Leucadia Set Back $500 Million by Recently Implemented US Tax Reform

The impact of the US government’s tax reform continues to be felt by many US and global corporations.

Leucadia has reported that the recent implementation of the US Tax Cuts and Jobs Act will leave its mark on the company’s financial reports for the fiscal year. The company’s assessment of the situation indicates that despite some favorable provisions to the tax code, the overall changes will cause Q4 2017 results to “reflect a charge in the approximate range of $450-$500 million.”

US lawmakers have recently installed a revised tax code that will replace the previous Internal Revenue Code of 1986. The tax reform will influence US corporations and global companies operating within the US, or offering services to US citizens. Global companies will be required to pay a ‘toll charge’ on any unremitted earnings of foreign subsidiaries, in an effort to strengthen US domestic business operations, and to limit the competitive advantage given to foreign firms operating in the US, while maintaining tax obligations abroad.

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Leucadia has conducted a thorough analysis of all activities pertaining to the company and its associated subsidiaries, and has concluded that the aforementioned charge is a direct result of the revaluation of its “deferred tax assets”, as well as an additional $30 million associated with the “net unremitted foreign earnings relating to Jefferies and Linkem.”

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Jefferies LLC, is a New York-based investment bank, which underwent a merger with Leucadia in 2012.

Widespread impact

The US Tax Cuts and Jobs Act has impacted many companies across a variety of sectors and industries. Some companies have seen their numbers reflect a negative impact, as they attempt to adjust to the new terms and provisions that influence financial planning. As previously reported by Finance Magnates, Interactive Brokers is expecting a $84 million decrease in Q4 2017 earnings, on the heels of the tax reform. While the comprehensive impact of the Tax Act cannot yet be measured, its influence on companies and corporate decisions will be substantial in the years to come.

Leucadia is well known for its crucial role in assisting FXCM during the Swiss franc crisis in early 2015. Following the Swiss National Bank’s decision to remove the cap against the euro, many FX brokerages suffered tremendous losses due to the sudden volatility in CHF-based currency pairs. FXCM incurred a loss of $225 million, as client accounts were hit hard by the unexpected move by Switzerland’s central bank. As FXCM faced a possible bankruptcy, Leucadia came to its rescue, by offering the brokerage a $300 million rescue package.

 

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