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Doing Business in the U.S. – Trump in the Changes!

 

As Donald J. Trump takes office as the 45th President of the United States, and as a Republican-controlled Senate (52 of the 100 Senators) and House (241 out of 435 Representatives) which make up the 115th Congress convenes, what legal changes are expected? Major issues such as infrastructure spending, international tax reform and immigration reform have been tipped to be key areas. Below we have identified some key policy issues and legal reforms that have been identified and that may affect UK businesses doing (or planning to do) business in the U.S.

Overall, it is expected that the new Administration will prioritize American businesses and focus government spending on American infrastructure, moving away from a globalization approach. Promoting a pro-business ecosystem driven by tax reform, healthcare reform, and de-regulation is expected, which may have a positive impact on the capital markets and overall access to both debt and equity capital. In relation to international trade, an increased willingness on the part of the Trump Administration to approve exports to “friendly” countries and deny them to countries not in accord with his foreign policy initiatives can be expected as are early withdrawal from the Trans-Pacific Partnership (TPP) trade deal and renegotiation of NAFTA.

 

  • Economic forecasts include:
    • Financial market volatility
    • Upturn in the economy
    • Higher U.S. interest rates
    • Increased infrastructure spending
    • Stimulus Bill in first 6 months

 

  • Capital Markets
    • From an equity perspective, tax reform and a pro-entrepreneurship Administration may create an increase in angel investments.
    • Access to the public markets and to raising capital via IPO’s may fall slightly in the tech sector, but offerings in the next couple of years in the healthcare, energy, and infrastructure industries may increase if pre-election policies are put in place in the next six to twelve months.
    • It remains unclear if the Trump Administration will consider any changes to the JOBS Act (enacted in 2012 with the intention of encouraging funding of U.S. small businesses by easing various securities regulations) or support a pullback in securities law enforcement against public companies.

 

  • Tax Reform
    • Lower tax rates, but removal of certain tax benefits is expected.
    • A move away for the U.S. “worldwide” tax system to a territorial system also seems likely as it a more friendly tax environment for U.S. and international investment.
    • Tax rates are expected to be consolidated into fewer brackets, to cap the highest tax rates well below current rates (ordinary income is taxed at 33% for individuals, 15% to 20% for corporations), and to eliminate the individual and corporate alternative minimum tax and the surtaxes imposed to support the Affordable Care Act (also known as “Obamacare”).
    • Tax reductions would likely be coupled with elimination of most deductions other than the deductions for home mortgage interest and charitable contributions, and most business credits other than the R&D credit. In other words, although tax rates may be lowered, the net effect of those lowered rates will ultimately depend upon the impact of eliminated deductions and credits.

 

  • Immigration reform
    • As immigration reform was a key element of Trump’s campaign, changes to business immigration and tougher enforcement of immigration law is expected as is a slower pace of application review, with a focus on protecting U.S. workers.
    • Reforms to employment-based visas including the H1-B (for employment of specialist graduate level workers in specialty occupations that require theoretical or technical expertise in specialized fields such as in IT) and the L-1 visas (which allows overseas companies to transfer executives, managers and employees with specialized knowledge to a new or existing U.S. office) are in process, to prioritize graduates of U.S. universities. Such reforms are likely and restrict the number of such visas available to a business and is likely to affect the tech sector in particular.
    • Businesses with U.S. employees are likely to be affected by these reforms and should both step up compliance and be aware of the effect on future staffing,

 

  • Intellectual Property Policy
    • It is likely that the Administration’s approach in negotiating future trade agreements will become more U.S.-focused, which may significantly alter the approval of the export of defense and high technology items.
    • Withdrawal from TPP would stop the international harmonization of patent and other intellectual property provisions.
    • Strengthening of trade secret laws in the U.S. is expected to protect U.S generated intellectual property and maintain such assets in the U.S.
    • A rise in the levels of biomedical R&D budgets is expected, which may in turn lead to an increase in U.S. innovation, patent filings, M&A and bio/pharma asset valuation.

 

  • Environmental
    • A temporary moratorium on all new environmental regulation, and plans to rescind certain regulations are likely.
    • Environmental rules and policies to regulate greenhouse-gas emissions will likely be dismantled or significantly weakened and instead the new Administration will focus on revamping U.S. energy policies to encourage domestic production of fossil fuels by opening up federal land for coal mining and promoting policies and regulations to develop the infrastructure necessary for the export of fossil fuels.

 

20th January 2017

For more information, contact Tracey Ginn at 0131 226 8232 or tracey.ginn@mbmcommercial.co.uk

MBM Commercial has experience in guiding businesses through the process of setting up new operations in the U.S and we value the opportunity to work with growing businesses and the new relationships and opportunities they open up for us. MBM Commercial provides this material for informational purposes only and specific advice should be sought. The above information is general and is not intended to be legal advice. Nothing herein should be relied upon or used without consulting a lawyer to consider your specific circumstances, possible changes to applicable laws, rules and regulations and other legal issues.

 

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