Editors' pick: Originally published March 3.
Tax reform is a hot topic in corporate earnings.
The issue has been discussed in hundreds of earnings calls since House Republicans announced their "Better Way for Tax Reform" blueprint in June 2016, according to a new analysis from Businesses United for Interest Loan and Deductibility (the BUILD Coalition). The border adjustment tax, a measure that taxes imports and exempts exports, has been the most common topic of discussion. Interest deductibility and profit repatriation have been major items on the agenda as well.
The BUILD Coalition combed through earnings calls transcripts of publicly-traded companies from July 14, 2016, to February 28, 2017, and found that tax reform has been discussed in 471 calls.
A quarter of those tax-related discussions focused on the border adjustment tax, while about 15% were tied to interest deductibility and repatriation.
It comes as little surprise that border adjustability would be a major theme -- the measure has generated controversy in Washington and on Wall Street.
Detractors say the tax creates an unfair playing field and would ultimately result in higher prices for consumers. Proponents say the measure is a necessary revenue-raiser in a tax plan that reduces corporate and individual tax rates. Despite concerns it might adversely affect importers and boost exporters, they argue currencies would adjust to balance things out.
Retailers have come out in fierce opposition to the border adjustment tax, forming a coalition called Americans for Affordable Products to oppose it. Members include AutoZone (AZO) - Get Report , Nike (NKE) - Get Report and Walmart (WMT) - Get Report . Boeing (BA) - Get Report , Oracle (ORCL) - Get Report , Pfizer (PFE) - Get Report and other exporters have created the Made in America Coalition to support it.
Jack Fusco, CEO of Cheniere Energy (LNG) - Get Report , in the company's fourth-quarter earnings call said "to the extent exports are favored we're in a pretty good spot." He said the company had been in communication with the House Ways & Means Committee, which is behind the GOP tax plan, "trying to get our business treated favorably if they want to treat exports favorably."
On General Motors' (GM) - Get Report fourth-quarter earnings call, CFO Charles Stevens said the border adjustment tax is just one of "a number of moving pieces" in tax reform. "As you can imagine, very, very complicated dynamic with supply footprint, manufacturing footprint, long lead investment, so a number of moving pieces here that we want to participate in and engage in around transition timing and other aspects of this," he said.
Interest deductibility was a commonly-discussed topic as well, perhaps surprisingly more than repatriation. The GOP tax plan disallows businesses to deduct net interest expenses. The BUILD Coalition is dedicated to preserving it.
Some utilities, energy and telecommunications companies have expressed concern about the potential elimination of interest deductibility in earnings calls.
AES Corporation (AES) - Get Report CEO Andres Gluski said in the company's fourth-quarter earnings call it would have "the most negative impact" of any item in tax reform. Duke Energy (DUK) - Get Report said it would permanently affect the cost of capital to customers, even with a lower corporate tax rate. Charter (CHTR) - Get Report discussed the potential effect on infrastructure building.
Repatriation has also been a topic of interest. The House plan would allow companies to bring back foreign profits at an 8.75% rate for cash and cash-equivalent profits and 3.5% on other profits.
Apple (AAPL) - Get Report CEO Tim Cook discussed the potential for a repatriation tax holiday and its effect on the more than $200 billion the company has in cash overseas in its first-quarter 2017 earnings call. "I am optimistic given what I'm hearing that there would likely be some sort of tax reform this year, and it does seem that there are people in both parties that would favor repatriation as part of that," he said. "So I think that's very good for the country and good for Apple."
He declined to comment on what Apple would do with the extra cash.
Talk about tax reform isn't going away anytime soon, as Washington lawmakers and the Trump administration promise a major overhaul sooner rather than later.
Treasury Secretary Steve Mnuchin said in an interview with Fox News this week that he expects to have a tax bill by August -- a timeline he admits is aggressive. Others have suggested legislation might not come until 2018.
In other words, expect chatter of tax reform on earnings calls for a while.
"We have a team of over 100 people in the tax department...that are crunching numbers 24/7," Mnuchin said.