As tax policies evolve in response to political shifts, corporate tax departments must remain agile and strategic, remaining aware of the potential changes and their implications for multinational corporations and domestic law departments alike
WASHINGTON, DC — The tax industry is of the few industries that is directly impacted by a change in government administration, and therefore tax professionals are seasoned to withstand what might be a shift in tax policy every four years. In this cycle, however, these changes are leaving corporate tax professionals feeling a bit more unsettled, especially those within multinational corporations.
As discussed at the recent Tax Executives Institute 2025 Midyear Conference, these changes in tax policies have the potential to significant impact the tax functions within both domestic and international companies.
Uncertainty in the current tax landscape
The Tax Cut and Jobs Act
In the Budget Act of 1974, a special legislative process was created to allow Congress to make tax and mandatory spending changes necessary to the congressional budget resolution, what is known as the reconciliation process. The timing, size, and permanency of tax packages are pivotal factors that will influence the legislative process and, consequently, the strategic planning of corporate tax departments.
Overall, the provisions of 2018’s Tax Cut and Jobs Act that were set to expire at the end of 2025 will most likely be extended, even though there may be pieces that are repealed or changed. These could include the potential repeal of Section 174 amortization, preservation of the depreciation and amortization in Section 163(j), restoration of bonus depreciation, and incentives for domestic manufacturing.
Inflation Reduction Act and Biden-era credits
The future of regulations established during the Biden administration, including those related to credits outlined in the Inflation Reduction Act, is a subject of considerable debate. The U.S. Treasury’s potential to overturn or modify these regulations, coupled with the Congressional Review Act’s influence on them, adds further layers of uncertainty.
International tax provisions
The international tax landscape is undergoing substantial shifts as well, with a particular emphasis on aligning with Pillar Two and addressing exposure under the Undertaxed Profits Rule. The role of US research & development credits in this context is also significant.
Additionally, the legacy of President Trump’s executive orders continues to influence international tax policy, with retaliatory measures and tariffs becoming key considerations. Further, the potential for bills like the long-dormant Section 891 of the U.S. tax code, which would allow for double-taxing of residents of certain countries, along with additional trade sanctions further complicate the international tax environment.
Pillar One and digital services taxes
The evolution of international tax policy also encompasses the future of Pillar One and the proliferation of digital services taxes around the world. The potential for retaliatory measures from the Trump administration against those countries levying digital services taxes and other unilateral measures is a significant concern. Moreover, the role of Pillar One’s Amount B — which aims to simplify the application of an arm’s length principle to the wholesale distribution of tangible goods — in the evolving international landscape adds another dimension to the strategic considerations for businesses that are operating globally. Understanding these dynamics is crucial for corporate tax departments as they navigate the complexities of international tax compliance and planning.
Key considerations for corporate tax departments
In the Thomson Reuters Institute’s 2024 State of the Corporate Tax Department report, the second most significant challenge for tax departments cited was concern over tax regulations. This is hardly surprising — over the years the complexities of global taxes and the changing requirements to comply with them has become a top-of-mind concern for tax practitioners.
Now, however, the added layer is the lack of clarity or guidance on new or amended tax policies. For example, manufacturing firms’ raw materials that come from the border are facing on-again/off-again imposed tariffs and start dates. How are business to remain in compliance with the executive order on when to pay tariffs if those dates are changing? And, if there a suspension of an additional tariff after it was paid, does that just become a lost cost for the business? If so, how can companies plan for expenses that will affect their bottom-line.
Further, consider how other multinational leaders’ heads are spinning as nations within the Organization for Economic Co-operation and Development began enforcing Pillar Two around the globe. They had to make sure the right assessments were being made in each region, and then layer on how the retaliatory tariffs may trickle down to US companies doing business in these areas and its effect on what some feel are already overly complex tax regulations with which to comply. Whew!
Managing through extreme changes
Every year, the survey for our State of the Corporate Tax Department report has asked respondents about the approach their department takes to its work. And every year, the overwhelming response has been that most respondents feel their departments are reactive, even though most would like to be proactive. In the current climate, it seems like working more proactively is no longer a nice-to-have but must almost certainly has become a necessity. One can imagine that corporate tax planning must now have a laser-style approach, that the proactive and strategic work (which more than 70% of the respondents say they desire) has to happen. The accounting talent constraints of the industry, including those impacting corporate tax departments, can’t be solved in the immediate short term. Departments will have to find the tools that can help them mitigate the problems that come from their lack of resources. There isn’t a preverbal silver bullet here, but the closest that comes to it will be an increased reliance on technology.
In the 2024 State of the Corporate Tax Department report, more than 50% of respondents said they felt their department was under-resourced (in both people and technology); yet, in another report — the Thomson Reuters Institute’s 2025 Corporate Tax Department Technology Report — more than 90% of respondents said they were optimistic about tax technology and a significant portion said they believed their technology budgets would increase.
Tax department leaders have also acknowledged their need to not only keep up with compliance work but to stay informed about the legislative priorities and potential changes in tax policy. This knowledge will enable businesses to align their tax strategies with legislative developments and optimize their tax positions — and perhaps, with the use of advanced technology tools, departments can do this work more efficiently, leaving time for their tax professionals to become more proactive in their work.
You can download a copy of the Thomson Reuters Institute’s 2024 State of the Corporate Tax Department report
