• • • Changing the balance of taxes 鈥� Budget鈥慸riven tax swaps and incentive reforms are changing the balance between income, property, and sales taxes, forcing large companies to revisit their multistate footprint.

    • How revenue is sourced is changing, too 鈥� Rapidly evolving digital and AI鈥憆elated taxes are creating new nexus, sourcing, and base鈥慸efinition issues for businesses that rely on revenue from digital advertising, social platforms, data monetization, and automated tools.

    • Planning amid continued uncertainty 鈥� New federal tax regulations, tariff鈥憆elated uncertainty, and even the elimination of the penny are all amplifying state鈥慴y鈥憇tate complexity for in鈥慼ouse tax departments.

WASHINGTON, DC 鈥� Tax industry experts who gathered at to provide updates on the current landscape of state and local tax (SALT) policy and offer insight that corporate tax departments should consider found, not surprisingly, that they had a lot to talk about in the current economic environment.

Mapping the new SALT frontier

For starters, this year鈥檚 SALT agenda is not just an abstract policy story for large, multistate businesses, rather, it鈥檚 a direct driver of cash taxes, effective tax rate (ETR) volatility, and audit exposure. Indeed, several state legislatures are advancing new taxes on digital advertising and data, revisiting incentives and data center exemptions, and using conformity to federal law 鈥� especially the tax provisions in the One Big Beautiful Bill Act (OBBBA) 鈥� as a policy lever, all against the backdrop of slowing revenues and contentious elections.

鈥淭ax swaps鈥� and incentives 鈥� States that are facing budget pressure are, unsurprisingly, looking at tax swaps to reduce income or property taxes while broadening the sales & use tax base and trimming exemptions. For example, on March 3, the state of Florida 鈥� which already doesn鈥檛 have a state income tax 鈥� passed legislation that in the state.

Moreover, with the rapid expansion of AI come the extensive need for data centers. Several states are reassessing data center exemptions and credits, either tightening qualification standards, requiring centers to supply more of their own power, or repealing incentives outright. A decision in Virginia to , for example, is viewed as a potential template for other states, particularly in those areas in which energy and environmental concerns are priorities. At the same time, proposals targeting include expanded corporate tax disclosures, CEO compensation surcharges, and enhanced reporting on apportionment and group filing methods.

What companies should consider 鈥� Large companies operating over multiple states should consider making an inventory of their credits and incentives by jurisdiction, including looking at sunset dates and political risk indicators.

Companies should also build forward鈥憀ooking models that show how any sales tax base expansion would interact with their supply chain and their procurement of digital and professional services.

New exposure for tech, marketing & data

Bipartisan legislators in several states are continuing to expand on digital economies as a revenue and policy target. For example, Maryland continues to lead with its digital advertising tax; while Washington state鈥檚 expansion of its sales tax to include certain digital and IT services and Chicago鈥檚 social media taxes illustrate the variety of approaches that state and local jurisdictions are exploring to expand their tax base and raise revenue.

Data and 鈥渄igital resource鈥� taxes 鈥� Proposals in states such as New York would tax companies that derive income from resident data, treating data as a natural resource. While no state has fully implemented a comprehensive data tax, however, large platforms and data鈥慸riven enterprises are monitoring these bills closely.

AI鈥憆elated SALT rules 鈥� Many states still classify AI solutions under existing Software as a Service (SaaS) or data鈥憄rocessing categories, but some 鈥� including New York 鈥� are exploring surcharges tied to AI鈥慸riven workforce reductions. And at least two states are explicitly taxing AI, similarly to the way software is taxed.

For corporate tax leaders, some practical next steps should include mapping those areas in which your group has digital ad spending, user bases, data monetization, or AI deployments. Then, overlaying that with current and pending digital tax proposals. In parallel, it is increasingly critical for the tax team to partner with IT and marketing teams to understand how contracts, invoicing structures, and platform design will affect nexus, tax base definition, and sourcing.

Federal shifts magnify multistate complexity

The OBBBA made permanent several of , while expanding SALT relief on the individual side and creating new interactions for multinational groups. Because most states start from federal taxable income 鈥� either on a rolling, static, or selective conformity basis 鈥� OBBBA changes reverberate across state corporate income tax bases, especially in those states that have decoupled themselves from interest limits, R&D expensing, or new production鈥憆elated incentives.

Corporate tax departments must now juggle different conformity dates and selective decoupling rules across rolling and static states, including jurisdictions that automatically decouple when a federal change exceeds a revenue impact threshold. This requires more granular state鈥慴y鈥憇tate modeling of OBBBA impacts on apportionable income, deferred tax balances, and cash tax forecasts. It also heightens the risk that political disputes 鈥� such as 鈥� produce mid鈥慶ycle changes that complicate provision and compliance processes.

Penny elimination 鈥� With federal , states now are moving toward symmetrical rounding for cash transactions, rounding the final tax鈥慽nclusive total to the nearest five cents while attempting not to alter the underlying tax computation. For retailers and consumer鈥慺acing enterprises, this shifts the focus to point of sale (POS) configuration, consumer鈥憄rotection exposure, and class鈥慳ction risk if rounding is implemented incorrectly.

Tariffs and refunds 鈥� The U.S. Supreme Court鈥檚 Learning Resources, Inc. v. Trump decision under the International Emergency Economic Powers Act in February leaves open how more than $100 billion in and what that means for prior sales & use tax treatment. Streamlined guidance generally treats tariffs embedded in product prices as part of the taxable sales price but excludes tariffs paid directly by a consumer鈥慽mporter from the tax base, raising complex questions if tariff refunds reduce costs or sales prices retroactively.

For indirect tax department teams, the confluency of the 2026 SALT changes 鈥� including the impacts around everything from data center credits to the recent Supreme Court tariff decision 鈥� the need to rely on internal partners across the business has never been stronger. Combining that with a greater reliance on technologies, including dedicated research tools to stay abreast of state-by-state tax changes, may be the best way for corporate tax teams to keep up with compliance requirements and avoid penalties.

You can download a full copy of here

Key findings:

• • State-level changes 鈥� States are responding to the impact of OBBBA on state-level taxation.

  • Budget shortfalls may result 鈥� Several states are already projecting reduced revenue collections because of the OBBBA.

  • Multi-state business impacts 鈥� Businesses with multi-state operations should re-evaluate where their operations are located for tax purposes.

The One Big Beautiful Bill Act (OBBBA) ushered in sweeping federal tax changes including provisions aimed at stimulating domestic business investment, particularly in manufacturing and research & development. While many businesses welcome the enhanced federal deductions, the changes are also significantly shifting the landscape for taxation at the state and local levels.

The impacts of the OBBBA are playing out differently across states, depending on each state鈥檚 own tax rules. In addition, the Act is likely to have fiscal ripple effects for states, including new budget challenges. How states respond to these combined impacts promises to dramatically reshape the tax environment, particularly for businesses operating across multiple jurisdictions.

These are among the considerations that seem to be keeping clients up at night 鈥� despite the federal tax benefits of the Act, many business owners and tax professionals are nervous about what it鈥檚 going to be mean at the state and local levels.

Impact on state-level tax policies

For businesses that operate across multiple states, the state and local tax landscape is suddenly more dynamic and much less predictable. States generally start their income tax calculations based upon federal taxable income, but they then modify those numbers based on their own rules and legislative priorities. That means federal changes, such as bonus depreciation or research expensing, are often partially or fully clawed back at the state level. So key provisions of the OBBBA, particularly those involving deductions and R&D expenses, will impact specific businesses differently depending on a state鈥檚 existing tax rules and policies.

For example, the OBBBA allows immediate 100% expensing for federal purposes for fixed assets placed in service after January 19, 2025. However, many states already decouple their assessments from federal bonus depreciation. Other states adjust the percentage or disallow the bonus entirely, forcing an addback and requiring businesses to instead use standard federal depreciation schedules. In fact, OBBBA threatens to widen these differences for deductions.

The impacts of the OBBBA are playing out differently across states, depending on each state鈥檚 own tax rules.

Similarly, the OBBBA enhances the ability of businesses to expense qualifying domestic R&D costs. Historically, only a few states followed the federal shift from expensing to capitalization under prior law. Some states, such as Indiana, may now conceivably permit a double deduction for these expenses under concurrent federal and state codes. Meanwhile, other states will likely reassess or restrict the treatment of these deductions because of concerns over the potential negative impact on state revenues.

Michigan and Rhode Island, for example, recently enacted legislation decoupling from the OBBBA provision that allows for the immediate deduction of domestic research and development expenses, resulting in the continued requirement to capitalize such amounts for state purposes.

State budget concerns

Meanwhile, concerns about the effect of the Act on state revenues could result in far more significant impacts.

One of the most immediate consequences of the OBBBA has been already observed in several states: Illinois, Maryland, Nebraska, and Oregon are among the states that have publicly acknowledged that major federal funding cuts in programs like Medicare, Medicaid, SNAP food assistance, and broader social services are likely to trigger budget shortfalls. And Colorado recently announced a projected $1 billion shortfall, prompting tax increases and a November 2026 referendum to raise income tax rates on certain high-income levels.

While clearly, nobody has a crystal ball, the OBBBA is already putting a lot of strain on state budgets and more states will likely follow in Colorado鈥檚 footsteps.聽 Indeed, at a Massachusetts Department of Revenue roundtable held September 30, Commissioner Geoffrey E. Snyder declared that the OBBBA is projected to reduce the state鈥檚 revenue collections by almost $700 million in their 2026 fiscal year.

Impact on businesses

For businesses, navigating through all these changes complicates everything from daily operations to long-term strategy planning 鈥� and the stakes are considerable.

New tax increases or other changes in state tax rules could change asset deployment strategies, shift business expansion plans, and even encourage relocation to more favorable jurisdictions. Robust proactive tax planning is now a competitive necessity rather than a defensive maneuver.

To get on top of this, tax professionals should look into adopting more customized, multi-state mindsets for their clients. It鈥檚 essential that tax professionals fully grasp the substance and trajectory of each material state, or those states in which their clients鈥� businesses have significant business activity. Given that most states currently apportion taxable income primarily based on revenue, rather than physical presence, the rules governing each material state should be monitored closely in addition to the state in which the client is headquartered.

To get on top of this, tax professionals should look into adopting more customized, multi-state mindsets for their clients.

Further complicating matters is that the ripple effects from state responses will vary considerably in terms of timing. Some state legislatures only meet biennially, while some states may call special sessions to address urgent revenue needs or adjust their rules to conform with federal law. States also may enact rapid changes in response to headline-making budget projections 鈥� often with little warning.

Tax professionals need to stay proactive and vigilant, and most importantly, keep their finger on the pulse of state tax policies to best keep their clients informed. Some key steps for tax professionals include:

• • • Conduct a 鈥渕aterial state鈥� audit 鈥� Proactively identify and monitor those states in which clients have meaningful revenue, as those locations will now drive new tax risks and opportunities.
    • Stay informed on legislative developments 鈥� Closely track statements from state governments, economic development departments, and relevant tax and economic authorities on budget forecasts and discussion of anticipated responses.
    • Educate and advise clients with flexibility and understanding 鈥� Provide clients with regular updates on state-level changes and counsel them to build flexibility into their business forecasts and strategies, especially around capital expenditures and R&D investments.

While the OBBBA is ultimately a federal catalyst 鈥� the state and local reverberations of the Act are just beginning to be felt. For tax professionals, this is a moment to lead by educating clients, anticipating legislative shifts, and building resilient tax strategies across jurisdictions. State and local responses to the OBBBA will be diverse and are only beginning to unfold. Steady guidance from tax professionals can make the difference between whether their clients thrive or flounder amid all these changes.

You can find more of our coverage of the One Big Beautiful Bill Act here

Key provisions:

• • Permanent and expanded deductions 鈥� OBBBA makes the QBI deduction permanent, creates deductions for tips and overtime, and increases expensing limits for businesses.

  • New caps and phaseouts 鈥� The OBBBA also imposes new limits and phaseouts on itemized deductions, the SALT deduction, and charitable giving, especially affecting high-income individuals.

  • Accelerated sunset for green incentives 鈥� Many energy-related tax credits and deductions will end sooner, so taxpayers should act quickly to benefit.

The recently passed One Big Beautiful Bill Act (OBBBA) carries a lot of questions for tax professionals, especially around new tax regulations, deductions, tax credits, and planning strategies. Here are some of the most Frequently Asked Questions (FAQs), to address the most pressing questions and provide clear, concise answers to help tax professionals navigate the OBBBA and its implications.

1. How do the new rules for deducting tips and overtime interact with traditional wage and self-employment income, and what substantiation is required for each?

Because the OBBBA provides a deduction for these items, rather than an exclusion from income, tips and overtime pay will initially be lumped in with traditional wage and self-employment income. Taxpayers will then be able to deduct up to $25,000 of reported qualified tips and up to $12,500 ($25,000 for joint filers) of qualified overtime pay. However, both deductions are subject to phaseout rules.

For substantiation purposes, employers must report the amount of qualified tips and/or overtime pay on the worker鈥檚 Form W-2 (for employees) or Form 1099 (for contractors). For qualified tips, the worker鈥檚 occupation also must be reported. In addition, a work-eligible Social Security Number is required for both deductions.

Note that these two deductions do not affect Social Security and Medicare taxes.

2. What are the permanent changes to the Qualified Business Income (QBI) deduction, and how should tax practitioners advise clients with pass-through businesses on long-term planning?

Thanks to the OBBBA, the QBI deduction is now permanent, which offers more stability when planning for QBI optimization. On top of that, starting in 2026, the OBBBA provides a $400 minimum deduction for businesses with at least $1,000 of QBI and increases the phase-in limitation range from $100,000 to $150,000 for joint filers (from $50,000 to $75,000 for other filers).

Tax professionals should continue to monitor wage and property limitations and the specified service trade or business phaseouts. For taxpayers with taxable income near or slightly over the threshold amounts, traditional planning techniques such as bunching income, making deductible retirement plan contributions or Health Saving Account contributions, or contributing to donor-advised funds should be considered to get under the threshold (or at least into the phaseout range).

3. Which changes to the Excess Business Loss limitation most significantly impact owner-operators and professional partnerships, particularly regarding carryforward treatment and bankruptcy?

The OBBBA makes the excess business loss limitation permanent. (Previously, it was set to expire after 2028.) Owner-operators and professional partnerships will now face a permanent cap on business losses; however, excess losses may be carried forward as a net operating loss (NOL), which will retain its character in a bankruptcy setting. Therefore, if a debtor excludes cancellation of debt income under the bankruptcy exception, their tax attributes will have to be reduced, including any NOL carryforwards.

4. How does the increased $15 million estate and gift tax exclusion, effective 2026, transform wealth transfer strategies and generation-skipping plans?

The larger exclusion allows for more tax-free transfers during life or at death. Tax professionals should explore estate planning strategies such as shifting future appreciation of assets through gifting, creating irrevocable trusts, and taking advantage of portability for married couples.

5. What are the new phase-out thresholds, floors, and limitations for itemized deductions and alternative minimum tax (AMT) exemption under the OBBBA, and how will this affect high-net-worth individuals?

For taxpayers in (or approaching) the 37% tax bracket, the OBBBA caps the value of each dollar of itemized deductions at $0.35. Also, itemizers can only deduct charitable contributions exceeding 0.5% of taxable income.

In addition, the OBBBA has permanently extended the increased AMT exemption amounts and phaseout thresholds. Starting in 2026, exemption phaseout thresholds will equal the 2018 levels of $500,000 (for single filers) and $1 million (joint filers), with those amounts being indexed for inflation beginning in 2027. In addition, the phaseout rate for higher-income taxpayers in 2026 increases to 50% from 25%.

