Summer 2015 CFO Survey: CFOs on tax issues

[Download the PDF of entire CFO survey]
[See landing page for entire CFO survey]

Grant Thornton LLP conducts its CFO Survey twice a year with CFOs and other senior financial executives across the United States. The summer 2015 survey took place between June 23 and July 22, with 912 CFOs and comptrollers participating. The survey has a confidence interval of +/- 3.24% at a 95% confidence level. Questions ranged from the state of the economy to the effects that current regulation changes are having on business growth. The following is an excerpt dealing with CFOs' views of tax issues.

When it comes to regulation changes, nearly half of executives (45%) are simply worried about the increasing costs associated with compliance. Thirty-one percent feel the biggest challenge lies in keeping up with the volume and complexity of regulations. These views are consistent across all business types and sizes.

Figure 1: Challenges to business growthThe U.S. Congress is attempting to address tax reform. One issue at hand includes the fact that so-called “tax extenders,” most notably the research tax credit, bonus depreciation and the production tax credit, expired at the end of 2013. However, before the end of 2014, Congress approved the Tax Increase Prevention Act of 2014. This law extended these tax extenders retroactively for one year, allowing businesses to claim these incentives on their 2014 returns filed in 2015. The question remains, Will the 114th Congress revisit this act and allow the use of these tax benefits on 2015 filings in 2016?

“In past years, negotiations over the tax extenders bill dragged on into December -- this is very troublesome and creates major headaches for U.S. businesses,” said Mel Schwarz, partner and director of tax legislative affairs in Grant Thornton’s Washington National Tax Office. “Lawmakers should be able to agree on at least a two-year retroactive extension of nearly all the provisions, with a one-year extension as an absolute fallback.”

Over a third (37%) of executives are acting as though the extension will not occur. Twenty-six percent are assuming some amount of risk it will not occur, while 9% assume fully that the extension will occur.

"Especially striking is the fact that more than half of those who actually use the provisions do all their planning with the assumption they won’t have them. Another 17% -- 5% greater than CFOs overall -- assume significant risk in their planning that they won’t have them,” added Dustin Stamper, director in Grant Thornton’s Washington National Tax Office. “That’s a huge blow to the incentive effects of the provisions -- and a major barrier to growth.”

Figure 2: Retroactively restored provisionsAmidst tax reform discussions, it has been suggested that combining lower tax rates with the elimination of existing tax benefits would encourage additional growth. Thirty-six percent of executives disagree with this viewpoint. Eighteen percent feel the rate would have to come down to 15% or lower for additional growth to actually take place. Only 3% say it can stay as high as 30% for growth to take place.

Compensation and benefits
Seventy-eight percent of those that expect an increase in revenue growth in the near future report plans to hire new talent to support their growth. Moreover, 67% say they plan to leverage existing talent by helping them develop their skills. Only 21% of executives’ plans for the future include using contract workers.

Regarding hiring changes over the next six months, the majority of all executives (52%) say they don’t expect their business to change its hiring rate. A large amount (40%) say their company will increase its hiring rate, while a small amount (8%) say they expect it to decrease. As expected, companies that foresee an increase in growth plan to increase hiring rates, while those that expect a decrease in growth plan to decrease hiring rates. The amount that expect an increase is slightly lower than it was one year ago (40% compared to 46%), but much greater than it was in the spring of 2013 (22%). At that time 67% expected hiring to remain the same.

When it comes to changes in compensation for their employees, executives report notable increases for only salaries, health benefits and bonuses (66%, 41% and 30%, respectively). Nearly all executives report there will be no changes to stock options, 401(k) matches, or retirement contributions compared to last year (74%, 86% and 85%, respectively). Only 15% of executives report that they anticipate decreases to bonuses. For executives that expect a decrease in revenue growth, only 38% report an increase in salaries and 38% in health benefits. Most executives share plans to keep things the same for 401(k) match and retirement contributions (83% and 70%, respectively). Decreases in bonuses and stock options, respectively, make up 47% and 27% of executives’ plans.

Dustin Stamper
Director, Washington National Tax Office
+1 202 861 4144

Eddie Adkins
Partner, Washington National Tax Office
+1 202 521 1565

Tax professional standards statement
This content supports Grant Thornton LLP’s marketing of professional services and is not written tax advice directed at the particular facts and circumstances of any person. If you are interested in the topics presented herein, we encourage you to contact us or an independent tax professional to discuss their potential application to your particular situation. Nothing herein shall be construed as imposing a limitation on any person from disclosing the tax treatment or tax structure of any matter addressed herein. To the extent this content may be considered to contain written tax advice, any written advice contained in, forwarded with or attached to this content is not intended by Grant Thornton LLP to be used, and cannot be used, by any person for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code.

The information contained herein is general in nature and is based on authorities that are subject to change. It is not, and should not be construed as, accounting, legal or tax advice provided by Grant Thornton LLP to the reader. This material may not be applicable to, or suitable for, the reader’s specific circumstances or needs and may require consideration of tax and nontax factors not described herein. Contact Grant Thornton LLP or other tax professionals prior to taking any action based upon this information. Changes in tax laws or other factors could affect, on a prospective or retroactive basis, the information contained herein; Grant Thornton LLP assumes no obligation to inform the reader of any such changes. All references to “Section,” “Sec.,” or “§” refer to the Internal Revenue Code of 1986, as amended.