The year 2018 promises to be a robust one for accounting firms in the San Fernando Valley area, and the big driver of the windfall of work is, of course, the new federal tax law.
The tax reform “is a great opportunity for our clients,” said Greggory J. Hutchins, partner at Holthouse Carlin Van Tright LLP, a CPA firm with 11 offices, including Encino, Westlake Village and Camarillo. However, he added, “It’s going to take their companies’ resources to take on these analyses.” (Holthouse Carlin ranks No. 2 on the Business Journal’s accompanying list of accounting firms with 64 CPAs in the Valley area.)
Since winning Congressional approval in late December, the Tax Cuts and Jobs Act — which reduces the corporate tax rate from 35 percent to 21 percent and includes a more generous repatriation provision for businesses with overseas earnings — has been the talk of the figurative town.
“Tax reform has been a major piece of most conversations with most clients. They are continuing discussions,” said Jay Mangel, the managing partner in Los Angeles and Orange County at Crowe Horwath LLP, a 75-year-old firm which ranks No. 5 on the list with 44 CPAs locally.
The law’s effect would seem to be simple – how hard can cutting tax rates be? – but it quickly becomes more complicated once the specifics of the law are applied to individual cases. Worse, those specifics aren’t settled yet. The law has yet to be translated into regulations by the Internal Revenue Service. So the law is in effect this year, even though many of its provisions remain unclear.
That means there’s lots of decisions up in the air and yet to be made. For example, company owners and managers must figure out whether to withdraw earnings or leave them vested in the company or even whether to sell or hold onto companies, Hutchins said.
E. Todd Van der Wel, partner in charge at Moss Adams in the firm’s downtown Los Angeles and Woodland Hills offices, said tax reform’s effects will be wide-reaching. (Moss Adams ranks No. 32 with 13 CPAs locally.
“The tax act is going to create a lot of disruptions,” Van der Wel said. “This is the first time in 30 years that this has happened. It happened on very short order over the holidays. A lot of tax folks were working over the holidays.
“A lot of interpretation is going on to figure out how the act is going to (play out),” he continued. “It’s going to take time to align all the pieces in the rules.