High-net-worth individuals will see a reduced benefit from itemized deductions and higher AMT exposure if their income exceeds the applicable threshold. Tax professionals should consider bunching deductions while carefully managing AMT triggers.

6. How should planning change for clients impacted by the temporary State and Local Tax (SALT) deduction cap increase (from 2025 to 2029), and how does the phaseout for higher earners function?

The OBBBA increases the SALT cap to $40,000 ($20,000 for married filing separately) for 2025 and $40,400 for 2026. For tax years beginning after 2026 and before 2030, the cap will be increased by 1% per year. For tax years beginning in 2030, the cap will revert back to $10,000 ($5,000 for married filing separately).

The increased SALT cap is subject to a phasedown once modified adjusted gross income (MAGI) exceeds $500,000 for 2025 and $505,000 for 2026. For years after 2026, the MAGI threshold increases by 1%. Taxpayers who are fully phased down will be capped at $10,000.

Although this is a welcomed change, tax professionals may need to advise some clients to accelerate payments of state and local taxes into years with the higher cap. Also, despite the higher cap, pass-through businesses may still want to make a pass-through entity tax election. This may lower a partner鈥檚 share of self-employment income or allow the business owner to take advantage of the even higher standard deduction under the OBBBA ($31,500 for joint filers in 2025).

7. How do the new charitable deduction provisions for both itemizers and non-itemizers alter year-end giving strategies, and what new floors or caps apply?

Under the OBBBA, itemizers can only deduct charitable contributions exceeding 0.5% of taxable income. Also, the 60% adjusted gross income (AGI) limit for cash gifts to qualified charities applies. However, the OBBBA provides a permanent charitable deduction of up to $1,000 ($2,000 for joint filers) for non-itemizers who donate cash to public charities.

Itemizers should consider bunching gifts to exceed the 0.5% floor. However, tax professionals should determine if the standard deduction plus the new charitable deduction for non-itemizers would be more beneficial than itemizing.

8. For business clients, what are the implications of permanent expensing for capital investments and research & development expenditures on future expansion or M&A plans?

The OBBBA makes permanent 100% bonus depreciation for property acquired and placed in service after January 19, 2025. Also, the Section 179 expensing limit has been increased to $2.5 million (with a $4 million phaseout threshold) starting in 2025. With respect to domestic research & development expenditures, the OBBBA permanently reinstates full expensing for tax years beginning after 2024. The bill also provides special transition rules for small businesses to expense research expenditures for tax years beginning after 2021.

Because many businesses will be able to immediately deduct the full cost of qualifying investments, their after-tax cash flow and return on investment will improve. Also, businesses should consider moving any foreign research activities to the United States so they can take advantage of immediate expensing of related costs. This will encourage investment in equipment, technology, and innovation into the US.

9. Which credits and incentives for green energy and vehicles are sunsetting, and what timing strategies should clients consider to maximize remaining benefits?

Among others, the following popular energy-related credits are scheduled to sunset quicker under the OBBBA:

• • • The clean vehicle credit and the previously-owned clean vehicle credit for vehicles acquired after September 30, 2025.
    • The alternative fuel vehicle refueling property credit, for property placed in service after June 30, 2026.
    • The energy-efficient home improvement credit terminates after December 31, 2025.
    • The residential clean energy credit expires for expenditures after December 31, 2025.
    • The energy-efficient commercial buildings deduction expires for property construction beginning after June 30, 2026.

For clients interested in taking advantage of these energy-related incentives, acquisition and installation of the qualified property should be accelerated before the relevant cut-off dates.

You can find more of our coverage of the impact of the One Big Beautiful Bill Act听丑别谤别

In a recent webinar, Shaun Hunley, Executive Editor of Thomson Reuter Checkpoint, along with Daniel Winnick, a principal at KPMG’s Washington National Tax Group, discussed how tax professionals should position themselves and their clients for potential changes (large and small) as we approach a pivotal election.

