How Footwear Companies Could Be Impacted by the Tax Reform Bill

The Republican-led tax reform bill is making its way through Congressional approvals today.

At press time, the Senate was debating the legislation, and the House (though it approved the bill earlier in the day) is set to re-vote tomorrow because of technical changes. Ultimately, the bill is expected to clear both chambers and land on President Trump’s desk by Wednesday or Thursday.

Though widely unpopular, the GOP’s tax legislation is aimed at boosting the economy by freeing up capital for corporations, as well as individuals.

Lobbying groups such as the American Apparel & Footwear Association and the Footwear Distributors & Retailers of America have both been closely watching the bill’s progress in the past months, to gauge its impact on the industry.

Matt Priest, president and CEO of FDRA, told FN, “There are some firms that are excited about the corporate rate going from 35 percent down to 21 percent — that’s a big drop and that will free up some capital to inject that back into supply chains and the industry.”

He also pointed to a repatriation provision which will impose a one-time tax on offshore assets. “There will be opportunity for some of our members to bring some of that money back [to the U.S.] and inject that into their operations, back into job creation and development, design, distribution and shareholder value,” he said.

However, the legislative process for the bill has been swift, with little time for companies and organizations to study the details.

“While the worst proposals from earlier drafts have been removed, namely the [border-adjustment tax] and the excise tax, there’s more digging to be done into these new and complex provisions,” said Steve Lamar, EVP at the AAFA.

He did predict, though, that tax breaks could have be positive for footwear companies. “For those consumers and our member companies that do achieve tax relief, we trust that the industry will benefit from increased spending on clothing and footwear and increased investment in supply chain growth and hiring,” said Lamar.

Once the final bill is approved, the changes are expected to begin taking effect in a matter of weeks. The FDRA recommends that companies stay plugged in and consult their tax counsels about the new provisions.

“The one thing about this is it impacts everybody, so we’re all in the boat together trying to navigate through these new uncharted waters,” said Priest. “2018 will be an interesting year, to say the least.”

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