Key takeaways:

• • • Tax departments lack resources and confidence 鈥� More than half (58%) of tax departments are under-resourced, and 59% are not confident that they can upgrade their tax technology over the next two years.

    • Under-resourced departments incur more penalties 鈥� At least half of respondents from under-resourced tax departments say their departments incurred penalties over the past year, compared to only about one-third of those from properly resourced departments.

    • Making the shift to proactive planning and value creation 鈥� For many tax departments, the winning model blends in-house expertise, targeted external support, and a coherent tech/AI stack that allows teams to shift from tactical compliance to proactive planning and strategic value creation.

Under-resourced corporate tax departments spend more of their budget on external support compared to well-resourced teams 鈥� yet they’re more likely to incur penalties and less confident in forecasting, according to the 成人VR视频 Institute鈥檚 .

Given this, the problem isn’t a lack of spending 鈥� it’s the operating model. With respondents from 58% of tax departments saying they are under-resourced, 59% saying they lack the confidence needed to upgrade their existing tax technology over the next two years, and most spending more than half their time on reactive compliance work when they’d prefer to focus on strategic planning, clearly the gap between ambition and reality has never been wider.

The answer isn’t working harder or throwing more money at consultants, however. It’s building a hybrid ecosystem of people, platforms, and partners designed to shift capacity from firefighting to foresight.

The Groundhog Day problem

Every year feels the same: New tax legislation (such as the One Big Beautiful Bill Act or Pillar 2), new compliance burdens, new geopolitical uncertainty 鈥� coupled with the same old constraints. Too much work, not enough time, and technology that lags.

When deadlines hit, under-resourced teams rely on two blunt levers: overtime and reactive outsourcing. Internal staff end up working longer hours, and external providers plug the gaps at short notice. This model is breaking departments and it鈥檚 breaking down itself.

Under-resourced departments are significantly more likely to incur penalties, with 50% of respondents saying their under-resourced department had been penalized in the past year, compared to just 34% of respondents from well-resourced departments that say that, according to the report.

Further, under-resourced department respondents said they were less confident in their ability to forecast accurately, with just 26% saying their ability to forecast accurately was “very likely” compared to 43% of well-resourced department respondents. Ironically, under-resourced departments also spend more on external support as a percentage of budget (44%) compared to 37% for well-resourced departments. Clearly, spending more doesn’t solve structural problems 鈥� it often masks them.

Meanwhile, tax professionals report spending more than half their time on tactical or reactive work, even though they would prefer to spend up to two-thirds of their time on strategic analysis. Not surprisingly, when the team is locked into manual reconciliations and last-minute fixes, it’s nearly impossible to influence business decisions or shape strategy.

Why 鈥渁ll in-house鈥� or “all outsourced” no longer works

When more work is moved onto the plates of the internal tax team, all in-house can often come to mean all heroics 鈥� talented people drowning in compliance volume with no time to use the analytical tools already on their desks. Conversely, all outsourced risks hollowing out the department鈥檚 institutional knowledge and weakening its seat at the table.

A hybrid model asks better questions: What kind of work is this, and where does it create the most leverage? These questions can be used to determine where and to whom work should go. For example, high-volume, rule-based, recurring tasks are prime candidates for automation, shared services, or managed services under strong tax oversight; while complex, judgment-heavy, strategically sensitive work should remain anchored in-house, with external advisors extending capacity and offering specialized insight.

Thus, the best model for a modern corporate tax department is a hybrid ecosystem 鈥� not a fixed organizations chart, but a deliberate blend of internal expertise, enabling technology, and external capability partners.

Four layers of the hybrid ecosystem

This hybrid ecosystem can be delineated into four layers, each bringing their own insight and value:

1. 1. 1. People and roles redesigned 鈥� High-performing tax functions invest in analyst and tax-tech roles that connect tax to enterprise resource planning (ERP) systems, data hubs, and analytics, thus freeing technical experts from manual data work. Senior professionals then become embedded advisors to finance, treasury, and the business, not just compliance reviewers.
      2. Processes segmented into “run” and “change” 鈥� The biggest barriers to strategic work are excessive volume, heavy compliance burdens, limited resources, and time pressure. Modern tax departments respond by explicitly segmenting work in which run the business processes are documented, standardized, and increasingly automated or pushed into shared or managed service models. Change the business work remains tightly linked to senior tax staff.
      3. Technology becomes the data spine 鈥� More than half of respondents say they expect above-normal increases in their tax technology budgets, and more than half say their main resourcing strategy is introducing more automation. The goal isn’t collecting point solutions; rather, it’s building a coherent data spine that includes ERP integration, tax-specific data models, consistent workflow tooling, and strategic platforms that flex as regulations shift.
      4. AI act as an accelerator 鈥� Two-thirds of tax departments aren’t yet using generative AI (GenAI), according to the report. And among the one-third that are, usage clusters around research, document summarization, drafting, and some analytical support. The next step up the AI chain is for departments to move from individual experiments to standardized, governed workflows that scan legislation, prepare first drafts of memos, or interrogate large data sets for anomalies.

What high-performing hybrid tax departments do next

Departments that feel well-resourced, allocate more time for their professionals to conduct proactive work, and invest deliberately in technology and skills are significantly more confident in their ability to forecast accurately, avoid penalties, and minimize tax liabilities, the report shows.

Indeed, these high-performing hybrid tax departments:

• • • invest ahead of crises in people, tech, and processes
    • treat external providers as capability partners, not emergency relief
    • actively protect time for strategic work by automating or outsourcing routine tasks
    • insist on a durable seat at the strategy table, not just one for compliance reporting
    • experiment with automation and AI in focused, repeatable use cases

It is worth noting that smaller companies (those under $50 million in annual revenue) and the largest one (those with more than $5 billion in revenue) are leading the way by securing leadership buy-in early and leveraging specialized external expertise rather than trying to build everything in-house. Midsize companies, by contrast, are more likely to rely on in-house teams to lead automation efforts and less likely to use third-party vendors 鈥� a cautious approach that risks having them fall too far behind to catch up.

