Spent several days in San Antonio at the TexFed Tax Institute.  Most of the discussion was about the Tax Cuts and Jobs Act (“TCJA”) after two years.   The main takeaway was how poorly written the law is.  If you recall the law was put together in about three weeks.  While the lowering of the corporate tax rate, has made us more competitive with other countries on the top line, the loopholes and limitations have not resulted in a significant rise in business activity in the United States.

Exciting opportunities created, such as opportunity zones, were drafted without consideration that real estate investment is typically made in pass through entities.  Two versions of regulations later, they still haven’t gotten it right.

Perhaps the worst provision of the TCJA is the elimination of the carryback of NOLs and the limitation of interest deduction to EBITDA now and just EBIT is a couple of years.  This was done because TCJA had to be done via reconciliation, and Congress had to find ways to keep the deficit hit to no more than $1,500,000,000,000 (which is absurd).  The problem is that these provisions will be devastating to distressed companies in the next downturn.  This will be like throwing gasoline on a fire.

Tax laws should be written deliberately with committees formed to develop underlying goals, and careful drafting to ensure consistency.  TCJA is ripe with inconsistencies and confusion.

Hopefully, all of these issues will be cleaned up over the next couple of years.  Or better yet, maybe we tear this one up and start over.