Bueller? Bueller?

by David Zaiken, Adam Johnson and Cheryl Leydon

This article was originally published in the South Carolina CPA Report | Spring 2026

The last time the United States adopted a comprehensive tariff regime was in the 1930s with the Smoot-Hawley Tariff Act. If you’ve seen Ferris Bueller’s Day Off, you may remember Ben Stein’s droning classroom monologue on tariffs. The joke was that no one cared. This is far from the case today.

Today, manufacturers and business owners cannot afford that indifference. Tariffs are back in force — including country-specific reciprocal tariffs under IEPPA, product-specific tariffs on steel, aluminum, and copper, shifting China and India tariffs, and numerous trade deals. These measures are evolving quickly and materially affecting business operations.

On February 20, 2026, the Supreme Court of the United States held that President Trump lacked authority to impose certain reciprocal (IEPPA) tariffs through executive orders. The ruling raises questions about tariff refunds, although the process for claiming them remains unclear and is under consideration.

Subsequent to the Supreme Court case, a new 10% tariff was enacted, with discussion of increasing it to 15%. Further legislative or executive action may follow, and Congress could respond with alternative tariff mechanisms or excise taxes.

Regardless of what comes next, strategic planning can no longer wait.

Tariffs Are a Core Business Issue

Tariffs directly affect cash flow, inventory, transfer pricing, and financial statements. Public companies have reported material impacts. Planning for tariffs is critical, including how to obtain refunds and how to best address and reduce tariffs. Consider various strategies, such as moving to U.S. production or assembly. The following chart illustrates planning alternatives still available for tariffs. Now is a prime time to evaluate these options.The tax impact is particularly significant among related parties. Transfer pricing determines who bears tariff costs. If refunds become available, prior allocations may require adjustment. Planning for the future is core.

For 2026, transfer pricing should be reevaluated. At the same time, Congress last July passed the One Big Beautiful Bill Act (OBBBA), introducing business friendly tax provisions. Coordinating tariff planning with these tax changes creates opportunities — but only if approached deliberately.

Post–Year-End Planning Must Be Immediate

With December 31, 2025, closed for calendar-year taxpayers, businesses should be forecasting now. C corporations, S corporations, partnerships, closely held businesses, and U.S. subsidiaries of foreign parents must evaluate how tariffs and the OBBBA reshape their tax posture.

Tariffs increase costs. The OBBBA provides tools to reduce them. The interaction between the two is complex and requires modeling.

100% Bonus Depreciation Requires Strategy

The OBBBA reinstated 100% bonus depreciation for qualified property placed in service after January 19, 2025. Businesses may immediately deduct the full cost of qualifying capital expenditures. Newly constructed manufacturing facilities — previously depreciated over 39 years — may also qualify for immediate expensing.

The instinct may be to deduct everything at once. However, accelerating deductions could push a company into a loss position, potentially reducing the value of those deductions in future higher-tax years. Losses may also limit benefits tied to export income.

State conformity adds another layer of complexity. In some jurisdictions, state tax exposure may exceed federal exposure, making depreciation decisions less straightforward.

R&D Expensing Returns

Domestic research and development costs may again be expensed immediately rather than amortized over five years. This change particularly benefits companies investing in technology, life sciences, and advanced manufacturing.

Still, expensing R&D may generate losses in some years. Depending on projections, some businesses may elect capitalization to smooth taxable income.

Interest Deductibility Has Expanded

Interest expense limitations have shifted from an EBIT-based calculation back to EBITDA, restoring deductions for leveraged businesses. When combined with accelerated depreciation and R&D expensing, the cumulative reduction in taxable income can be substantial.

These decisions affect not only tax returns, but also financial reporting, estimated tax payments, and deferred tax assets and liabilities.

Export Incentives Remain and Are Enhanced

Corporations continue to benefit from the export regime enacted under the 2017 tax law changes. Foreign Derived Intangible Income — now renamed Foreign Derived Deduction Eligible Income — allows export income to be taxed at 14%, calculated without allocating research and development, interest, or other indirect expenses. This is a potentially large benefit that can be combined with tariff planning.

State and Local Tax

Many states have not yet conformed to the OBBBA provisions, yielding very divergent state tax results. This is important to monitor and plan as the year goes on.

Tariffs Complicate Inventory Accounting

Tariffs directly affect cost of goods sold and inventory valuation. Companies must determine whether tariffs materially increase ending inventory balances. Most businesses use FIFO accounting, but if inventory levels are high, evaluating LIFO could produce a more favorable result.

Companies operating under reciprocal tariffs must reassess whether refunds will alter inventory costs and taxable income. Running comparative calculations now is prudent.

It’s equally important to confirm that tariffs were properly assessed. Country-of-origin determinations and product classifications must withstand auditor scrutiny. Errors may compound financial and tax exposure.

New tariffs need to be monitored, and refund opportunities addressed once rules are finalized.

Transfer Pricing: A New Pressure Point

Tariffs introduce significant transfer pricing challenges. Many U.S. subsidiaries are structured to earn routine arm’s-length profits. If tariffs materially reduce margins, year-end adjustments may be required.

If intercompany prices are lowered to restore profitability, tariffs may already have been paid on higher import values. The mismatch can complicate cost-of-goods-sold deductions and documentation.

Do the Math — Now

Depreciation, R&D expensing, interest deductibility, inventory accounting, transfer pricing, and tariff uncertainty together create a materially different taxable income profile than in prior years.

Accelerated deductions are powerful but involve tradeoffs. Large first-year deductions may reduce taxable income needed to utilize other benefits. Interest deductibility changes require long-term modeling. Potential tariff refunds introduce further uncertainty that must be incorporated into projections once guidance is issued. Tax compliance alone is not sufficient. Estimated payments, deferred tax positions, auditor review, and financial reporting all depend on proactive analysis.

In Ferris Bueller’s classroom, no one paid attention to tariffs. Today, business leaders cannot treat them as background noise. The intersection of tariffs and tax reform has created a more complex environment. Companies that engage thoughtfully — and run the numbers early — will be far better positioned than those that wait.