The message: Design the ecosystem, don’t just work harder

For corporate tax professionals, the message may be harsh but hopeful: You cannot work your way out of structural constraints by effort alone. Rather, a well-designed hybrid ecosystem can turn those constraints into a catalyst that will allow the department to deliver more value to the business. In fact, the modern corporate tax department is hybrid by necessity; but the question is whether it’s hybrid by design 鈥� or just by accident.

You can learn more about the challenges facing modern corporate tax departments here

Key takeaways:

• • • Advocate for investment in technology and talent 鈥� As compliance and strategic demands grow, tax departments should use benchmark data from industry reports to build compelling business cases for automation, generative AI, and additional headcount.

    • Explore transferable tax credit opportunities 鈥� The transferable tax credit market has matured significantly, more departments should pursue these to offset tax liability, reduce estimated quarterly payments, and free up cash flow.

    • Proactively manage the OB3 transition 鈥� The One Big Beautiful Bill Act introduces substantial federal tax changes requiring strategic planning for 2026. Document analysis carefully as state conformity issues create future audit exposure.

The corporate tax landscape in 2025 is defined by resource constraints, regulatory complexity, and rapid technological change. And many corporate tax department leaders face mounting pressures from compliance demands, talent shortages, and evolving legislation 鈥� all while being asked to deliver more strategic value to their organizations, according to the , published by the 成人VR视频 Institute and Tax Executives Institute.

Under-resourcing and strategic gaps persist

Perhaps the most striking finding from the 2025 report is that 58% of corporate tax department professionals said their departments are under-resourced 鈥� an increase from 51% who said that the previous year. This apparent deterioration in resourcing creates cascading risks for businesses. Departments facing resource constraints report higher rates of penalties and audits, with 44% of survey respondents saying their under-resourced department experiencing penalties in the past year and 12% saying it had faced penalties exceeding $1 million.

The good news is that more departments are planning to hire rather than rely on overtime from existing staff, the report shows. However, the talent pool remains tight, making recruitment challenging. For tax department leaders, advocating for investment in both talent and technology is essential for risk management and maintaining compliance.

For tax department leaders, advocating for investment in both talent and technology is essential for risk management and maintaining compliance.

The report also showed that corporate tax departments continue to struggle with an imbalance between strategic and tactical work, with in-house tax professionals noting that they spend the majority of their time on reactive, tactical tasks while ideally wanting to reduce this to approximately 30% to 38% of their time.

What’s holding teams back? Excessive workload volume tops the list, they said, followed by complex compliance requirements, limited resources, and outdated technology. While two-thirds of respondents said their departments are still in the chaotic reactive stage of technology maturity, more than half said they expect higher-than-normal budget increases for investment in tax technology in the coming year, with many beginning to incorporate generative AI (GenAI) into their workflows.

Opportunities to create value exist

While these challenges exist, there are ways that corporate tax departments can identify and pursue value in the coming year. For example, the passage of the One Big Beautiful Bill Act (OB3) in mid-2025 introduced substantial changes to federal tax provisions including the ability to immediately expense research and experimentation costs under Section 174, reintroduction of full bonus depreciation, and liberalized interest deduction limitations.

The new Section 904(b) rules significantly improve the foreign tax credit mechanism by eliminating the allocation of interest expense and research and experimental (R&E) expenses to foreign source income, potentially lowering effective tax rates from 18.9% to approximately 14% at the aggregate level.

Departments that invest in technology, build strong business partnerships, and track their value contributions are demonstrating that having a strategic impact is possible even in resource-constrained environments.

However, OB3’s retroactive application to tax year 2025 creates immediate compliance complexity. State conformity issues compound the challenge, as many states have not yet updated their codes, creating potential mismatches between federal and state taxable income calculations.

Further, the transferable tax credit market has matured significantly, with nearly 25% of Fortune 1000 companies now participating, which is a 60% increase over 2024. Current market conditions favor buyers, with investment tax credits and production tax credits trading at discounts of 89-cent to 91-cents on the dollar.

These credits can offset tax liability, reduce estimated quarterly payments, and free up corporate cash flow. Tax departments should explore this opportunity as another tool for creating measurable value for the business.

Planning for 2026 and beyond

Despite the challenges facing corporate tax departments in 2025, success stories abound. Departments that invest in technology, build strong business partnerships, and track their value contributions are demonstrating that having a strategic impact is possible even in resource-constrained environments. The key is making the case for investment, staying ahead of regulatory changes, and continuously communicating your added value back to the business.

You can download听a full copy of the听, from the 成人VR视频 Institute and Tax Executives Institute, here

Key takeaways:

• • • Reframe your value proposition 鈥� Translate tax achievements into business language the C-suite understands, such as protecting shareholder value, enabling growth, and mitigating risk rather than simply reporting compliance metrics.

    • Invest strategically in technology and talent 鈥� Prioritize automation and AI tools while outsourcing strategically to free internal resources for high-value strategic work that demonstrates the department’s business impact.

    • Build cross-functional partnerships 鈥� Proactively collaborate with IT, legal, operations, and HR on enterprise-wide initiatives that will position the tax function as an essential strategic partner rather than an isolated compliance department.

SAN FRANCISCO 鈥� In recently released , published by the 成人VR视频 Institute and Tax Executives Institute,听a large portion of the tax department professionals surveyed expressed their desired to do more strategic work compared to simple tactical work. This was a theme we鈥檝e seen repeatedly across our research: Tax professionals are shedding their traditional compliance-focused image and moving toward becoming strategic business partners to their organizations.

By articulating their value proposition, investing strategically in technology and talent, and aligning with broader business objectives, tax department leaders can secure the resources and influence needed to drive meaningful organizational impact.

Yet, the tax function has long been viewed as a necessary cost center 鈥� a department that ensures compliance, files returns, and manages audits 鈥� despite the essential work that in-house tax professionals do. Rarely did these professionals feel they are treated as strategic business partners. However, perception is rapidly changing, according to the insights shared at the recent听.

Today’s tax leaders are positioning their teams as strategic partners who provide critical insights that influence business resilience, growth strategies, and organizational risk management, conference panelists explained.

