Steps companies should take now to prepare for major tax legislation in 2025

The Republican-led Congress that wrote the law had to meet strict budget requirements to get the bill enacted, and to keep costs down they included a sunset of the individual taxpayer provisions after 2025. That means that unless Congress steps in, most taxpayers – many of whom are also voters – will face unexpected and unwelcome tax increases in 2026.

Because most members of Congress will want to head off some or all of the tax increases on their constituents, we expect Congress – regardless of the election results – to consider a tax bill next year. But what might be included in that tax bill will depend on who wins the presidency and on whether either party has unified control of Congress or if control of Congress is split.

Both parties are interested in extending the individual tax cuts, albeit for different groups of taxpayers. And while the corporate rate is “permanent,” Democrats, and some House Republicans, have expressed interest in raising it. Republicans and Democrats alike have also talked about modifying the new international system – whether to address concerns with the US law or to react in some way to changes being made through the global minimum tax project initiated by the Organisation for Economic Co-operation and Development (OECD). Both parties want to address the expiration of the pass-through deduction. And both parties are wrestling with the massive $4 trillion-plus cost of canceling the tax increases.

All this means that business taxes are on the table for 2025 – and not just those covered by the TCJA. Other business tax changes are fair game too. So, with the near certainty of tax legislation in 2025 but lots of uncertainty about how business taxes could change, what should business leaders be doing to prepare?

Action steps

First, establish and order your priorities. Review your company’s tax profile and model various scenarios to gauge the potential impact on your company’s operations and finances. Business leaders shouldn’t assume they know what their tax priorities are – the modeling might turn up some surprises. Once you know the relative impacts of policy changes, consider how your business should smartly deploy limited political capital. For example, you may find that the corporate income tax rate is a significant issue, but that your business also is encountering unique problems with another tax proposal. Because you know that the broader business community will carry the corporate rate arguments, you may want to make solving your company-specific issues a higher priority.

Next, revisit your company’s advocacy plans to make sure your company’s interests are fully protected. The coalitions and trade associations that have always represented you in Washington are fine for broad issues. But when complicated and expensive tax changes are being discussed, especially given increasingly unique company and industry tax characteristics, companies need to be clear-eyed about their advocacy resources. Business leaders should take this time, before the next Congress begins working on the tax legislation, to make sure they have a robust approach in place and be prepared to pivot if needed.

Finally, your tax teams should be thinking about appropriate steps the company can take in light of possible tax law changes as well as how proposed changes could alter the economics of possible future business plans.

For example, in an environment in which tax rates increase, companies may want to consider accelerating income and deferring deductions, depending on their specific situations. Many factors drive the decision-making process, and companies need to work with their advisors to map out an approach that appropriately reflects their specific situation and their broader business goals.

Companies actively considering business transactions may want to model both current law and possible future tax law changes. The results may point to alternative approaches that better protect the business and the economics of future plans, and provide business leaders with more complete information.

With the uncertainty that exists around how the expiring TCJA provisions will be addressed, which business taxes might be changed in the US or through countries implementing OECD changes, the tax policy environment over the next few years will be increasingly complicated for businesses. Companies that approach “Taxmageddon” with a focus on how potential changes might affect them and a plan for addressing those impacts, and that stay informed and engaged, will be equipped to navigate the complexity with the fewest unpleasant surprises.