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Deferred Income Taxes And The Tax Cuts And Jobs Act

The Tax Cuts and Jobs Act (TCJA) is hot off the presses and contains many provisions which will impact taxpayers in 2018. In addition, the change in corporate tax rates could also impact many regular (or “C”) corporations immediately.

Regular corporations recognize deferred tax assets and liabilities related to temporary differences between book and tax income. These deferred tax assets and liabilities are calculated using an effective tax rate at which these temporary differences are expected to reverse. The TCJA may cause a significant adjustment to deferred tax assets and liabilities resulting in an unexpected impact on 2017 earnings for regular corporations.

A recent Forbes’ article estimated that S&P 100 companies could see as much as a $120 billion net positive earnings’ impact from this change. This impact reflects companies with a positive impact of $200 billion, offset by companies with a negative impact of $80 billion.

Put simply, regular corporations with a net deferred tax asset could expect to see a charge against earnings based on the TCJA, and those with a net deferred tax liability could expect to see a benefit to earnings. Regular corporations should consult with their applicable Blue & Co. tax advisor for more information on this impact.


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