The evolving role of the tax function

Amid ongoing tax and trade policy shifts and increased business uncertainty, opportunities abound for tax professionals in corporate tax departments. Indeed, several panelists noted that the State of the Corporate Tax Department report showed that tax leaders are increasingly becoming deeply involved in strategic decisions ranging from business resilience strategy (with 63% of survey respondents saying their tax department is involved in this area) to M&A transactions (60%), organizational risk management (58%), and supply chain management (55%).

Further, CFOs are increasingly looking to their in-house tax leaders for support across multiple strategic areas, including digital transformation and AI, ESG strategy, workforce strategy, and economic resilience planning. This expanded role creates for the tax team creates both opportunities and challenges for those seeking to demonstrate their strategic value.

By articulating their value proposition, investing strategically in technology and talent, and aligning with broader business objectives, tax department leaders can secure the resources and influence needed to drive meaningful organizational impact.

In fact, one of the most pressing question tax leaders face is how to secure adequate budget funding in an environment of competing corporate priorities. The answer lies in strategic thinking about resource allocation and being intentional about having a seat at the table to better advocate for necessary investments. Tax department leaders must educate executive leadership on the risks that come with not having enough budget resources 鈥� from trying to do more with less to the potential for the company to face more exposure and risk that includes increased audits and fines.

As session panelists explained, the key is to frame discussions in terms that C-Suite leaders understand. Rather than simply requesting more resources, tax leaders should articulate how investments in the tax function can all it to better protect revenue, enable growth opportunities, and mitigate organizational risk.

Creating a value-focused identity

That articulation to management is a big step toward a tax function鈥檚 goal to move from feeling and acting like a cost center to being a strategic partner to the business. Indeed, corporate tax department leaders must change their own perceptions of how the department is perceived first 鈥� in essence, rebranding themselves and reimagining their identity. This starts with creating a compelling value story that resonates with the C-suite.

Start with creating (or recreating) a department mission statement that emphasizes value creation rather than mere compliance, aligning with broader priorities of the organization, such as business partnership and growth. Then, work to provide insights to drive decisions, and support regulatory demands while maintaining transparency.

Check out for more insight on how corporate tax professionals shift from compliance to strategic work

One practical approach is to speak the language of the C-suite by translating tax achievements into business metrics that executives care about, panelists added. For example, rather than reporting that the department completed the tax provision on time, frame it instead as the department protected $X million in shareholder value through accurate financial reporting or enabled the acquisition to close on schedule by providing timely tax due diligence.

It is also important for tax departments to track and communicate their wins consistently, panelists said, creating regular touchpoints with executive leadership to share accomplishments that position the tax function as a proactive business partner.

Navigating technology, talent, and collaboration

Technology investment represents both an opportunity and a challenge for tax departments, as the State of the Corporate Tax Department report makes clear. More than half of the respondents say they expected some increase in their budgets to invest in new tech tools over the next few years, and many indicate they plan to invest in tools and solutions to automate their workflow, especially those that support machine learning and generative AI (GenAI).

While it is great they are anticipating an increased budget, panelist explained that tax department leaders must educate management on the practical challenges of AI adoption, including the need for clean, well-structured data as a foundation.

It is also important for tax departments to track and communicate their wins consistently, creating regular touchpoints with executive leadership to share accomplishments that position the tax function as a proactive business partner.

On another point, staffing remains one of the most critical challenges facing tax departments, and many survey respondents cited hiring as key strategic priority, according to the report. Many departments will also look to technology to augment the missing talent and strategically use outsourcing and co-sourcing to alleviate talent pressure as well. And by partnering with external advisors for specialized compliance work or surge capacity during peak periods, tax departments can further free up internal resources to focus on higher-value strategic activities.

In fact, a central theme the session panelists leaned into was how the most effective tax departments build strong collaborative relationships across the organization. According to the report, 94% of CFOs and tax leaders report that the CFO helps facilitate cross-collaboration between tax and other functions such as legal, IT, operations, and finance.

Tax department leaders should proactively seek these opportunities to partner with other departments on strategic initiatives; for example, collaborating with IT on digital transformation, working with operations on supply chain optimization, partnering with legal on M&A transactions, and supporting HR on workforce strategy.

Today, the transformation of the corporate tax function from cost center to strategic partner is not merely aspirational 鈥� it is already underway in many forward-thinking organizations. As tax, audit, and trade policy become more complex and business uncertainty continues to mount, the opportunity for tax leaders to demonstrate their strategic value to the organization has never been greater.

You can download听a full copy of the听, from the 成人VR视频 Institute and Tax Executives Institute, here

Key takeaways:

• • • Penalties spike when resources and controls are stretched thin 鈥� Under-resourced tax departments face significantly higher penalty exposure, with nearly half reporting at least one penalty and one-in-eight experiencing fines exceeding $1 million.

    • Reactive workloads erode savings and accelerate burnout 鈥� Tax professionals spend most of their time on reactive or tactical work despite preferring a 70/30 strategic/tactical split, creating an environment in which reaction consumes planning capacity.

    • Incrementally targeted technology deliver faster returns than big-bang overhauls 鈥擭early 70% of tax departments remain in chaotic or reactive stages of digital maturity, with many tax professionals saying they lack confidence in their department鈥檚 ability to upgrade systems within two years.

The numbers are blunt. A large portion (44%) of respondents to the report, published by the 成人VR视频 Institute and Tax Executives Institute,听say their department had at least one penalty 鈥� and among under鈥憆esourced tax departments, it was nearly one鈥慼alf. And one-in-eight say these fines topped $1 million.

And when it comes to technology, large portions of tax department professionals say their departments鈥� approach to technology is either chaotic or reactive (69%), and two鈥憈hirds say their departments aren’t currently using generative AI (GenAI) to improve efficiency within the department.

This isn’t a skills problem 鈥� it’s a system problem.

Fortunately, as the Corporate Tax Department report showed, there are steps that corporate tax department leaders can take, including:

• • Treat penalty reduction as a board鈥憀evel KPI, tracking the number, value, and cause of penalties to better pinpoint control gaps
  • Direct a defined slice of the technology budget toward core preventives 鈥� such as data accuracy, filing automation, indirect鈥憈ax determination, and reconciliation tools 鈥� that can cut errors before they become fines
  • Frame resource requests around real avoided鈥憄enalty scenarios, because showing that incremental investment could have offset last year鈥檚 losses builds a more persuasive case for future funding

Ultimately, penalties and fines are data points that reflect a deeper through-put problem and solving that requires visibility at the corporate governance level, not reactive patchwork after the fact.

