Tax reform readiness: Steps to prepare now

With the enactment of the Tax Cuts and Jobs Act (TCJA) in 2017, we learned that there are many complexities involved in navigating a corporate tax rate change—especially since the 2017 changes came after more than 30 years of stability. As the political appetite for new tax legislation grows, the process for navigating change is certainly more familiar, yet not without continued complexity. Today’s tax reform requires utilities to understand the implications of another rate change or other reform initiatives on the business and the extensive preparations required to manage those initiatives effectively.

One of my goals with this series [CP1] is to inform tax teams of those relevant legislative initiatives and impacts to utilities, based on what my industry colleagues and I are hearing from Capitol Hill. Here’s the latest that we’re tracking:

Top White House and congressional officials announced on April 28 a new deadline for passing President Trump's big tax promises: July 4.

On Tuesday, May 6, more than 30 Republicans signed on to a letter to Speaker Mike Johnson (R-La.) and Majority Leader Steve Scalise (R-La.) reaffirming that their support for Trump’s “big, beautiful bill” being crafted in the House depends on “at minimum” the proposal’s “strict adherence” to House’s blueprint for the plan. “Under the House’s framework, the reconciliation bill must not add to the deficit. The House budget resolution assumes that enacting President Trump’s agenda, including extending the 2017 tax cuts, will generate $2.5 trillion in additional revenue through economic growth,” they argued. “This means that all additional tax cuts or increases in spending above this level must be offset.”

Treasury Secretary Scott Bessent and White House National Economic Council Director Kevin Hassett explained to House and Senate leaders that there could be huge new corporate tax cuts, citing a potential drop from 21% to 15% for U.S. manufacturers. It’s unclear if this would apply to industries outside of manufacturing: two weeks ago, White House Press Secretary Karoline Leavitt said President Trump has not "made a determination" on if he supports the idea of hiking corporate taxes to pay for other tax cuts.

Of course, once legislation passes, the tax team must quickly adjust financials to reflect the impact of new rates or other changes, ensuring timely and accurate regulatory filings comply with the new regulations.

But there are a variety of steps tax teams can take in advance of legislation to ensure they’re set up for success. Here are three keys:

Stay informed: It’s important to regularly monitor legislative updates to understand the impact of potential tax reform on your operations. Be sure to keep all relevant departments informed about potential changes and their implications.
Lay the groundwork: Develop flexible strategies that can adapt to changes in tax rates, deductions, and compliance requirements. This includes forecasting, scenario-based action plans, and contingency plans to ensure smooth enactment of any updates.

Be prepared to reassess deferred tax balances and make necessary adjustments to reflect new tax rates. Establish a process for rate case preparation. From a regulatory standpoint, make sure your systems and data are in balance to withstand heightened scrutiny from regulators verifying compliance with new tax laws.

Leverage advanced technology for operational enhancements: Anticipated tax reform offers the opportunity to evaluate current financial and accounting systems and consider options that ensure more accurate reporting, offer faster and easier forecasting, and are more flexible in the face of rapid change.

As Chief Strategy Officer at PowerPlan, I have the unique benefit of witnessing how big an impact those operational enhancements can have amidst a changing tax landscape. I’ve seen our technology evolve over the last eight years, and I am excited about all we’ve delivered to customers since 2017 to better equip them in navigating tax reform. The introduction of Tax Fixed Assets (TFA) in 2023 has not only provided heightened data transparency and accuracy but also provided greater flexibility and faster forecasting—both necessary in preparing for tax reform.

Despite the challenges tax reform can bring, I'm encouraged that tax teams have continued to prepare their organizations to be ready for an ever-changing landscape. We continue to see our customers adopt new technology to deliver accurate, informative, and impactful data to their CFOs and regulatory teams, showcasing how these changes will affect their businesses and customers.

Confidence in the Face of Uncertainty

In the months following enactment of the TCJA in 2017, PowerPlan was on the ground assisting our customers in adopting historic legislation, and we are even more prepared now to handle what comes next. As Congress continues to draft legislation, we are closely monitoring developments to ensure our team and our products are ready to help customers adapt and react. Stay informed: