Two years ago, Congress passed the most sweeping rewrite of the US tax code in more than thirty years. When they took effect on December 22, 2017, few companies were prepared for the sudden changes, let alone the long-term impact of tax reform.
On one hand, certain changes were celebrated by many companies, such as the reduction in the corporate tax rate from 35 to 21 percent. But some provisions are still in a gray area, such as creating a quasi-territorial tax system, which has encouraged certain US companies to bring back earnings from foreign subsidiaries. But the provision does not create a pure territorial tax system, meaning international tax planning will still remain quite complex.
One of the major impacts, however, won’t show up in any legislation—the increasing necessity for having tax leaders at the business table. And as Witland LeBlanc explains, a tax specialist who identifies as a generalist as part of the leadership team strengthens a company’s core business strategies.
“I’ve always thought of a good tax person as being someone who is part-time tax and part-time finance because you have to deal with a lot of accounting issues,” says LeBlanc, who adds that his role also includes being a part-time treasury, legal, and HR practitioner. “I’ve always viewed myself in that light. If you can’t, then you’re just one of those tax guys who sit in the corner and just files returns.”
LeBlanc and his team have been instrumental in helping leadership at Oceaneering International, a subsea engineering and applied technology company based in Houston, not only understand the complexities surrounding the tax reform bill, but also in solving numerous challenges outside the numbers.
LeBlanc, the vice president of tax and treasurer for Oceaneering International, spoke with Profile about the impact of tax reform and why tax getting a seat at the business table is more important than ever.
What are some of the challenges you and your team are taking on as a result of the tax reform bill?
Number one, there hasn’t been a lot of guidance that has come out from the US Department of Treasury or the IRS, so we’re still piecing it all together somewhat like other companies and public accounting firms. There are certain items that read one way, but then you read more into it.
For example, everybody thinks that the new US tax rate going down to 21 percent and the idea that we’re now under a more quasi-territorial tax system regime is beneficial because you can bring back all of your earnings tax-free. And then when you get into it, and you have a lot of little nuances that may result in no longer being territorial because you may have additional taxes that you can’t shield with foreign tax credits.
I think the challenge for us has been the swiftness of the change. I don’t think anyone was expecting it to change on December 22. And there’s a lot of companies like us. We won’t know what the normalized tax rate is probably going be for a year or two.
There is so much complexity around reform for tax leaders, let alone those in leadership who aren’t in the tax function. How do you go about sharing strategies in ways leaders in business can understand?
You really have to gain the trust of your operational groups and your functional groups. What you have to find is people that talk in layman’s terms. That’s the problem I think with a lot of tax departments.
There are probably many tax departments in the world that are highly technical. But what they can’t do is look at the business, understand the business, and come up with a plan that makes sense. We look at things from a “does it make sense” approach.
How do you know when tax and treasury is viewed as a true business partner?
When you get invited to meetings rather than trying to force your way in. Once you’ve gained that trust and they know you’re there to help and look at things from different angles that they might not have thought about, I think that’s when you know you’ve been successful.
One of the ways you were able to do that was by improving automation at Oceaneering. Where did you see those areas for improvement?
From a treasury perspective, we’ve created a centralized credit and collections group starting in 2017. What we did was take some of the existing resources throughout the company—mostly from a collection perspective—and train everybody as to what’s the best way to analyze credit. We looked further into D&B, what it could do for us, and then realized we weren’t using the tools to their full capability. We were able to go into the system and input certain factors to perform automatic customer stress tests in order to generate monthly reports. These reports highlighted whether customer creditworthiness was getting better or worse.
Many of those tools are in conjunction with your strategy to be proactive in solving issues rather than reactive. Can you give me an example of that?
Over the last couple of years, the oil and gas markets and related service markets have been down. As some of our customers were having financial difficulties, we were experiencing a number of bad debt write-offs. If we would have had the tools in place that we have now, there probably wouldn’t have been that many surprises. That doesn’t mean that we wouldn’t have had the write-offs, but we would have had earlier visibility.