The reactive鈥憌ork trap that quietly kills savings

This year鈥檚 report found that tax professionals spend most of their time on reactive or tactical work, even though they say they鈥檇 prefer to see a 70/30 strategic/tactical mix. Also, nearly 60% describe their departments as under鈥憆esourced 鈥� up from 51% a year earlier.听 Having an under鈥憆esourced tax department, our research shows, can create an environment in which reaction consumes any planning and strategic work.

Indeed, the consequences of being under-resourced compound quickly. More than half of respondents from under-resourced departments say they face penalties, and many also report missing tax鈥慶redit opportunities, delaying cross鈥慺unctional projects, and operating with less confidence in their forecasts or liability management.

Not surprisingly, burnout is another hidden cost that under-resourced departments pay daily: Tax teams that are stretch through overtime to compensate for structural and personnel shortfalls often see reduced accuracy, just when judgment is most needed.

Again, there are steps that corporate tax department leaders can take, including:

• • Establish a proactive鈥憈ime floor and mandate that each week a fixed block of time is reserved for modeling, forecasting, or credit discovery 鈥� then, measure results in saved cash or lower effective鈥憈ax鈥憆ates
  • Create a rapid鈥憈riage lane for repetitive fire drills that would allow you to codify recurring crises 鈥� such as late adjustments, jurisdictional queries, or document chases 鈥� and then automate the intake so these tasks stop devouring cognitive bandwidth
  • Invest in targeted capacity, not generic headcount; adding a tax鈥憈ech analyst or process鈥慳utomation specialist yields more lasting leverage than simply dividing the same tasks among already overworked staff

In much of this, the bigger insight is cultural: Reclaimed time is reclaimed value. Every hour shifted from reactive compliance to predictive analysis strengthens your tax department鈥檚 compliance posture.

Tech hesitation is expensive, while smaller faster wins matter more

As the report shows, almost 70% of respondents say their tax departments are still in the chaotic or reactive stages of digital maturity, and barely 6% operate optimally. Further, nearly 60% of respondents say they lack confidence in their ability to upgrade systems within the next two years. This correlation between reactive approaches and technological stagnation can feed directly into a department seeing increased penalties and an overreliance on manual processes.

Interestingly, corporate tax departments in smaller organizations, those with less than $50鈥痬illion in annual revenue, and those from very large organizations, with more than $5鈥痓illion in annual revenue, are outpacing their midsize peers when it comes to technology purchases and integration. In fact, these two groups 鈥� at opposite ends of the market 鈥� are more likely to secure leadership buy鈥慽n, tap external vendors for automation, and climb faster toward proactive operations.

Of course, GenAI sits on the cusp of this changing that trajectory. More than half (57%) of respondents say their tax departments are implementing new technology this year, including GenAI-driven tools. And those departments that are, mainly are using it for research, summarization, and document drafting, rather than more complex integrated tax analytics. However, without a reliable tax data spine 鈥� clean, centralized, and accessible data 鈥� even the smartest model can鈥檛 deliver true automation or insight.

Still, as the report outlines, there are actions that tax department leaders can take now to boost their department鈥檚 tech prowess, including:

• • Prioritize 蹿补蝉迟鈥慠翱滨 automations, such as indirect鈥憈ax determination, e鈥慽nvoicing compliance, tax鈥憄rovision close tasks, and certificate management. These are proven areas in which automation immediately cuts cycle times and penalty exposure
  • Pair early GenAI pilots with structured data. For example, start with narrow copilots for research or variance explanation, but feed them curated internal data to evolve beyond guesswork and toward data-driven decisions
  • Borrow capacity intentionally and partner with third鈥憄arty automation specialists for discrete projects using a build鈥憃perate鈥憈ransfer model. This way, internal teams inherit sustainable, well鈥慸ocumented workflows rather than black鈥慴ox solutions.

Waiting for a full replacement of the organization鈥檚 enterprise resource planning system or a perfect end鈥憈o鈥慹nd tech stack actually can trap departments in perpetual backlog. Incremental wins, particularly those tied directly to penalty reduction or labor savings, can build the momentum and political capital needed to make the case for proper resourcing for larger transformations.

The recent 2025 State of the Corporate Tax Department report reveals a powerful connection between resource allocation and tax department performance: Under-resourcing perpetuates penalties and reactive workflows that can only be broken by shifting to proactive systems and automation.

For tax department leaders, the imperative is clear 鈥� invest in prevention, reclaim strategic time, and modernize incrementally, because true progress comes not from doing more, but from choosing fewer priorities and executing on those select ones with excellence.

You can download听a full copy of the , from the 成人VR视频 Institute and Tax Executives Institute, here

Key takeaways:

• • • Automation is a top priority, but progress is slow 鈥� While automation ranks highly among corporate tax leaders’ priorities, leaders from a majority of tax departments still view their automation efforts as reactive or chaotic rather than optimized or predictive.

    • Resource constraints limit automation efforts 鈥� More than half of respondents say their tax departments feel under-resourced, and those departments with limited resources are much more likely to struggle with implementing effective automation strategies.

    • Departments need to invest to see automation returns 鈥� Most tax departments attempt to tackle automation internally, often relying on hybrid roles rather than dedicated technology professionals, which can further strain already limited resources and hinder progress.

The corporate tax world wishes to automate. This likely isn鈥檛 a surprise, given the increasingly complex and ever-changing nature of tax laws and regulations, particularly over the past year. In fact, according to the recently published 2025 State of the Corporate Tax Department report from the 成人VR视频 Institute and Tax Executives Institute, 10% of corporate tax leaders named process automation as their single top priority for the next 18 months, and about one-quarter of them have it as a Top 3 priority. That trails only tax compliance, planning & strategy, and new tax legislation among trends that are top of mind among corporate tax leaders today.

This heightened level of importance for automation may be a reflection of where tax departments view their efforts currently. The same report reveals that more than two-thirds of survey respondents view the levels of automation within their tax departments as reactive or chaotic, while very few are taking an optimized or predictive posture. Clearly, there is work to be done in order to extract the most from workflow tools, or even next-generation technologies such as .

