Congress has a big week ahead of it and companies from the technology and communications sectors will be watching closely to see how things progress.
With the Senate having passed its version of the Tax Cuts and Jobs Act in a 51-49 vote on Dec. 2, a conference committee will now begin to negotiate the differences between the Senate version of the bill and the version of the bill passed in November by the U.S. House of Representatives. The committee is comprised of conferees appointed by both the House and the Senate, who together produce a "conference report" that must be approved by both chambers.
For communications companies and other major businesses, one of the key differences between the two bills is when the change in the corporate tax rate will go into effect. Though both the House and Senate bill would lower the corporate rate to 20% from 35%, the lowered rate would be effective tax year 2018 under the House bill and effective tax year 2019 under the Senate bill.
CNN reported Dec. 3 that many companies are expected to use any spare cash created by reduced tax outlays to repurchase shares or fund dividend payments. Telcos — including CenturyLink Inc., Frontier Communications Corp., AT&T Inc. and Verizon Communications Inc. — are particularly known for their dividends, though questions were raised throughout 2017 as to whether those dividends were sustainable. AT&T has also said it will invest an additional $1 billion in the U.S. in 2018, if the House bill is signed into law.
"We'll increase our investment in 2018 to accelerate our fiber deployment to bring high-speed internet to more U.S. homes and businesses," AT&T CEO Randall Stephenson said after the House tax reform bill first passed.
As for tech companies — such as Apple Inc., Alphabet Inc. and others — they will be watching to see if Republicans in the House and Senate are able to come together enough to get a bill passed. Analysts have noted that although most industries stand to benefit significantly from the tax reform package being considered, tech companies stand to benefit the least due to their long-standing practice of keeping cash overseas. Both the House and Senate bills call for moving to a territorial tax system that would increase taxes on income earned overseas.
According to CNBC, Goldman Sachs recently estimated the median S&P 500 company pays an effective tax rate of 27%, as compared to a 39% statutory rate, including the 35% federal rate and 4% for state and local taxes. By comparison, Goldman Sachs estimated the tech sector pays an effective tax rate of 24%, largely due to the cash held overseas. The firm estimated that tax reform will result in an effective tax rate slightly below 24% for the S&P 500, including federal, state and local taxes, CNBC reported. Assuming all companies, across all industries begin paying an effective rate of 24%, the Goldman Sachs analysts expect tech EPS to actually decline whereas the aggregate S&P 500 would see a 5% increase.
Congress also must pass a spending bill by Dec. 8 to avoid a government shutdown. While Republicans were able to move forward on tax reform without any support from Democrats, that will not be the case with a spending package, which will require at least some bipartisan support. House Republicans are currently eyeing a stop-gap funding measure that would keep the government operating through Dec. 22.
|Dec. 6||The Senate Committee on Aging will hold a hearing a 9:30 a.m. ET titled "America's Aging Workforce: Opportunities and Challenges."|
|Dec. 6||The House Subcommittee on Research and Technology will hold a hearing at 10 a.m. ET titled "From Lab to Market: A Review of NSF Innovation Corps."|
|Dec. 8||The House Subcommittee on Oversight and Investigations will hold a hearing on at 9 a.m. ET titled "Examining the Role of the Department of Energy in Energy Sector Cybersecurity."|
|Dec. 8||The current spending bill expires at midnight ET.|
|Dec. 6||The Federal Communications Commission's Technological Advisory Council, comprised of a diverse group of technology experts, will meet. The group provides technical expertise to the commission to identify areas of innovation and develop informed technology policies.|
|Dec. 7||The North American Numbering Council, a federal advisory committee that advises the commission on issues like telephone number portability and the North American numbering plan, will meet to consider recommendations that foster efficient and impartial number administration.|
|Dec. 4||The Supreme Court will hear arguments on Christie v. National Collegiate Athletic Association, a case that asks whether a federal ban on sports betting in most states violates state sovereignty protections in the U.S. Constitution. The case centers on a 2012 New Jersey law that legalized sports betting at casinos and racetracks in the state. The NCAA and all four major U.S. sports leagues — the National Basketball Association, the National Football League, the National Hockey League and Major League Baseball — are fighting the state law.|
|Dec. 4 - 6||UBS will host its annual Global Media and Communications Conference featuring 90 companies from the advertising, broadcasting, entertainment, pay TV, new media, publishing, telecommunications and internet industries.|
|Dec. 5||The Open Technology Institute at New America will host an event titled "Total Eclipse of the Net: The End of Net Neutrality?"|
|Dec. 5||The Phoenix Center for Advanced Legal & Economic Public Policy Studies will host its annual U.S. telecoms symposium looking at issues such as net neutrality and regulation. Speakers include representatives from DISH, the FCC and the Federal Trade Commission.|
|Dec. 5||USTelecom will host a webinar titled "The Next Broadband Battleground: the Subscriber Experience."|
|Dec. 5||Public Knowledge will host an event titled "Net Neutrality & Competition: The Final Days of Internet Freedom."|
|Dec. 5||The Center for Data Innovation will host an event focused on how data, artificial intelligence and connected technologies can make all levels of government smarter.|
|Dec. 6||The Open Markets Institute will host an event focused on how monopolization affects entrepreneurship, innovation, job creation, wages and the free flow of information. Sen. Elizabeth Warren, D-Mass., will deliver a keynote address.|
|Dec. 6||The Federal Communications Bar Association will host an event focused on understanding the technical basics involved in FCC regulation.|
|Dec. 7||National Religious Broadcasters will announce a new internet freedom initiative. Sen. Ted Cruz, R-Texas, will deliver a keynote address.|
|Dec. 7||The State Department's International Telecommunication Advisory Committee will hold its regular meeting. The committee advises the department on telecommunications and information policy matters related to U.S. participation in the International Telecommunication Union, the Organization of American States Inter-American Telecommunication Commission and the Organisation for Economic Co-operation and Development.|
|Dec. 7 - 8||The Practising Law Institute and the Federal Communications Bar Association will host their annual conference on telecommunications policy and regulation.|
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