Question

Access the 2017 Form 10-Ks for General Motors, Inc. and Berkshire Hathaway. What was the impact of the Tax Cuts and Jobs Act on their income tax provision for 2017? Why was the impact in opposite directions (i.e., in one case the provision increased and in the other it decreased)?

To access the Form 10-Ks, go to sec.gov. Input the company's name under "Search EDGAR”. You will find the detailed financial statements in each company's 10-K, a filing required by the SEC.

Answer 1

Tax Cuts and Jobs Act caused reduction in the corporate income tax rate from 35% to 21%. In Berkshire's case, the corporate tax cut was a big benefit that far exceeded the added cost from the deemed repatriation tax. Berkshire Hathaway's direct income tax benefit from tax reform in 2017 was $28.2 billion.

Berkshire's annual report says that upon the enactment of the tax reform law, the company recorded a reduction $35.6 billion in deferred income tax liabilities because of the drop in the corporate tax rate.

Because of the law tax rate and accelerated depreciation many companies had benefits. On the other hand, because of interest expense deduction for highly leveraged companies and Repatriation tax many other companies had downward impact.