This begs the question, however: Even if corporate tax leaders are trying to automate, how are they going to go about actually doing so? As with many initiatives in the business world, it may be easier said than done.

Corporate tax departments have long been asked to do more with less, and many are feeling the effects of limited resources for daily tax work, let alone new technology investment and implementation. At the same time, however, research reveals that many of these same departments are looking to tackle automation initiatives on their own, eschewing outside aid from service providers or other third parties.

Clearly, something has to give in order to automate the department. Either corporate tax departments need to find resources to dedicate to true automation, or they need to figure out how to better work with outside providers to make automation occur. Because as it stands now, many departments risk being stuck in a state of stasis, never being able to truly bring their automation beyond a reactive posture.

Automation issues

Process automation can provide a major boon to corporate tax departments, if it is implemented correctly. Actions such as integrating and centralizing data through an enterprise resource planning (ERP) system, breaking down silos to facilitate cross-departmental coordination and communication, and implementing cutting-edge technologies such as AI can help tax professionals gain greater speed, accuracy, and efficiency.

However, it鈥檚 clear that many tax professionals do not believe their organizations are automating in a way that allows for more proactive technology usage. In fact, 68% say they view their organization鈥檚 technology and automation usage as chaotic or reactive 鈥� only slightly better than in last year鈥檚 report.

This skeptical view towards their tax department鈥檚 technology posture also is not unique to any particular size or geographic location of their company. More than 60% of respondents from companies with less than $50 million in annual revenue took a negative view towards the state of automation; yet the same holds true for respondents from companies with more than $5 billion in annual revenue. And while global respondents were slightly more bullish on automation than their counterparts in the United States, the need for more automation is clearly a global goal.

Some interesting differences occur, however, when cross-tabulating opinions of automation with whether a respondent feels their department is adequately resourced. In total, 58% of respondents say they feel their department is under-resourced (an increase of 7 percentage points from last year), while just 38% say they feel their department is resourced about right, with the remainder unsure.

To be sure, there is some technology consternation even among those that say they feel their organization is adequately resourced. More than half (55%) of that group say they feel 听their automation posture was either reactive or chaotic, displaying that adequate resources are not a panacea to technology woes.

A lack of resources, however, can certainly seem to exacerbate the problem. Among respondents who say they feel their department is under-resourced, 77% called their automation posture chaotic or reactive, 22 percentage points higher than did respondents at adequately resourced departments. Just 4% of this under-resourced group felt their automation was either optimized or predictive, compared to 10% of the adequately resourced group.

Automation plans into action

One might expect that corporate tax departments would be looking for outside help 鈥� either from the rest of the business or from third parties 鈥� particularly given the effect of resource constraints on technology efforts. After all, automation is just one priority among a number of complex areas within the tax department, and it鈥檚 also not an area that many tax professionals may be naturally equipped to tackle.

However, when asked about their primary strategies for tackling automation internally, many tax departments are still mainly looking in-house. Some are working with their company鈥檚 IT or senior leadership, while fewer are working with outside vendors or consultants. Among companies of all sizes, however, the primary way most are tackling automation is through a team within the tax department itself.

Tax departments within larger companies do tend to have more resources, both monetary and in personnel, and thus have more capability to tackle tax automation in-house. Even at smaller companies, however, most are attempting to stretch resources internally rather than setting aside budget for external help.

Often, this means training existing staff on technology, given that few tax departments have technologists directly on staff. In a separate report from the 成人VR视频 Institute and the Tax Executives Institute released earlier this year, the , our research found that just 15% of survey respondents say their tax departments have a technology-specific professional within the department, while 28% say they have technology personnel shared with another department such as finance. However, the most common way of staffing technology matters is through hybrid roles, the report shows, with more than half (52%) of departments primarily staffing their technology initiatives through hybrid personnel that hold both tax and technology job functions.

Again, this begs the question: How big of a priority is automation truly for today鈥檚 tax departments? Department leadership claims that it is one of their top priorities moving forward, but tax professionals still see a reactive or chaotic posture towards automation in their own work. Further, attempts to change this dynamic are largely internal, often being left to personnel with dual tax/technology roles who may be already feeling the pressure of being under-resourced and having to do more with less.

Ultimately, automation should be a top-level strategy decision for tax departments, not something simply alluded to with lip service. Is automating the department鈥檚 work processes actually a priority? Would automation provide positive returns, making it worth the investment? What mix of personnel would actually lead to success, rather than to what is expedient?

If automation is truly a priority, corporate tax leaders need to dedicate actually impactful resources to technology projects, above and beyond stretching internal tax professionals further. Otherwise, today鈥檚 tax departments risk never moving beyond a reactive technology posture.

You can download a full copy of the 2025 State of the Corporate Tax Department report, published by the 成人VR视频 Institute and Tax Executives Institute, here

On April 2, President Donald J. Trump announced the most sweeping tariffs since the 1030s, impacting all United States trading partners. Now, as the world adjusts amid tariff retaliation likely coming from several countries, the issues of trade, tariffs, and their implication on corporate tax departments will continue to be to have a significant impact in the coming months and years.

Yet, even before this announcement, tariffs were the topic of numerous discussions in several sessions at the recent Tax Executives Institute 2025 Midyear Conference. Indeed, the ongoing proposed tariffs among the United States and some of its key trading partners now have multinational companies scrambling at a heightened degree. In this environment, corporate tax leaders are not only seeking to understand how their businesses should respond, but also how to remain in compliance and what new strategies are needed to optimize their businesses鈥� tax liabilities while simultaneously enhancing operational efficiency.

Foreign tax policies that may be impacted due to tariffs

There are several tax policies that are likely to be strongly impacted by the ongoing tariff dispute, including:

Pillar 1 and digital services taxes

An increasingly central component of the Organisation for Economic Co-operation and Development鈥檚 (OECD鈥檚) Pillar 1 is the . The OECD in partnership with the G20 formed a coalition to create a single set of agreed-upon international tax rules to prevent businesses from shifting their profits to certain tax jurisdictions in efforts to minimize tax liabilities. The OECD and G20 felt the rule was needed given the global digital economy creating a framework for how taxes can be assessed beyond the traditional systems (which typically involved an organization paying taxes in those jurisdictions in which it had a physical presence). In 2017, the European Commission lead the charge with its introduction of digital services taxes marking a pivotal shift in how digital revenue is taxed.

