As I and many others start to consider the disclosure implications of the Tax Cuts and Jobs Act, I’ve begun a list of possible disclosure related topics:
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Re-measurement of deferred tax assets. As discussed in my post last week, a re-measurement will not trigger an obligation to file under Item 2.06 of Form 8-K. However, it is possible that a re-measurement may affect compliance with an issuer’s financial covenant, a trigger under Item 2.04 (Triggering Events That Accelerate or Increase a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Agreement).
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Regulation FD. As pointed out by Gibson Dunn & Crutcher and noted by Broc Romanek, issuers need to be mindful of the possibility that their public announcements will trigger an obligation to furnish a Form 8-K pursuant to Item 2.02.
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Section 162(m). Although the SEC eliminated in 2006 the specific requirement to discuss Section 162(m) in a company’s Compensation Discussion & Analysis, the SEC made clear that a discussion of the statute now falls within the broader ambit of tax and accounting polices material to compensation decisions. Existing discussions of Section 162(m) will need to be updated and those companies not currently discussing the statute may want to consider the impact of the TCJA changes to Section 162(m).
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MD&A
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Deferred tax asset re-measurement. (see above).
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Limitation on interest deduction. A limitation on interest deductions may be a known trend or uncertainty. If the company is a real property trade or business (as defined in IRC Section 469(c)(7)(C)) that elects out of these limitations, will changes in depreciation periods be material?
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Changes in tax rates. Does the company expect a material change in its historical effective tax rate?
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Effects of changes in tax law on customers. Consider, for example, whether the limitations on deductions of state and local taxes can be expected to have a material positive or negative impact on the company’s business.
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Repatriation. Will the new law affect the company’s plans with respect to repatriation of foreign profits?
