Tax Legislative Outlook
Corporate taxes are one of the hot topics in today’s public policy debates. Some people feel U.S. companies pay too little in taxes, while corporate leaders often feel they pay too much, compared to other jurisdictions. Leo Chomiak (MSTX '87), an international tax partner with Grant Thornton LLP, moderated the ForUM panel discussion on “Tax Legislative Outlook,” with two South Florida tax professionals.
“Tax planning is crucial to any company,” said John D'Arpino (BBA '89, MSTX '91), vice president for mergers and acquisitions, tax structuring and planning at Sheridan Healthcare, a privately held entity. “Our company is active in 48 states, so we have to look at those tax rates, along with employment taxes and income taxes. So, you have to plan ahead and help your accounting team address these challenges.”
As for tax policy reform, D’Arpino said he would like more consistent application of federal and state rules. “It would be nice if the Internal Revenue Service would step in with rulings on major health care issues,” he said. “One example is payroll taxes for physicians who are salaried employees versus those who are considered independent contractors.”
The federal government needs to reduce corporate tax rates to comparable levels with other countries in the developed world, according to Marcel Maier, vice president, tax, The GEO Group Inc., a Boca Raton-based operator of correctional facilities that reorganized as a U.S. real estate investment trust (REIT) in 2013. “Our national tax rate of 35 percent is much higher than countries like the United Kingdom, which is only 20 percent,” he said. “Many U.S. companies also have to pay state income taxes.”
Maier said turning The GEO Group into a REIT meant that its real estate business is no longer subject to tax. “However, we spend a lot of time looking at sales and use taxes, property taxes and employment taxes,” he said. “Effective tax planning is all about the details – looking at the financial data and understanding the implications.”
Chomiak asked the panelists to comment on an IRS regulation designed to curtail “inversion transactions,” when a foreign company acquires a U.S. company and moves its headquarters to a lower-tax jurisdiction. “That adds another layer of complexity to an already complicated business,” said Maier. “Some of our companies are fully taxable while others are not. We have to deal with 50 sets of state tax rules, and we have foreign operations as well, so we have to be very careful in doing our tax planning.”
In response to another question, regarding the disclosure and documentation requirements for intercompany debt, D’Arpino said, “This is a huge issue in our tax planning as we have about 330 domestic entities. Fortunately, we have a proactive CFO who brought us into the process at an early stage, rather than looking at tax as an afterthought.”