As of 2024, there are about 20 countries that have implemented digital services taxes. On February 21, President Donald J. Trump issued signaling his Administration鈥檚 plan to 鈥渢ake action regarding tax and regulatory measures .鈥� As the Trump considers extending tariffs to the European Union, some EU member nations are reconsidering on digital services taxes on US-based tech companies. a financial bill, which went into effect April 1, that removes their digital services taxes.

Pillar 2

A key part of the OECD鈥檚 Global Anti-Base Erosion Model Rules (GloBE), Pillar 2, was agreed to by more than 135 jurisdictions. In 2021, these jurisdictions pledged to update and modernize their international tax systems to better reflect a global digital economy, including establishing a global minimum tax. On January 20, on his first day in office of his second term, President Trump withdrew the US from the OECD鈥檚 and suggested imposing retaliatory that impose a global minimum tax on US businesses.

US responses: Section 899 and tariffs

In response to what鈥檚 perceived as international tax challenges, the US has proposed (the Defending American Jobs and Investment Act), which imposes additional taxes on the US income of foreign individuals and entities from jurisdictions that have extraterritorial or discriminatory taxes, such as the OECD鈥檚 Pillar 2 undertaxed profits rule or digital services taxes. The tax would increase by 5% each year for four years, culminating in a 20% additional tax annually.

Furthermore, Section 899 includes treaty override language, which would deny these foreign entities and individuals the benefit of reduced withholding taxes under any treaty with the United States. This provision is intended to reinforce the OECD Global Tax Deal Executive Order and counteract foreign measures perceived as undermining US economic interests.

What should corporate tax departments do?

There are several actions that corporate tax departments can take now to help them navigate the current environment, including:

Scenario planning and strategic decision-making

For corporate tax departments, tax planning and tax modeling has always been an essential component of determining their companies鈥� financial strategy. With additional considerations of tariff and trade wars, that planning becomes even more essential. In-house tax departments now must be able to fine tune their scenario planning to not only anticipate but quickly pivot when new information becomes available.

Departments also will need to have several models that can be changed and adjusted so that a clear picture of how their businesses may mitigate the impact of tariffs on operations. For example, understanding what counts as manufacturing rather than assembly, and where these activities take place, can influence tariff rates and eligibility for trade agreements. Tax professionals must weigh the trade-offs between income tax and tariffs, considering the overall tax burden and operational efficiency of their companies.

Collaboration and strategic alignment

Corporate tax departments must collaborate with various business units within their organizations to ensure strategic alignment in managing trade and tariffs. This involves working with supply chain teams to optimize classifications and origins, exploring opportunities for tariff reduction, and understanding the implications of manufacturing and assembly decisions.

As businesses around the globe navigate what some might say is a new era in trade and tariffs, it is the corporate tax departments that will play a pivotal role in helping businesses manage the impact of trade and tariffs on their operations. Department leaders who are able to leverage their people and technology to keep up with the rapid changes will be able to optimize tax strategies and ensure compliance in the jurisdiction in which their businesses operate.

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As discussed at the recent Tax Executives Institute 2025 Midyear Conference, these changes in tax policies have the potential to significant impact the tax functions within both domestic and international companies.

Uncertainty in the current tax landscape

The Tax Cut and Jobs Act

In the Budget Act of 1974, a special legislative process was created to allow Congress to make tax and mandatory spending changes necessary to the congressional budget resolution, what is known as the . The timing, size, and permanency of tax packages are pivotal factors that will influence the legislative process and, consequently, the strategic planning of corporate tax departments.

Overall, the provisions of 2018鈥檚 Tax Cut and Jobs Act that were set to expire at the end of 2025 will most likely be extended, even though there may be pieces that are repealed or changed. These could include the potential repeal of Section 174 amortization, preservation of the depreciation and amortization in Section 163(j), restoration of bonus depreciation, and incentives for domestic manufacturing.

Inflation Reduction Act and Biden-era credits

The future of regulations established during the Biden administration, including those related to credits outlined in the Inflation Reduction Act, is a subject of considerable debate. The U.S. Treasury’s potential to overturn or modify these regulations, coupled with the Congressional Review Act’s influence on them, adds further layers of uncertainty.

International tax provisions

The international tax landscape is undergoing substantial shifts as well, with a particular emphasis on aligning with Pillar Two and addressing exposure under the Undertaxed Profits Rule. The role of US research & development credits in this context is also significant.

Additionally, the legacy of President Trump’s executive orders continues to influence international tax policy, with retaliatory measures and tariffs becoming key considerations. Further, the potential for bills like the long-dormant Section 891 of the U.S. tax code, which would allow for double-taxing of residents of certain countries, along with additional trade sanctions further complicate the international tax environment.

Pillar One and digital services taxes

The evolution of international tax policy also encompasses the future of Pillar One and the proliferation of digital services taxes around the world. The potential for retaliatory measures from the Trump administration against those countries levying digital services taxes and other unilateral measures is a significant concern. Moreover, the role of Pillar One鈥檚 Amount B 鈥� which aims to simplify the application of an arm’s length principle to the wholesale distribution of tangible goods 鈥� in the evolving international landscape adds another dimension to the strategic considerations for businesses that are operating globally. Understanding these dynamics is crucial for corporate tax departments as they navigate the complexities of international tax compliance and planning.

Key considerations for corporate tax departments

In the 成人VR视频 Institute鈥檚 , the second most significant challenge for tax departments cited was concern over tax regulations. This is hardly surprising 鈥� over the years the complexities of global taxes and the changing requirements to comply with them has become a top-of-mind concern for tax practitioners.

Now, however, the added layer is the lack of clarity or guidance on new or amended tax policies. For example, manufacturing firms鈥� raw materials that come from the border are facing on-again/off-again imposed tariffs and start dates. How are business to remain in compliance with the executive order on when to pay tariffs if those dates are changing? And, if there a suspension of an additional tariff after it was paid, does that just become a lost cost for the business? If so, how can companies plan for expenses that will affect their bottom-line.

