Changes introduced by the Tax Cuts and Jobs Act were expected to mainly affect companies with large international footprints. As it turned out, because of the “TCJA dependency” problem, tax reform creates complexities for companies with small global footprints, too.
Can Spreadsheets Keep Up
Prior to TCJA, it was easy for companies with negligible subpart F income and fewer than 20 controlled foreign corporations (CFCs) to manage historical E&P data using spreadsheets. This approach worked because subpart F income and required E&P tracking were isolated calculations disconnected from other tax reporting. Tax teams could carve out data, run calculations in Excel®, drop results into federal forms, and move on. TCJA changed all of that.
TCJA Dependency Defined
Now, overlapping data can simultaneously influence calculations for Global Intangible Low Tax Income (GILTI), Foreign Derived Intangible Income (FDII), and Base Erosion and Anti-Abuse Tax (BEAT). These data dependencies mean that a change to any single attribute can change multiple tax calculations.
Updates to foreign and domestic data impact taxable income. The way Tested Income, QBAI, DTIR, Specified Interest, and GILTI Inclusion impact taxable income can then have a favorable or unfavorable effect on deduction Eligible Income, QBAI, Deemed Intangible Income, Foreign Derived Deduction Eligible Income, and FDII deduction. It’s all connected.
With uncertainty around future state requirements, storing data for federal and state reporting in one location—with detail back to the source—clearly shows how changing data impacts taxable income.
A single system for tax automatically takes dependencies into account by using up-to-date compliance and provision data in all calculations. Time is saved and errors avoided by eliminating the endless loop of updating, checking, and rechecking.
A centralized tax system also overcomes the need to port data back and forth between applications for reporting—and provides immediate access to trustworthy information to use for strategizing and modeling. In the end, gaining time for high-value planning—instead of losing it to low-value data shuffling and reconciliations—minimizes risk, boosts confidence, and enhances the tax department’s performance.