AT&T’s announcement this week that it would give $1,000 bonuses to more than 200,000 workers after Trump signed the new tax plan? Not as altruistic as it might seem.
With the current 35% tax rate, AT&T could get a $70 million deduction, but once the new 21% rate is in effect next year, the company would only get a $42 million deduction. Promising to dole out those bonuses now could save AT&T $28 million, according to The Journal’s calculations.
Unlike individuals who are only taxed on income once they actually receive it, AT&T and other such large corporations are “accrual” taxpayers, which The Journal notes means they can record income and expenses when “it is certain of them,” which could be before the cash even changes hands. Because AT&T tied its bonuses to the signing of the tax reform bill and Trump signed it today, they are able to claim the taxes for 2017, in turn saving them $28 million.
AT&T isn’t the only company that might have been thinking the same way. Others that have announced bonuses or investments in recent days, such as Boeing, Wells Fargo, and Fifth Third Bancorp, could similarly be seeking to capitalize on advantageous tax rates before the bill comes into effect.