Worcester Business Journal

18 Worcester Business Journal | February 5, 2018 | wbjournal.com F O C U S B A N K I N G & F I N A N C E Companies are praising the new federal tax law and eying local investment, but many questions are unanswered BY ZACHARY COMEAU Worcester Business Journal Staff Writer F ederal tax reform is coming at the perfect time for Wormtown Brewery in Worcester, which is in the midst of a $1.1-million capacity expansion. Although all the ramifications are yet to be realized, the Tax Cuts and Jobs Act, the Republican-backed tax over- haul Congress passed almost entirely along party lines in December, is designed to lower tax rates for business. Included in the bill – and a big bonus for Wormtown – was cutting the feder- al excise tax on beer in half, from $7 per barrel to $3.50 per barrel. That will result in a savings of about $70,000 for the Shrewsbury Street brewery, said Managing Partner David Fields. The brewery's growth has exploded of late, including a new can- ning line, quality control lab and plans to hire at least four new employees. The new tax law "came at a great time for us," Fields said. "There are a few pieces of equipment we've been on the fence about. Now, we know how we're going to pay for them." Still figuring it out National and local businesses have praised the new federal tax law and expect to realize savings immediately and over the long term, but a number of companies declined to comment for this story, citing the proximity to year- end earnings reports and the infancy of the new tax laws that advisors and accountants have yet to pour through. Mary Duncan, a tax manager with Worcester's Shepherd & Goldstein, said many companies don't know what they'll be saving because they're waiting for the Internal Revenue Service to issue new regulations and guidances due to how hastily the bill was passed. "The big story of tax reform is not that the bill was just passed, but how it unfolds through regulations and proce- dural advice from the IRS over the next year or two," Duncan said. The bill was proposed on Nov. 2 and signed into law by President Donald Trump on Dec. 22, hardly enough time for a substantial piece of legislation to be considered. "There are a lot of holes that really need to be clarified," Duncan said. Good for business, bad for customers? Table Talk Pies, a 94-year-old Worcester manufacturer of desserts, is one of those companies still working out the numbers. The company just completed a 50,000-square-foot manufacturing facil- ity in the South Worcester Industrial Park, and the equipment alone was $4 million, said owner Harry Kokkinis said. A second line at the facility would be another $4 million, and extra cash from the new tax law would undoubt- edly ease some stress from making such a large expenditure. "Reinvesting in the company has always been something we've done," Kokkinis said. The company has historically been taxed to the limit – about 35 percent. Tax reform will help fund the $4-million pro- duction line, but it's how the tax cuts will be paid for that bothers Kokkinis. He's worried food stamps and other federal welfare benefits – programs long eyed for cuts by the GOP – will be tar- geted next. Around the first of each month when welfare benefits are dis- tributed, supermarkets report a bump in sales, as do Kokkinis' pies. "Those are the people I'd like to see have more disposable income, so they can be spending more at supermarkets and stores," he said. Net gains Looking strictly at their bottom lines, several Central Massachusetts compa- nies praised the tax bill in quarterly Corporate tax rate Up to 35% 21% Pass-through business Up to 39.6% Up to 29.6%, 20% deduction on tax rate qualified business income Multinational Up to 35%, worldwide system One-time transition between companies with deferral and foreign tax credit 8%-15.5% tax on unrepatriated foreign earnings, territorial-based after with base erosion provisions Corporate alternative minimum tax Yes No Small domestic brewers (excise tax) $7 per barrel $3.50/barrel for first 60,000 barrels Federal tax changes Previous tax law Tax cuts and jobs act Source: Tax Cuts and Jobs Act, Tax Policy Center Tax savings Worcester's Table Talk Pies, pictured here, is hoping for a big bump from a new federal tax law, but owner Harry Kokkinis is more worried about what his customers can afford. P H O T O / Z A C H A R Y C O M E A U

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