2017 Tax Cuts and Jobs Act – Impact on Mobility Programs

Tax Alert - December 27, 2017

Jen Stein, Managing Director

GTN Great Lakes
phone: +1.312.698.9864 | email: jstein@gtn.com

On November 2, 2017, H.R. 1, the “Tax Cuts and Jobs Act” was released. Fast forward to December 21, 2017, and the bill, now known as “An Act to provide for reconciliation pursuant to titles III and V of the concurrent resolution on the budget for fiscal year 2018” was presented to President Trump for signature. President Trump signed the bill into law on Friday, December 22, 2017. The broad changes will likely have a direct impact on the mobility industry.

Some of the actions global mobility managers can take now and in the near future are:

Communications

Program managers should consider creating a communications action plan. This plan should include the timing and type of communication to assignees, business units, finance, and other global mobility stakeholders. The communication to assignees could include:

For business units and finance, the communication plan may be a heads-up for updated cost projections and accruals.

Potential Policy Review and Revisions

Many of the changes in the proposed tax reform may directly affect an individual’s hypothetical tax. For example, with the increase in the standard deduction many individuals may no longer be able to utilize itemized deductions. Some equalization policies allow for itemized deductions based on a percentage of income or combined with a percentage of housing norm and hypothetical state income taxes. While these deductions may still be relevant, companies should review their equalization policy language to ensure it does not conflict with the new legislation.

Due to the change in moving expense exclusion/deduction, companies may also need to review their policy to determine next steps. Some questions to consider include:

Budgeting

One of the first questions a global mobility manager is likely to receive is “What will this due to my paycheck?” As you can imagine, it will take some time to review all of the details in the new tax bill. In addition, payroll and tax calculation tools will need time to implement the changes. Thus, it will be very likely that paychecks will not be affected immediately. Global mobility managers will need to convey that message to their assignees and determine the right time to update hypothetical withholding.

Cost projections and accruals should also be reviewed. Companies will need to decide when and if they will update the projections. Given the tax bill will affect each individual differently, it will be difficult to predict a generalized trend for global mobility programs. Thus, we encourage program managers to work with their tax teams to determine the cost impact to the organization.

Expense Management

Due to the suspension of the moving expense exclusion and deduction, action may need to be taken before December 31, 2017. By working with your relocation management firm or internal accounts payable, moving expenses paid/reimbursed in 2017 would be excluded from taxable income. If however, moving expenses are paid/reimbursed after December 31, 2017, the company will either need to gross up these amounts or inform the employee of the tax impact. Decisions will need to be made internally as to whether or not the company will gross-up moving expenses. These decisions will likely coincide with a review of your policy.

In short, the new tax bill will certainly create ongoing discussions in 2018. We will continue to bring you updates and insights as more guidance is announced regarding this significant legislative change.

We’ve prepared a summary of the tax law changes for individuals in a separate bulletin. You may access the overview below:

2017 Tax Cuts and Jobs Act Overview

If you have additional questions, please contact Jen at jstein@gtn.com or at +1.312.698.9864.

The information provided above is for general guidance only and should not be utilized in lieu of obtaining professional tax and/or legal advice.

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