What Will Your Company Do with its Tax Cut?

By |2017-12-20T16:56:00+00:00December 4th, 2017|

We know its coming – tax reform legislation. The President continues to promote it, the Senate just passed it, and now we have tax plans in both the House and Senate to be negotiated and reconciled. And corporate tax reform is a big part of equation. So, our question to you is – what is your company going to do with its tax cut?

The answer should be: expand our Corporate Social Responsibility (CSR)  investment.

What we know

President Trump wants tax reform legislation completed this year. House and Senate versions currently differ, but it seems pretty clear that tax cut reforms will impact the business community in several ways:

  • The highest tax brack for corporations will be reduced from 35% to 20%
  • Small business “pass-through” tax rates for LLCs and s-corps, where profits and losses pass through to the tax returns of the individual owners and so are tied to individual tax brackets, could be capped at 25%.
  • And perhaps the most significant short term impact from tax reform could be felt from lowering rates on corporate profits earned overseas in order to encourage the rapid repatriation of capital to the U.S. for investment into our economy – as much as $1 trillion or more!

The deals are not done yet, and there is plenty of legislative work to do. Still, talk to your CFO or corporate tax accountants and you will quickly learn that they are very busy figuring out what this means for company finances.

Just as important, however – every one of our CSR practitioners in Corporate America should be just as busy … right now. So I will ask the question again: What will your company do with its tax cut?

Companies need tax cuts?

It is tempting to get caught up in the debate over who needs what when it comes to tax cuts. And it is even more tempting to leave the discussion about what to do with a tax cut to the corporate CFOs and tax accountants. Tax legislation is heady stuff, and tax benefits require a bunch of financial, technical analysis. So just leave it all to the financial wizards to work it out. Right?

Wrong!

Corporate tax cuts will have two primary impacts on our companies. The first is obvious: corporate cash flow will improve. This is the part that the CFOs are paying attention to right now. Okay.

The second impact, however is less obvious, but just as real: corporate reputations will suffer in the eyes of many consumers. Why? Because there is a very real narrative in this country promoted by too many corporate critics that companies are “rich”, they cheat the little guy, and “the rich” don’t need tax breaks.

Our advice to you: don’t debate that narrative. Don’t take the bait.

Instead, we want to encourage every company to combat such perceptions by focusing on something you can control – your reputation. And the weapon to fight back with is your CSR investment.

So, CSR professionals, this is your opportunity to lead.

As companies grow and cash flow improves, leadership has choices to make: either (a) invest the additional cash flow into the company, (b) return cash to your investors, or (c) both. Let’s look at these options more closely, and – more importantly – let’s look through the lens of CSR.

Investing in your company

What investments would you make for your company if you had more cash? Your C-suite is talking about this right now. For example, would you:

  1. Invest in your people?
  2. Invest in plant and equipment to make it more efficient so that you could reduce the cost of, or waste associated with, production?
  3. Target growth markets with potential to increase sales of your products and services?
  4. Enhance your brand in order to improve customer loyalty?

If you answered “yes” to one or more of the above questions, then you need to expand your investment in CSR.

Today’s CSR has evolved into a broad landscape that touches almost every facet of a company. This is what makes CSR such a compelling answer to our question about the tax cut.

  • Employee engagement strategies and activities are necessary to attract and retain the best talent.
  • Sustainability initiatives help businesses produce more widgets using fewer resources, while managing plant and office facilities to use less energy.
  • Strategically planned corporate philanthropy bridges the gap between corporate missions, your products and services, and community impact.
  • And finally, brand is everything to a company. Whether we listen to compelling research by Cone or Nielsen, or we consider the boom in B-corps, the data continues to affirm that consumers buy from companies with a demonstrated commitment to the people and communities in which we work and live.
Paying a dividend? Do more!

Maybe your company is considering a return to investors. Turning profits into dividends isn’t the problem. The problem is the corporate critic who argues that companies are cold, faceless institutions that just want to get rich … so tax cuts make the rich richer.

Expanding your CSR investment – literally, your footprint across the communities in which you operate – is the answer. CSR quiets the critics. Do good with some of that tax cut. In other words, as you return more value to your investors in the form of dividends, return more value to your employees and your communities through CSR.

Bringing it home

Attention CSR professionals: Tax cuts are coming. Do NOT leave it to the bean counters to tell you what to do with savings. Get out in front and lead. The future success of every company depends on it.

Companies that invest in CSR are investing in their employees, their communities and their brand. That makes CSR the perfect trifecta. There are plenty of next steps to consider: expand a Signature Program, re-evaluate existing CSR programs, survey employees and stakeholders to ask them what they believe is important to your brand, upgrade your CSR and B-corp reporting … you get the idea.

And be sure to promote CSR as part of your brand NOW – don’t wait to be on the receiving end of unfounded criticism. Be proactive, not reactive. The tax cuts are coming – are you ready?

Never forget – CSR matters – and it matters now more than ever. Need some help figuring this out? That is why CSR Matters is here – contact CSR Matters today!

About the Author:

A Principal at CSR Matters, Gary has 25+ years of experience working in Corporate Social Responsibility, including nonprofits, software development and the financial services industries. "It's a labor of love. I have a number of professional interests, and they all intersect with CSR." Over the past several years, he has been actively involved in the acquisition, growth and consolidation of a number of companies in the CSR space, including AmeriGives, Good Done Great, WPG Solutions, and Dexterity Ventures, plus donor advised funds DonateWell and Place2Give. Gary's prior experience includes leadership positions with Bank of America, United Way and KindMark. To learn more about the breadth and depth of Gary's operational, financial and executive experience, please visit https://www.linkedin.com/in/gpfcarr/.