• • • Changing the balance of taxes — Budget‑driven tax swaps and incentive reforms are changing the balance between income, property, and sales taxes, forcing large companies to revisit their multistate footprint.

    • How revenue is sourced is changing, too — Rapidly evolving digital and AI‑related taxes are creating new nexus, sourcing, and base‑definition issues for businesses that rely on revenue from digital advertising, social platforms, data monetization, and automated tools.

    • Planning amid continued uncertainty — New federal tax regulations, tariff‑related uncertainty, and even the elimination of the penny are all amplifying state‑by‑state complexity for in‑house tax departments.

WASHINGTON, DC — Tax industry experts who gathered at to provide updates on the current landscape of state and local tax (SALT) policy and offer insight that corporate tax departments should consider found, not surprisingly, that they had a lot to talk about in the current economic environment.

Mapping the new SALT frontier

For starters, this year’s SALT agenda is not just an abstract policy story for large, multistate businesses, rather, it’s a direct driver of cash taxes, effective tax rate (ETR) volatility, and audit exposure. Indeed, several state legislatures are advancing new taxes on digital advertising and data, revisiting incentives and data center exemptions, and using conformity to federal law — especially the tax provisions in the One Big Beautiful Bill Act (OBBBA) — as a policy lever, all against the backdrop of slowing revenues and contentious elections.

“Tax swaps” and incentives — States that are facing budget pressure are, unsurprisingly, looking at tax swaps to reduce income or property taxes while broadening the sales & use tax base and trimming exemptions. For example, on March 3, the state of Florida — which already doesn’t have a state income tax — passed legislation that in the state.

Moreover, with the rapid expansion of AI come the extensive need for data centers. Several states are reassessing data center exemptions and credits, either tightening qualification standards, requiring centers to supply more of their own power, or repealing incentives outright. A decision in Virginia to , for example, is viewed as a potential template for other states, particularly in those areas in which energy and environmental concerns are priorities. At the same time, proposals targeting include expanded corporate tax disclosures, CEO compensation surcharges, and enhanced reporting on apportionment and group filing methods.

What companies should consider — Large companies operating over multiple states should consider making an inventory of their credits and incentives by jurisdiction, including looking at sunset dates and political risk indicators.

Companies should also build forward‑looking models that show how any sales tax base expansion would interact with their supply chain and their procurement of digital and professional services.

New exposure for tech, marketing & data

Bipartisan legislators in several states are continuing to expand on digital economies as a revenue and policy target. For example, Maryland continues to lead with its digital advertising tax; while Washington state’s expansion of its sales tax to include certain digital and IT services and Chicago’s social media taxes illustrate the variety of approaches that state and local jurisdictions are exploring to expand their tax base and raise revenue.

Data and “digital resource” taxes — Proposals in states such as New York would tax companies that derive income from resident data, treating data as a natural resource. While no state has fully implemented a comprehensive data tax, however, large platforms and data‑driven enterprises are monitoring these bills closely.

AI‑related SALT rules — Many states still classify AI solutions under existing Software as a Service (SaaS) or data‑processing categories, but some — including New York — are exploring surcharges tied to AI‑driven workforce reductions. And at least two states are explicitly taxing AI, similarly to the way software is taxed.

For corporate tax leaders, some practical next steps should include mapping those areas in which your group has digital ad spending, user bases, data monetization, or AI deployments. Then, overlaying that with current and pending digital tax proposals. In parallel, it is increasingly critical for the tax team to partner with IT and marketing teams to understand how contracts, invoicing structures, and platform design will affect nexus, tax base definition, and sourcing.

Federal shifts magnify multistate complexity

The OBBBA made permanent several of , while expanding SALT relief on the individual side and creating new interactions for multinational groups. Because most states start from federal taxable income — either on a rolling, static, or selective conformity basis — OBBBA changes reverberate across state corporate income tax bases, especially in those states that have decoupled themselves from interest limits, R&D expensing, or new production‑related incentives.

Corporate tax departments must now juggle different conformity dates and selective decoupling rules across rolling and static states, including jurisdictions that automatically decouple when a federal change exceeds a revenue impact threshold. This requires more granular state‑by‑state modeling of OBBBA impacts on apportionable income, deferred tax balances, and cash tax forecasts. It also heightens the risk that political disputes — such as — produce mid‑cycle changes that complicate provision and compliance processes.

Penny elimination — With federal , states now are moving toward symmetrical rounding for cash transactions, rounding the final tax‑inclusive total to the nearest five cents while attempting not to alter the underlying tax computation. For retailers and consumer‑facing enterprises, this shifts the focus to point of sale (POS) configuration, consumer‑protection exposure, and class‑action risk if rounding is implemented incorrectly.

Tariffs and refunds — The U.S. Supreme Court’s Learning Resources, Inc. v. Trump decision under the International Emergency Economic Powers Act in February leaves open how more than $100 billion in and what that means for prior sales & use tax treatment. Streamlined guidance generally treats tariffs embedded in product prices as part of the taxable sales price but excludes tariffs paid directly by a consumer‑importer from the tax base, raising complex questions if tariff refunds reduce costs or sales prices retroactively.