Further, consider how other multinational leaders鈥� heads are spinning as nations within the Organization for Economic Co-operation and Development began enforcing Pillar Two around the globe. They had to make sure the right assessments were being made in each region, and then layer on how the retaliatory tariffs may trickle down to US companies doing business in these areas and its effect on what some feel are already overly complex tax regulations with which to comply. Whew!

Managing through extreme changes

Every year, the survey for our State of the Corporate Tax Department report has asked respondents about the approach their department takes to its work. And every year, the overwhelming response has been that most respondents feel their departments are reactive, even though most would like to be proactive. In the current climate, it seems like working more proactively is no longer a nice-to-have but must almost certainly has become a necessity. One can imagine that corporate tax planning must now have a laser-style approach, that the proactive and strategic work (which more than 70% of the respondents say they desire) has to happen. The accounting talent constraints of the industry, including those impacting corporate tax departments, can鈥檛 be solved in the immediate short term. Departments will have to find the tools that can help them mitigate the problems that come from their lack of resources. There isn鈥檛 a preverbal silver bullet here, but the closest that comes to it will be an increased reliance on technology.

In the 2024 State of the Corporate Tax Department report, more than 50% of respondents said they felt their department was under-resourced (in both people and technology); yet, in another report 鈥� the 成人VR视频 Institute鈥檚 鈥� more than 90% of respondents said they were optimistic about tax technology and a significant portion said they believed their technology budgets would increase.

Tax department leaders have also acknowledged their need to not only keep up with compliance work but to stay informed about the legislative priorities and potential changes in tax policy. This knowledge will enable businesses to align their tax strategies with legislative developments and optimize their tax positions 鈥� and perhaps, with the use of advanced technology tools, departments can do this work more efficiently, leaving time for their tax professionals to become more proactive in their work.

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One of those aspects has been Section 174. First enacted in 1954, Section 174 allowed a deduction of expenditures related to research and development (R&D) in the year the expense occurred. The upgrade to Section 174 under the TCJA eliminated the ability to deduct R&D cost as an expense in the year the expense occurred, and instead the cost would have to be amortized over a five-year period for domestic research and 15 years if it was outside of the United States.

Over the years, the IRS has released guidance several times on how best to approach Section 174 R&D capitalization, including its most recent guidance, issued December 17, 2024, that discussed the required accounting method used with Specified Research or Experimental Expenditures.

However, since the changes to Section 174 which took effect in 2018, businesses have struggled to track R&D costs, including what should be excluded or included as a cost. Some tax experts believe that this year and next could bring significant changes to the tax & accounting industry with a new presidential administration 鈥� as well as the fact that some key provisions of the TCJA are set to expire later this year.

President-elect Donald Trump has made it clear that his intentions are to extend all the expiring provisions, but the potential impact of this on the national debt could make this a more difficult task.

Planning for uncertainty

Although there is a unified Congress going into 2025 (with Republicans having a slim majority in the House), there previously was a to reverse Section 174. However, because the cost to the government of implementing a more favorable R&D expensing rule is uncertain, it is questionable whether it would pass.

While much of the upcoming year may be steeped in uncertainty, especially around tax policies, companies now need to strategically plan for and mitigate any possible changes that may be on the horizon and that could impact their business.

Indeed, there are ways that corporate tax departments can plan and prepare for potential changes. Today, many corporate tax departments already feel taxed, no pun intended, and more than half say their work is primarily reactive, with more than 70% expressing a desire to do more proactive work, according to the 成人VR视频 Institute鈥檚 most recent .

In 2025 and beyond, tax professionals will have to work differently to be compliant, with Section 174 only being a part of the potential changes that may be coming down the pike for businesses.

Here are a few more considerations for corporate tax department leaders to worry over:

• • • Understanding qualified research 鈥� The tax department must understand what is considered qualified research and development. This involves staying current on all guidelines issued by the tax authorities. Also, it is essential to work with the company’s R&D team to understand the research being done and then advise that team on the kinds of expenditures that need to be captured, or which costs do or don’t qualify for deductions. This information also should be communicated to upper management when considering product expansion or enhancements.
    • Documentation & recordkeeping 鈥� Making sure there is concise documentation of any apparent expense activity 鈥� and, for good measure, require documentation even if there is some uncertainty over whether the related expense is an R&D activity. Capture now, and decide later 鈥� because it’s better to have the data than not. This requires working closely with the various internal teams responsible for those activities. And for any R&D activity that takes place outside of the US, all data should be captured in the same manner domestic documentation. In short, corporate tax departments should be systemizing documentation, collection, and storage of any R&D expense-related information.
    • Scenario planning 鈥� Departments should also develop multiple financial models based on different potential outcomes of Section 174 adjustments. This will help the company understand the range of impacts and prepare accordingly. Scenario planning can help the company decide on the timing of developing or enhancing products because the data points from the modeling can reveal potential tax savings or liabilities that could impact cash flow.
    • Other tax incentives 鈥� Depending on the industry in which the company operates, there may be other tax credits and incentives to consider, like Section 41, which provides tax credits for increasing research activities. Tax teams should ensure that claiming one credit does not adversely affect eligibility for others. Evaluate how R&D activities can be structured to maximize available tax incentives.

In conclusion, tax professionals must adopt a proactive approach to remain agile amid shifting tax policies, including potential changes to Section 174 and sunsetting provisions of the TCJA.

Corporate tax departments can navigate uncertainties effectively by staying informed about legislative developments, engaging in continuous learning, and leveraging advanced tax planning strategies. Also, collaboration with internal teams and external advisors will be crucial in identifying opportunities and mitigating risks.

Ultimately, establishing and fostering a proactive and nimble mindset will enable tax professionals to optimize their positions and drive business success in an ever-evolving regulatory landscape.

You can find more information about how corporate tax departments manage Section 174 rules here.

Not surprisingly, nearly 60% of tax department leaders have identified compliance and regulatory adherence as one of their top priorities, according to the findings of the 成人VR视频 Institute鈥檚 recent .

