Tuesday, August 23, 2022

Another day, another research note on the Inflation Reduction Act and its possible implications for corporate taxes. This time the research note comes from Morgan Stanley — and yes, that’s Calcbench data the bank uses to perform its analysis.

You can download your own copy of the research note from Morgan Stanley directly. The short version is that analysts at the bank modeled the effects of the Inflation Reduction Act’s new 15 percent “book tax” for companies with net income of $1 billion or more. That tax provision is likely to hit 70 to 100 companies every year, and trim their free cash flow by an average of 7 percent.

As we explored in a previous post on the Calcbench blog, the 15 percent book tax (called that because the tax would be based on GAAP net income reported to shareholders in the annual 10-K) would apply to the domestic profits of corporations that report $1 billion or more in annual net income. According to our Multi-Company page, 303 companies within the S&P 500 fit that profile in 2021. Apple ($AAPL) led the way with $94.7 billion, down to Campbell Soup ($CPB), which squeaked onto the list with $1.002 billion.

The Morgan Stanley analysts did a much more nuanced analysis than that, of course. They identified the sectors most likely to be hit by the minimum tax (diversified financials, communications services, consumer discretionary, technology, healthcare), and gamed out the implications of new tax credits and carryforwards that the law also allows.

Perhaps most interesting for our dear readers here is that Morgan Stanley includes a detailed explanation of its methodology — meaning, you can recreate that model yourself (or modify it as necessary to fit your specific interests) and then populate your model with Calcbench data just like Morgan Stanley did. You can do so via our Excel Add-In or even our dedicated API if you want to get super-fancy.

The bottom line is that we have the financial data, and all the tools and channels necessary to get that data from our archives into your models, computer screens, and brains. Then you can research these issues as long as you’d like!

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