Spring 2018 issue of Horizons

INDUSTRY UPDATE PRIVATE EQUITY

New Tax Law Won’t be a Deal Killer for Private Equity by Jeff Naeger, JD, CPA & Eric Janson, CPA

P rivate equity firms will need to code included in the Tax Cuts and Jobs Act (the Act) will alter the way buyout targets are valued, particularly with respect to the valuation of tax attributes and basis step-ups. It also remains to be seen if some of the advantages will come out of leveraged buyouts. Regardless, numerous provisions in the new tax law will influence financial analysis and tax diligence for deals occurring in 2018 and beyond. rethink the way deals are done. The sweeping changes to the tax

Corporate Tax Rate and Pass-Through Deduction The headline to the Act may, for some, be the reduction in the corporate federal tax rate from 35% to 21%. No more brackets, no more bubble taxes, just a flat and simple 21% tax rate. The rate is also reasonably competitive with those imposed on corporations by our foreign trading partners. For portfolio companies taxed as corporations, the double taxation issue still exists, but the lower corporate rates generally will help close the gap between corporate and pass-through structures.

New Tax Law Won’t be a Deal Killer for Private Equity

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