The current tax landscape & expiring provisions

To begin with, regardless of who sits in the White House beginning in January 2025, they will have to address the possible looming fiscal cliff based on the sunsetting of some of the Tax Cuts and Jobs Act (TCJA) tax provisions that are set to expire at the end of 2025. TCJA, the most significant overhaul of the tax code in modern history, introduced numerous expiring provisions that could impact both individuals and corporate taxpayers, unless these expiration dates are extended.

For individuals, according Hunley, the reduction in tax rates and the doubling of the standard deduction under the TCJA were significant changes. If these provisions expire, taxpayers could face higher rates and a return to lower standard deductions, leading to increased tax liabilities. In addition, the Qualified Business Income (QBI) deduction, a vital provision for pass-through entities, is also at risk. Huntley noted that practitioners have spent years mastering this deduction, and its potential expiration could disrupt tax planning for many businesses. Additionally, the $10,000 cap on state and local tax (SALT) deductions remains a contentious issue, with both parties expressing interest in either lifting or modifying it.

For businesses and corporations, Winnick states that the expiring TCJA provisions are only one of the many challenges over the past decade, as tax policy has undergone extraordinary changes, both domestically and internationally. This constant evolution requires tax professionals to adapt swiftly, often dealing with retroactive changes during filing seasons.

The role of political outcomes

Today鈥檚 election, not surprisingly, will play a significant role in shaping future tax policies. Regardless of the outcome, Congress will need to address expiring provisions to avoid significant tax increases for taxpayers. However, the specifics of any legislative changes will depend on which party controls the White House and Congress and, if it鈥檚 a divided government, how they will work together. Winnick pointed out that a divided government could lead to prolonged uncertainty, potentially delaying legislation until 2026.

Strategic planning amid uncertainty

Given all of the potential tax uncertainties on the horizon, tax professionals need to do strategic tax planning for their clients or company, now more than ever. Both Hunley and Winnick emphasized the importance of proactive communication with clients. Indeed, they said, tax professionals should educate themselves about potential changes and model various scenarios for their clients. This can involve using client data to identify those clients most affected by potential changes and provide tailored advice.

These experts suggested that by leveraging technology for data mining and modeling, tax professionals can present clients with different outcomes based on an array of possible legislative scenarios. This proactive approach not only prepares clients for potential changes but also positions tax professionals as trusted advisors.

Opportunities in challenges

The possible legislative changes could feel daunting; the unknowns, the potential knowns, and how it all will impact clients could make some tax professionals feel like closing up shop and hiding under a rock until things blow over. While this may be one way to look at things, it鈥檚 possibly not the most effective. You, as a tax professional, still need to make money, and your clients will most likely need you more than they did back in 2017 when TCJA was enacted.

However, those tax professional who can see the opportunities in these uncertainties, really have an opportunity to demonstrate their value. By staying informed and proactive, tax professionals can offer their clients advice to help them plan for and, in some cases, maximize the advantages of their tax position.

Hunley encouraged tax practitioners to view legislative changes as an opportunity to engage with clients, showcase their expertise, and expand their advisory roles. This approach not only helps clients navigate uncertainty but also positions tax professionals as indispensable partners in strategic planning.

Conclusion

The insights shared by Hunley and Winnick highlight the importance of preparation and adaptability in the face of uncertainty. By embracing these principles, tax professionals can turn challenges into opportunities, ensuring that they remain valuable partners to their clients in an ever-changing tax environment.

As today鈥檚 election will make clear, all tax professionals must engage in strategic planning because the tax landscape will continue to be shaped, shifted, and influenced by politics. A tax professional who is informed, proactive, and adaptable is one who can survive and thrive during the coming months of changing tax regulations and tax policy uncertainty. By leveraging technology, modeling various scenarios, and maintaining open communication with clients, these proactive tax professionals can navigate the complexities of any tax policy changes effectively.

For more insights from Hunley and Winnick on what tax professionals should consider and do, check out the webinar, here.

Still, this overall attitude among company executives raises a good question 鈥� As an in-house counsel or compliance specialist, how do you talk about regulation to your management and executive teams?

