Planning tips for the year-end tax strategies.

The potential tax reform makes year-end planning even more important for public companies. Your shareholders expect you to understand and respond to the risks and opportunities created by the legislative process, and the possibility of a substantial cut in the corporate rates creates unique planning opportunities. Public companies should look for ways to accelerate deductions into 2017 while rates are high, and defer income into future years when rates might be lower.

Read about our planning tips to implement this and other strategies.

Perform an accounting methods review – IRS rules provide many different methods for recognizing certain types of income and expenses. Most public companies employ dozens of separate accounting methods on everything from inventory and rebates to software development and advanced payments. Consider a comprehensive review of all your accounting methods. Identifying a more favorable method can allow you to accelerate a deduction into 2017 while rates are high and defer income into a future year when rates might be lower. The IRS has identified more than 150 accounting method changes that can be made automatically, and there are scores of others you can change after receiving IRS approval.

Accelerate your capital cost recovery – Commercial real estate is depreciated over nearly 40 years, so one of your biggest opportunities for tax savings might be identifying and reclassifying building assets that can be depreciated using shorter lives. A cost segregation study can often identify scores of building components that can be segregated and depreciated more quickly. It is just as important to understand whether any of your capital improvements qualify as repair or maintenance costs that can be immediately deducted instead of depreciated. New IRS rules allow many common expenses that are treated as improvements for book purposes to be deducted as repairs for tax purposes.

Deduct bonuses before the year’s end – The potential for a corporate rate cut next year means that it may be more valuable to take deductions for employee compensation this year instead of next year. You may have many opportunities in your compensation and benefit plans, and one of the best is employee bonuses. The accrual method of accounting used by public companies allows you to take a deduction in 2017 for bonuses paid within the first two and a half months of 2018 if you meet certain conditions. The bonuses must meet the “all-events” test. For bonuses, this typically means that the full bonus pool must be set before year-end.

Consider a reverse audit for sales and use tax refund: Companies that make frequent or large purchases resulting in hefty sales and use taxes should consider a sales and use tax “reverse audit.” Many states offer exceptions for property both for machinery and property bought for further manufacture or resale. You may be eligible for a refund for missed exceptions, misapplied rates and overpayments.

Perform a property tax assessment: Businesses have the right to challenge the valuation a state or local government places on their property in order to assess it. A property tax assessment involves analyzing nearby or similar locations to reveal property value overestimations by state and local authorities that can be successfully challenged to lower taxes.