US Companies Relish "Big and Beautiful" Tax Reform Benefits, Cash Flow Boosts Expected
Our correspondent learned that various companies are hailing President Trump's new tax law as a game-changer for boosting consumer spending. The "Big and Beautiful Bill" (OBBB) is set to release funds by allowing large healthcare enterprises like Johnson & Johnson (JNJ.US) to immediately capitalize domestic capital expenditures.
US accounting association vice chairman Jan Lewis noted that this development has brought a significant advantage for domestic R&D work. However, if these research expenses occur outside the US, they will still need to be capitalized and amortized.
Although many companies have yet to specify their plans, last month's tax legislation has helped alleviate some concerns as companies strive to cope with tariff uncertainty. Among Russell 3000 index constituent stocks that have reported Q2 earnings, 19% have mentioned this new law in conference calls. US companies can now expense R&D, new equipment, and property costs in full upon purchase, without having to amortize over several years, which will save them money and encourage faster equipment purchases and facility upgrades.
Johnson & Johnson has cited this tax law as a positive factor for its previously announced $550 billion investment plan in the US, bringing certainty to tariff-related issues. The company's CEO stated that while it's still difficult to predict the outcome of tariff policies, the new tax policy has already created job opportunities and driven innovation.
Lewis noted, "If you can now deduct hundreds of millions or even tens of millions of dollars in equipment costs from your taxable income, your taxable income will decrease, and your tax burden will lighten, making it a positive development from a financial reporting perspective."
AT&T Inc. (T.US) CFO Pascal Desroches stated that the company expects to save as much as $80 billion in cash taxes from 2025 to 2027 and plans to use approximately $35 billion of this amount to expand its fiber network.
Paccar Company (PCAR.US) and General Dynamics (GD.US) executives have mentioned in their earnings conference calls that the released funds have given them more business consulting opportunities. Paccar's CEO stated, "The ability to utilize these funds or purchase capital assets like trucks is gradually becoming a focal point of discussion and part of our optimistic outlook for the second half."
General Dynamics' CEO noted that the company's good "order-to-delivery ratio" has been largely driven by tax depreciation policy.
Bah Callahan & Co. and United Rentals (URI.US) have both revised their free cash flow expectations upward, by $2 billion and $4 billion respectively, citing tax benefits. Northrop Grumman (NOC.US) expects to receive $2-2.5 billion in cash tax benefits this year, while Reliance Steel & Aluminum Co. (ROP.US) anticipates saving approximately $1.5 billion in taxes this year and expects a $1.2 billion tax benefit next year.
Some companies, such as Ford Motor Company (F.US) and Sherwin-Williams (SHW.US), are still evaluating the financial impact. Other companies, including Boeing (BA.US), believe there will be no significant impact this year.
This law may encourage companies to increase their business scale in the US, but this could also lead to higher costs. US accounting association CEO Mark Koziel noted, "There's still negotiation over tariffs, which makes things more complicated. You can't isolate this issue; you can't say these companies will have a lot of cash and use it to spend freely and make more money than last year."