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MAKING SENSE OF DODD-FRANK

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Dodd-Frank

New Tax Bill Unleashes Flood of SEC Disclosures

by   |   December 21, 2017

The new tax bill awaiting President Trump’s signature has unleashed a flood of disclosures in SEC filings. The new bill was unartfully renamed  “To provide for reconciliation to titles II and V of the concurrent resolution on the budget for fiscal year 2018” in the final legislation.  SEC filings appear to be sticking, at least for now, with the prior name “Tax Cuts and Jobs Act” and perhaps the White House moniker “Tax Cuts Act” will catch on.  Some examples include:

FedEx Corp. Form 10-Q

As of the date of this filing, Congress has passed and the President is expected to sign the Tax Cuts and Jobs Act of 2017 into law. If enacted, we estimate a tax benefit between $1.2 billion and $1.5 billion for 2018, primarily due to the revaluation of our net deferred tax liabilities as well as a lower tax rate on 2018 earnings.

Our capital expenditures are expected to be approximately $5.9 billion in 2018 and include spending for aircraft and aircraft-related equipment at FedEx Express, sort facility expansion, primarily at FedEx Ground, and new and replacement vehicles at all of our transportation segments. We expect to invest an additional $1.2 billion for aircraft and aircraft-related equipment during the remainder of 2018. However, we may increase our capital expenditures in 2018 if the Tax Cuts and Jobs Act of 2017 is enacted.

Finish Line Inc. Form 10-Q

U.S. Congress has passed the Tax Cuts and Jobs Act tax reform legislation, which is under consideration by the White House. While the Company continues to assess the impact of the tax reform legislation on its business and consolidated financial statements, if the legislation is enacted, the U.S. corporate tax rate would be reduced to 21% from a current rate of 35%. At November 25, 2017, the Company had a deferred tax liability of approximately $29.6 million based on a U.S. federal tax rate of 35%. If the U.S. federal tax corporate statutory tax rate is reduced to 21%, this liability will be revalued at the lower rate, resulting in a benefit to income tax expense in continuing operations and a corresponding reduction in the deferred tax liability. The impact would be recognized in the period in which the tax legislation is enacted. Consequently, the Company’s effective tax rate for the thirteen and thirty-nine weeks ended November 25, 2017 does not include the impact of any potential tax reform, as it was not enacted before November 25, 2017. The Company expects a slight reduction to its effective tax rate for the fourteen and fifty-three weeks ending March 3, 2018, if the legislation is enacted during the fourteen weeks ending March 3, 2018.

Federal Home Loan Mortgage Corporation Form 8-K

On December 20, 2017, Congress passed the Tax Cuts and Jobs Act. This bill includes, among other things, a reduction of the U.S. corporate tax rate from 35% to 21%. Because of this reduction in the corporate tax rate, Freddie Mac is required to measure its net deferred tax asset using the new rate in the period in which the bill containing the rate change is signed by the President and enacted into law. This will result in an estimated one-time charge through the tax provision of approximately $5.3 billion in that period. This charge will likely result in Freddie Mac being required to draw from Treasury under the Senior Preferred Stock Purchase Agreement at the end of the next subsequent period.