equity? Will companies be less likely to take on debt with new expense limitations?
21% Tax Rate
Lower tax rates for C Corps should increase cash flow, but how much? Will the increased savings be put into new capital expenditures, more wages, to shareholders?
20% Deduction for Pass-Through Entities
How will the new 20% tax deduction for pass-through entities affect the S Corporation premium often used in S Corporation/Partnership valuations?
These are but a few effects the 2017 Tax Cuts & Jobs Act will have on Business Valuations. Please call us to discuss how these and other changes may change how your business, or your client's business, is valued.