One way that has proven effective is to approach the issue of regulations and compliance as an issue of brand risk. Look at any corporation or financial firm from Main Street to Wall Street, and you鈥檒l see that can cause significant damage to an organization鈥檚 reputation and severely impact the goodwill of its brand in the eyes of consumers and the market.

Worse yet, any damage to the company鈥檚 brand may be long-lasting and is incredibly hard to undo and shake off.

That鈥檚 why it鈥檚 so crucial that in-house counsel should position compliance as a brand issue 鈥� that if the company isn鈥檛 in compliance with regulation or the law, it could damage the brand. And simply put, being the type of company that doesn鈥檛 adhere to compliance rules won鈥檛 give the company the kind of reputation it wants 鈥� and certainly doesn鈥檛 align with the brand the company wants to display to its customers and the overall market.

鈥淎 company鈥檚 reputation and brand image in the market is crucial to its success, especially in a retail or consumer setting,鈥� says Sangeetha Raghunathan, a Partner in Corporate & FinTech at the law firm Gunderson Dettmer. 鈥淎ny damage caused by improper compliance with regulatory requirements can be very harmful to the company going forward so you can get the ear of the CEO and the business about compliance by positioning it as a brand issue.鈥�

Increasing in-house influence

Before an in-house legal or compliance team can make the case for stronger regulatory compliance to the company鈥檚 management and executive teams, they would be wise to first assess how much influence the legal and compliance functions have on business strategy and day-to-day decision-making.

Clearly, it鈥檚 much more difficult to make strong cases for adherence to compliance regimes that management might view as overly onerous if your insights and opinions don鈥檛 carry much weight, especially around the executive table or the corporate boardroom, and if you don鈥檛 fully understand the business.

However, there are ways in-house legal and compliance professionals can leverage their influence across the company and earn the ear of those critical decision-makers. For example, in-house legal and compliance teams can make sure they reach across functions and build relationships across functions, such areas as product, engineering, finance, and even IT and HR. This relationship and collaboration will give legal and compliance teams a line of sight across the whole of company operations, allowing them to better manage, understand, and assess the risk on a business-wide basis. It will also allow them to have partners in the business who know you鈥檙e on their side when you raise a compliance concern.

In fact, it鈥檚 even a smarter move to think outside the box of these relationship channels and try to learn about the business in other, less traditional ways. For example, access various Slack channels or other online forums to find out what is going on, albeit taking what you learn with a grain of salt and verifying everything before you act.

鈥淚n this way, it鈥檚 actually an important attribute to be curious and connected 鈥� simply because you need to know what is going on in the business,鈥� says Raghunathan.

This outreach also should be expanded beyond the company itself, especially in situations in which you are dealing with compliance or regulatory issues that may impact the entire industry and not just your company.

Staying in touch with trade associations, for example, can provide a keen source of market information and also be good allies if your company gets into trouble, such as being targeted with litigation or a regulatory agency investigation or enforcement action. Trade associations can file amicus briefs in support of the company, particularly on antitrust issues, and can even aid in locating resources to help lobby the agencies or Congress on the company鈥檚 behalf.

And despite for regulatory agencies like the Federal Trade Commission and the U.S. Department of Justice, many regulatory and enforcement agencies are not changing their stances. In fact, there seems to be a lot of activism among government agencies right now, so it鈥檚 critical that the legal and compliance functions within companies foster allies both inside and outside of the company.

What about AI regulations?

One of the most head-scratching questions in corporate and regulatory circles today is how the regulatory framework around artificial intelligence (AI) will look especially around AI.

OpenAI, the creator of the publicly available ChatGPT generative AI product, is running around saying it wants regulation, while governments 鈥� both in the U.S. and the rest of the world 鈥� are running around trying to figure out whether and how to regulate this latest innovation.

This makes it critical for the legal and compliance functions of any company that is in this space 鈥� and even those just adjacent to it 鈥� to keep a watchful eye on any regulatory proceedings involving generative AI. And while OpenAI and other AI companies may be pursuing a smart regulatory and lobbying strategy, they should remember that going to the government and simply saying you need regulation, does not give you full leeway to continue to move fast and break things.

