Goldman Sachs has accelerated nearly $100 million in stock awards to top executives before the end of the year in order to avoid unfavorable changes in the new tax code, according to public filings posted Friday.
The most sweeping overhaul of U.S. tax code in 30 years includes a provision which caps a corporate deduction for executive pay; under current law, corporations can deduct up to $1 million per executive’s base salary, however there’s no cap on deductions for performance-based pay, such as bonuses.
Under the new provisions, both base salary and performance bonuses count towards to $1 million cap – which is why Goldman accelerated $94.8 million in bonuses originally scheduled for January, 2017, reports CNN.
Most of Goldman’s executives received early payouts – including of course, CEO Lloyd Blankfein.
Accelerated bonuses aren’t the only thing at least temporarily grinding Goldman’s gears about the new tax code. According to another Friday filing with the SEC, Trump’s “repatriation tax” is going to knock approximately $3.3 billion off its profits in Q4 2017.
[T]he enactment of the Tax Legislation will result in a reduction of approximately $5 billion in the firm’s earnings for the fourth quarter and year ending December 31, 2017, approximately two-thirds of which is due to the repatriation tax.
The repatriation tax is designed to encourage companies like Apple – with their $250 billion offshore cash hoard, to bring trillions of dollars home in exchange for a one-time break on taxes – which were at 35% before the new provisions were signed into law.
Citigroup estimates that US companies hold $2.5tn of capital overseas, with executives justifying the tax-dodge as a measure to look out for shareholder interests.
The remaining 1/3 of Goldman’s $5 billion hit “includes the effects of the implementation of the territorial tax system and the remeasurement of U.S. deferred tax assets at lower enacted corporate tax rates,” making it more difficult for them to deduct past losses from future tax bills.
Barclays estimates this change will cost them around £1 billion ($1.35bn usd).
Barclays said the change had reduced the value of its “deferred tax assets” and would result in an associated one-off charge of about £1bn after tax.
It is expected to drag Barclays’ full-year earnings further into the red. The bank lost £628m in the first nine months of the year due to write-offs related to pulling out of African ventures. –The Guardian
On the bright side, the US corporate tax rate has been cut from 35% to 21% with the new law.
As The Guardian notes, the tax changes were overseen by treasury secretary, Steve Mnuchin – a 17 year Goldman vet who declared the bill to be “great for hardworking workers.”
originally published by ZeroHedge
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