The Tax Cuts and Jobs Act saw the most changes to U.S Tax policy in recent history. Tax matters are a driving force of mergers and acquisitions (M&A) when determining the value of the transaction. In order for Technology (Tech) companies engaged in M&A to assess the impact of the TCJA, they must take into consideration the changes in the rules for 1) Net Operating Losses (NOLs), 2) Research and Experiment tax deduction, 3) fringe benefits, 4) the Global Intangible Low Tax Income (GILTI), and 5) the new limitations interest deductions.
Deferred tax benefits such as NOLs add value to the transaction because it allows the acquiring company to benefit from the target’s prior losses. Prior to the TCJL NOLs were allowed to be carried back provision where the taxpayer could apply its NOLS to previous years. The TCJL eliminates the ability to carry back NOLs. Tech company with volatile cash and operating capital may use NOLs as an incentive to facilitate the sale. The new restrictions on NOLs may decrease the purchase price.
Tech companies are heavily invested in research and experimentation (RE) activities by nature. Expenses incurred from these activities are deductible. Under the TCJA these expenses will eventually no longer be allowed to be deducted immediately and will only be allowed to be capitalized and amortized between 5 and 15 years. This will have a high impact on the tax position of Tech companies with significant capital invested in RE actives.
The TCJA disallows the deduction of fringe benefits or perks given to employees. These activities considered to be entertainment, amusement or recreation, and transportation benefits. In the current employee friendly climate, Tech companies are at the front of the line in terms of providing work friendly environments and employee amenities. Tech companies now must weigh the option ceasing to provide these benefits or incur the tax cost of the activities.
The Global Intangible Low Tax Income (GILTI) is an entirely new provision. This provision requires shareholders of Controlled Foreign Corporations to include GILTI into their gross income. The provision allows for 80% foreign tax credits and an incremental GILTI tax levy on corporations whose taxes are below a certain threshold. U.S. Tech companies routinely establish foreign-owned subsidiaries in counties with no taxes on income. As such they are subject to GILTI tax provision which can frustrate the tax implications of a transaction.
Section 163(J) places a cap on deduction of interest expenses to interest income plus 30% if adjusted taxable income. The limitation is without regard to allowable deductions for depreciation amortization and depletion. The TCJA revises and expands section163(j) to apply to all businesses including partnerships. These new limitations decrease the amount of cash flow a Tech company has to include in the valuation of the transaction. 
 Unless otherwise indicated, all IRC section references are to the Internal Revenue Code.