It will be extremely interesting to observe whether and how those companies and start-ups deep in the AI space develop their own responsible framework towards AI until the government鈥檚 own regime of regulation comes down.

The Wayfair ruling opened the door for states to later receive record amounts of sales tax during and after the pandemic as people shopped mostly online. Wayfair created an economic nexus in virtually every state and local tax (SALT) jurisdiction.

Given the current state of the internet of things (IoT) 鈥� the connectivity of almost every aspect of our lives 鈥� means that there is almost no industry that isn鈥檛 impacted by IoT. And this has created income opportunities for SALT jurisdictions, which, after Wayfair, were able to determine what items are taxable, going beyond a physical product like a hammer or a pair of pants and extending it software and code, as well as to services including communication and technology.

In some cases, the taxability of these transactions isn鈥檛 as straight forward as one would assume, consider free trials, what is the value of the goods or services there that have been exchanged? Because in many ways tax regulations have not caught up to modern-day goods and services, allowing SALT jurisdictions to get creative in how they apply the antiquated tax laws to businesses inside or outside their state.

The challenge to calculating taxes on items like digital automated services, computer service, information or communications services, is when they are treated like traditional goods. The is continuously working to determine what is considered a digital good, as well as how such digital goods are to be categorized. Add to this, the , which currently holds that the digital advertising gross revenues tax of between 2.5% and 10% is imposed on entities that have global annual gross revenues of at least $100 million and deriving gross revenues from digital advertising in Maryland of at least $1 million. Although this tax requirement has only been rolled out and contested in Maryland, more than 10 other states are considering similar legislation, such as Massachusetts, which has various used approaches to taxing digital advertising including a gross receipts tax and an excise tax. The state is making a further a study of how best to tax such activity.

The challenge of time & resources

Not surprisingly, time and resources are the biggest challenges for many tax preparers. For corporate tax departments navigating the changes in tax regulations 鈥� especially around understanding how the classification of digital items are taxed 鈥� it鈥檚 more important than ever to ensure their data management is compliant. Tax departments need a strategy to organize data because failure to do so could provide risks, including subjecting the business to potential audits. The strategy requires consideration of technology that the company currently may have or may acquire and looking at the following three factors: data, workflow, and end-to-end automation. Assessing a tax department鈥檚 current technology stack and having an understanding of what technologies and corresponding processes are in place is necessary in order to get into compliance from the start. Firms should consider the following three factors in this technology and process assessment:

1. Data management 鈥� Knowing what technology is used in accordance with which process in step-by-step way is critical. Making sure such processes are streamlined, and that whichever software or application used can connect to multiple sources in order to gather and format the data to where it is then most easily usable.

2. Workflow 鈥� Having the right technology will also be determined by the people and their talent level. Indeed, having the best technology will only be as good as the people that are using it. Right-skilling your teams is foundational and allows for the team to create project pipelines that can be measured against key performance indicators (KPIs) which can in turn help provide a clear picture of the tax department鈥檚 value to the overall business. This overall picture can be leveraged to influence the company鈥檚 future spending on tax technology and other department needs.

3. End-to-end automation 鈥� Most tax departments have stated that there still is a relatively large amount of manual work that takes place. Manual works causes some of the highest inefficiencies within the department, including using more time and having a larger potential for mistakes being made. The most ideal situation is to have technology that provides end-to-end automation, limiting the amount of manual work needed. Using technology such to execute structured, repeatable, and logic-based tasks that mimic the actions taken by existing human staff, will free up staff to perform more analytical and strategic work that provides additional value to the team and business.

The general consensus is that the tax landscape will not become less complex and that SALT governments will continue to look for creative ways to generate more revenue. In fact, the state-level enactment changes to that took effect last year further adds to the work and complexity that a corporate tax department will need to navigate.

In fact, tax department leaders would be smart to form a strategic plan 鈥� along with the necessary technology 鈥� that will allow them to gather and manage their company data while finding a way to analyze the data faster and more accurately.