Key business tax issues to watch in 2016

Ongoing tax-reform developments in a presidential election year, greater compliance demands and a focus on tax transparency will make the tax environment in 2016 a very challenging one for company stakeholders.

In 2016, it is critical for decision makers to stay informed on a number of tax issues in the United States and abroad. These international, federal and state tax issues could affect company operations and, potentially, corporate reputations. To provide the best value for their companies, leaders will need to stay informed and consider a range of tax scenarios when making business decisions.

Looking ahead, here are some action items for executives in 2016:

Keep a close watch on business tax reform developments

While the prospect of tax reform in 2016 are uncertain, it remains a priority for members of Congress, and business leaders should keep a close watch on the continuing debate. Interest in reducing tax-code complexity and stimulating competitiveness, coupled with developments that bring new leaders and influencers into the process, creates the possibility for action on some version of reform in the coming year. One area to watch with some common ground is on the international front. With the presidential election coming into full swing, executives should stay engaged and monitor proposals, and consider engaging with members of Congress on policy direction.

Monitor ongoing calls from regulators for heightened visibility into corporate tax arrangements.

The Organization for Economic Cooperation and Development’s Base Erosion and Profit-Shifting project, emphasizing enhanced tax compliance in the 21st century, is in the implementation stage. Companies need to monitor the steps taken by individual countries to adopt BEPs recommendations and then determine their responses, such as preparing to meet the enhanced transfer pricing documentation and reporting requirements, which may require significant internal investment or even changing how you operate.

Of particular importance will be country-by-country reporting, which will require the parent company of multinationals to provide a single country-by-country report to the government in which they are resident and include detailed financial information about their operations in every jurisdiction in which they operate.

Keep an eye on state tax developments.

With the presidential election and a number of gubernatorial elections taking place, the coming year should be a relatively quiet one for state tax law changes. But executives should be attentive to some pending developments. In certain states, particularly oil and gas producing states, fiscal stress may force lawmakers to adopt tax increases or “loophole closing” measures. Additionally, Like Colorado’s “Amazon Tax”, a number of states are considering legislative proposals implementing remote-seller sales-tax collection responsibilities, especially in light of Colorado’s recent win in the 10th Circuit. Finally, in certain states, such as New York, Pennsylvania, and Tennessee that have made meaningful changes to their corporation income tax over the last couple years, the state taxing authorities are just starting to issue guidance on the new laws.

Be mindful of payroll tax reporting and withholding rules to stay compliant.

Today’s mobile workforce makes it necessary for companies to track employees working across borders, internationally and domestically. Neglecting to properly report and withhold taxes associated with mobile employees can put a company at risk of losing foreign tax credits and corporate deductions, overpaying liabilities and incurring penalties. Individuals also risk financial penalties for failing to pay taxes or for not filing the required documents with the appropriate tax authorities.

Tax authorities also are implementing technology to make it easier to detect noncompliance.  Employers will need to implement new processes and technology to meet global and domestic tax-reporting obligations with respect to mobile employees, preferably before issues arise.

Michael D. Moore is a tax partner in the Denver and Boulder office of KPMG LLP. He can be reached at mmoore@kpmg.com

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