What was the most significant development in your region/jurisdiction's tax practice in the past 18 months?
COVID-19 and the related legislative activity are the most significant developments related to Deloitte's US Tax business this year. Across industries and sectors, companies are facing never-before experienced challenges and business issues, such as significant revenue contractions, staffing and supply chain inconsistencies and distressed debt considerations. To lessen the impact of the downturn on individuals and businesses, the United States Congress passed the massive tax-and-spending CARES Act package to provide economic relief to address the impact of the COVID-19 pandemic. In addition to direct cash payments for individual taxpayers and penalty-free, early access to retirement savings, the legislation also includes several significant business tax provisions, such as eliminating the taxable income limit for certain net operating losses (NOL) and allowing businesses and individuals to carry back NOLs arising in 2018, 2019, and 2020 to the five prior tax years.
In April 2020, Deloitte Tax identified the business areas that were most critical for our clients, which have been driving our focus for the immediate term as we work through the COVID-19 outbreak and response. These key areas are: transition to remote working; tax planning for cash needs; employee retention credit/payroll tax deferral; debt restructuring; and tax operating model considerations.
What was the most notable effect of that change?
The most notable effect of COVID-19 and the CARES Act remains to be seen. However, as business situations change Deloitte will continue to work closely with clients to carefully consider how the new law could impact their business plans and performance.
With additional coronavirus stimulus spending on the horizon, our professionals are helping financial executives and tax leaders understand how their organizations might be impacted. Using our state-of-the-art modelling tools, Deloitte Tax professionals are providing robust scenario analyses and customized reporting for new and existing tax provisions, and are working to develop recommendations and action plans for various scenarios.
Where is the market moving in this practice area?
Deloitte is continuing to help clients navigate through the uncertainty created by COVID-19 and the subsequent CARES Act. We see lots of movement towards planning how potential scenarios could affect the fundamentals of their business, reveal vulnerabilities, and even create new opportunities, and our professionals are helping our clients stay up-to-date and adaptable in the face of constantly changing conditions.
What kind of impact will this have on your work?
Deloitte is always in the practice of adapting our work to meet our clients where they're at. COVID-19 and corresponding legislation to mitigate the worst economic impacts of the pandemic have only heightened our focus on providing services and technology tools to meet our clients' evolving and unprecedented needs – and give them the confidence to make informed decisions during uncertain times. At Deloitte, we will use our expertise to help our clients navigate this complex legislative landscape and provide innovative solutions and meaningful insights that deliver real, lasting value.
Do you anticipate any significant legislative changes in the future with a material impact on tax in your region?
The United States has seen the enactment of several major pieces of legislation aimed at helping individuals and businesses cope with the health and economic hardships of the coronavirus pandemic. On the tax side, these new laws tend to focus on providing much needed liquidity to businesses and individuals. As the year progresses, it is possible we will see implementation of further efforts to use the tax code to assist coronavirus mitigation, response, and recovery, though the extent to which we will see bipartisan political cooperation continue is uncertain. Historically, law-making slows dramatically as we get closer to November's quadrennial presidential election, though it is possible the enormous challenges to individuals and businesses posed by the pandemic create something of an exception to that precedent.
How would you describe the tax controversy landscape in your region/jurisdiction?
Tax authorities in the Americas are continuing to transition to a centralized, more automated approach in selecting the highest risk taxpayers for examination. Driven by data analytics, tax examiners are utilizing an issue-focused approach in their audits. With the exception of taxpayers involved in aggressive tax planning, it is expected that tax authorities will no longer target specific industries or taxpayers for audit. Centralized decision-making and a perceptive deployment of limited resources should enable a more strategic approach to examinations. As a result of these changes, tax authorities have generally been more cooperative and transparent with taxpayers. We have experienced this collaborative interaction with senior leadership of the tax authorities as we work through the many operational, technical and procedural issues stemming from the recent CARES Act legislation enacted due to the COVID-19 pandemic.
Tax authorities in the Americas continue to publish new and updated guidance related to recent tax legislation (TCJA) which has resulted in added uncertainty and challenges to the tax preparation process, as well as new areas subject to eventual scrutiny by tax examiners. Our tax controversy specialists are supporting compliance personnel in tax preparation and are focusing more on the examination process with the goal of trying to resolve issues before administrative appeals or litigation become necessary. As a result, it is essential to have tax controversy specialists who are technically proficient, procedurally savvy, and know how and when to elevate an issue to the appropriate levels within a taxing authority. Clients are seeking such competencies, particularly as issues become more difficult to resolve at the examination level.
Is the global drive towards regulation going to affect tax practice? If yes, in which areas?
Over the past few years, governments around the world have been looking at how the global digitalization of the economy is changing business models and whether that has implications for tax. Driving much of the attention about taxation is the question of whether multinationals are "paying their fair share," in terms of recognizing income earned from the markets they serve. For businesses, it's important to understand that, although the focus began with digital business models, other multinational operations involving intangible value not linked to digital activities are also being looked at, especially if they involve high-margin activities viewed on a global basis.
What do you see as direct impact of COVID-19 in your practice?
See response to Question 1.
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