Companies saw a significant impact from the lower corporate tax rate since the passage of the Tax Cuts and Jobs Act at the end of 2017, but not as many of them are planning to increase employee wages as a result, according to a new survey of corporate board members by BDO USA. Instead more companies are planning to do stock buybacks, increase corporate dividends and pursue mergers and acquisitions.

Nearly half the directors polled (47 percent) claim their organizations didn’t take any specific action as a result of the Tax Cuts and Jobs Act, but of the companies that were motivated to act on changes to their tax position, their activities shifted in some important ways compared to BDO’s 2018 survey findings. Last year, 14 percent of them said they planned to increase employee wages, but this year, only 8 percent of them did. However, 6 percent of directors in the 2019 survey indicated their companies distributed a one-time bonus to employees.

Conversely, while 7 percent of the directors polled last year said their companies initiated stock buybacks, 19 percent said this year that they did. Last year, 11 percent of the respondents said their companies would pursue a merger or acquisition, but this year that more than doubled to 23 percent. And while 9 percent said last year their companies would increase dividends, 16 percent of the directors polled said they would.

Plans for repatriating corporate profits back to the U.S. from abroad have also increased as a result of the new tax law, with 10 percent of the directors polled last year saying their companies would repatriate cash back to the U.S., compared to 16 percent this year. Meanwhile, plans for capital investment have only ticked up slightly, at 17 percent last year, increasing slightly to 18 percent this year.

The main impact seen by corporate board members is the reduced corporate tax rate, which went from a maximum of 35 percent before the TCJA to 21 percent today. “That reduced corporate tax rate seems to be getting everyone’s attention,” said Matt Becker, managing partner of tax at BDO. “There are some other provisions related to how foreign earnings are treated and how interest deductions are calculated, but we’re not seeing board members as interested. The larger the company, the more nuances get discussed. But in general it’s the reduced corporate tax rate having the biggest impact. Then if you look at the specific actions that are being taken as a result of tax reform, about half the directors say their organizations do not take specific actions. Of those that do take specific actions, we’re seeing those taken related to mergers and acquisitions activity, buybacks, increased cash repatriated to the U.S., and in some cases increases in employee wages.”

However, there’s a stark contrast between those directors whose companies plan increases in employee wages (8 percent) versus stock buybacks (19 percent).

“I don’t think we have evidence that they’re cutting employee wages, but there’s a clear preference for stock buybacks as a reaction to tax reform,” said Becker.

The survey found 83 percent of directors at large companies report feeling the effects of tax reform changes compared to only half of all micro or nano cap companies. Along with those trends, more companies are looking at not only their federal taxes, but also their state and local taxes over the past few years. Nearly two-thirds of the directors surveyed (65 percent) report a high or moderate understanding of their company’s total tax liability, factoring in income, indirect, property, payroll, excise and other taxes along with credits, incentives, customs, duties and deductions. In contrast, in 2018, among the board members surveyed by BDO, only 44 percent said they have a strong understanding of their organization’s total tax liability and how it impacts the company’s tax strategy.

“We’re seeing companies interested in understanding their total tax liability, including indirect and excise taxes,” said Becker. “With the federal income tax rate being lower, others represent a [bigger] portion of total tax.”