The balancing act of resource management

One of the primary challenges for tax department leaders is managing resources effectively. The report underscored this among those department leaders surveyed, showing that more than half of them said they felt their tax departments were under-resourced 鈥� an astounding finding.

There are many negative ramifications of your department being under-resourced, from staff experiencing burnout at a higher rate to more critical consequences like increased audits and penalties. Managing this involves making strategic decisions about how work is performed 鈥� whether through in-sourcing, outsourcing, or co-sourcing. Historically and even now, most tax department leaders would prefer to keep much of their work in-house, but the growing complexity of work and the increasing volume of work is making it difficult for departments to have in-sourcing as the only choice.

While some departments may consider outsourcing to external firms, the consensus among department leaders is to maintain control internally making co-sourcing the better choice. This approach ensures that the department owns the entire process, reducing the risk of miscommunication and errors with outside providers.

For the work that remains in-house, however, department leaders then have to confront the challenge of balancing talent and technology, making sure their teams have the necessary skills and tools to manage workloads efficiently. This often involves investing in technology that supports and enhances human capabilities. However, less than a quarter of tax departments鈥� budgets are being spent on technology, according to the report, although most department leaders surveyed said they hope or anticipated that this will change over the next 12 months.

Is technology a double-edged sword?

There is no doubt that technology plays a crucial role in modern tax departments, offering both opportunities and challenges. Most tax departments (79%) have automated half or less of their work, the report showed, with technology being used to automate routine tasks, and therefore freeing up employees to focus on higher-level strategic activities. This practice not only improves efficiency but also helps the department retain talent by eliminating the least-desirable aspects of the job.

When advocating for technological investments, department leaders should not only emphasize the need for such investment to mitigate compliance risk but also highlight how it will help with retaining staff.

However, integrating new technology is not without its challenges, requiring careful planning and training to ensure that all team members are equipped to use new tools effectively. One challenge identified in the report that鈥檚 currently faced by department leaders is staff adoption. Indeed, even when companies recognized the need for technology investment in their tax departments, those departments often face the challenge of getting the technology utilized 鈥� in the way it should be and to the degree that makes the investment worth it.

Therefore, having a standardized approach to training may not always be effective, rather it may be far more beneficial to train staff on the technology in the way in which they would be working with it, based on their unique needs and workflows.

How to build & train a resilient tax team

Too often there is just one course of training that typically comes only at the beginning of a technology鈥檚 implementation; however, for success, departments must provide continuous training and development in order for staff to maintain the needed skills and cultivate an adaptable workforce environment. That鈥檚 why it鈥檚 important for department leaders to prioritize training as part of annual departmental goals and development plans, ensuring that their teams are equipped to handle current and future challenges.

In additional, interdepartmental training could be particularly effective, allowing team members to learn from each other’s experiences and expertise. Having a culture that encourages curiosity and continuous learning while also fostering collaboration builds a team that is resilient. This further allows for team members to feel valid and not stagnant in their jobs as they experience or expand their roles.

In the report, many tax department leaders cited hiring and retaining talent as a top priority, and part of the talent picture includes the various policies companies may have around return-to-office plans. For those tax department leaders who are part of an organization that has mandated a return to office, they have to find other ways to keep staff engaged and provide additional incentives to retain them. Tax departments that remain hybrid might fair better with retaining talent, however some team members may struggle to have the kind of engagement that comes organically with in-person office work.

Leading a corporate tax department through continuous change requires a strategic approach that balances compliance, resource management, and innovation. By focusing on in-sourcing and technology, fostering a culture of continuous learning, and implementing flexible return-to-office policies, leaders can position their departments for success, as our recent report suggests. With the right strategies in place, tax departments can not only help their companies meet regulatory requirements but also drive additional value for their organizations.

You can download a full copy of the 成人VR视频 Institute鈥檚 , here.

That sentiment is certainly reflected on the 成人VR视频 Institute鈥檚 new , which showed that many respondents to this year鈥檚 survey said that automating work processes and improving efficiency would not only help with the coming talent crunch, but would also allow many in-house tax professionals to do what they strongly wish to do 鈥� spend more time on strategic and proactive tasks that could benefit the company in the long run.

This year鈥檚 survey report 鈥� published annually by 成人VR视频 Institute in partnership with Tax Executive Institute 鈥� gathered responses from more than 250 decision-makers within corporate tax departments across several global regions and over a variety of industries.

Key findings

Some of the most critical findings of the report included:

• • • Respondents said that talent acquisition is the most significant challenge facing tax departments, noting that compliance with Pillar 2 and the Global Minimum Tax regulations also are significant challenges.
    • Respondents said they wish to shift their work balance toward conducting more strategic, proactive work while spending less time on tactical and reactive work. To that end, the top strategic priorities cited by respondents center around ensuring compliance internationally, automating work processes, ensuring proper staffing, and making time for value-added planning.
    • Most tax departments (79%) have automated half or less of their work processes, respondents said. More concerning, two-thirds of respondents described their tax departments as reactive or chaotic in their approach to technology. Many also said they feel ill-equipped to make improvements.

And while more than one-half of respondents said their internal tax department is under-resourced, which often leaves their company more vulnerable to audits and penalties, an almost equal amount said they expect their departments鈥� technology budget to increase beyond its usual annual rate in the coming year, indicating a perceived willingness by companies to get their tax functions the modern tools they need to do their jobs more effectively and better deal with the expected loss of talent.

Indeed, much of that hopefulness coming from corporate tax professionals reflected in the report seems to spring from the feeling that new AI-driven technology tools and solutions will allow them to make up for both a lack of personnel and resources. Yet, whether going forward tax department leaders鈥� optimism will prove well-founded or not may depend less on toll that the wave of Baby Boomer retirements might have on the tax industry and more on whether companies will provide their tax functions with the advanced AI-driven tools they need and the resources to implement them to better overcome these challenges.

As this year鈥檚 report clearly demonstrates, many tax department leaders are fully aware of the talent crisis that threatens to swamp their boat, but they are looking proactively for answers among the many tax-specific tech solutions and tools out there in order to keep sailing forward. And they are also looking toward their companies in the hopes management will provide the tools necessary for their in-house tax professionals to do their jobs in the most efficient and effective way possible.

You can download a full copy of the new , here, and copy of here.