For indirect tax department teams, the confluency of the 2026 SALT changes — including the impacts around everything from data center credits to the recent Supreme Court tariff decision — the need to rely on internal partners across the business has never been stronger. Combining that with a greater reliance on technologies, including dedicated research tools to stay abreast of state-by-state tax changes, may be the best way for corporate tax teams to keep up with compliance requirements and avoid penalties.

You can download a full copy of here

Key takeaways:

• • • Tax departments lack resources and confidence — More than half (58%) of tax departments are under-resourced, and 59% are not confident that they can upgrade their tax technology over the next two years.

    • Under-resourced departments incur more penalties — At least half of respondents from under-resourced tax departments say their departments incurred penalties over the past year, compared to only about one-third of those from properly resourced departments.

    • Making the shift to proactive planning and value creation — For many tax departments, the winning model blends in-house expertise, targeted external support, and a coherent tech/AI stack that allows teams to shift from tactical compliance to proactive planning and strategic value creation.

Under-resourced corporate tax departments spend more of their budget on external support compared to well-resourced teams — yet they’re more likely to incur penalties and less confident in forecasting, according to the Thomson Reuters Institute’s .

Given this, the problem isn’t a lack of spending — it’s the operating model. With respondents from 58% of tax departments saying they are under-resourced, 59% saying they lack the confidence needed to upgrade their existing tax technology over the next two years, and most spending more than half their time on reactive compliance work when they’d prefer to focus on strategic planning, clearly the gap between ambition and reality has never been wider.

The answer isn’t working harder or throwing more money at consultants, however. It’s building a hybrid ecosystem of people, platforms, and partners designed to shift capacity from firefighting to foresight.

The Groundhog Day problem

Every year feels the same: New tax legislation (such as the One Big Beautiful Bill Act or Pillar 2), new compliance burdens, new geopolitical uncertainty — coupled with the same old constraints. Too much work, not enough time, and technology that lags.

When deadlines hit, under-resourced teams rely on two blunt levers: overtime and reactive outsourcing. Internal staff end up working longer hours, and external providers plug the gaps at short notice. This model is breaking departments and it’s breaking down itself.

Under-resourced departments are significantly more likely to incur penalties, with 50% of respondents saying their under-resourced department had been penalized in the past year, compared to just 34% of respondents from well-resourced departments that say that, according to the report.

Further, under-resourced department respondents said they were less confident in their ability to forecast accurately, with just 26% saying their ability to forecast accurately was “very likely” compared to 43% of well-resourced department respondents. Ironically, under-resourced departments also spend more on external support as a percentage of budget (44%) compared to 37% for well-resourced departments. Clearly, spending more doesn’t solve structural problems — it often masks them.

Meanwhile, tax professionals report spending more than half their time on tactical or reactive work, even though they would prefer to spend up to two-thirds of their time on strategic analysis. Not surprisingly, when the team is locked into manual reconciliations and last-minute fixes, it’s nearly impossible to influence business decisions or shape strategy.

Why “all in-house” or “all outsourced” no longer works

When more work is moved onto the plates of the internal tax team, all in-house can often come to mean all heroics — talented people drowning in compliance volume with no time to use the analytical tools already on their desks. Conversely, all outsourced risks hollowing out the department’s institutional knowledge and weakening its seat at the table.

A hybrid model asks better questions: What kind of work is this, and where does it create the most leverage? These questions can be used to determine where and to whom work should go. For example, high-volume, rule-based, recurring tasks are prime candidates for automation, shared services, or managed services under strong tax oversight; while complex, judgment-heavy, strategically sensitive work should remain anchored in-house, with external advisors extending capacity and offering specialized insight.

Thus, the best model for a modern corporate tax department is a hybrid ecosystem — not a fixed organizations chart, but a deliberate blend of internal expertise, enabling technology, and external capability partners.

Four layers of the hybrid ecosystem

This hybrid ecosystem can be delineated into four layers, each bringing their own insight and value:

1. 1. 1. People and roles redesigned — High-performing tax functions invest in analyst and tax-tech roles that connect tax to enterprise resource planning (ERP) systems, data hubs, and analytics, thus freeing technical experts from manual data work. Senior professionals then become embedded advisors to finance, treasury, and the business, not just compliance reviewers.
      2. Processes segmented into “run” and “change” — The biggest barriers to strategic work are excessive volume, heavy compliance burdens, limited resources, and time pressure. Modern tax departments respond by explicitly segmenting work in which run the business processes are documented, standardized, and increasingly automated or pushed into shared or managed service models. Change the business work remains tightly linked to senior tax staff.
      3. Technology becomes the data spine — More than half of respondents say they expect above-normal increases in their tax technology budgets, and more than half say their main resourcing strategy is introducing more automation. The goal isn’t collecting point solutions; rather, it’s building a coherent data spine that includes ERP integration, tax-specific data models, consistent workflow tooling, and strategic platforms that flex as regulations shift.
      4. AI act as an accelerator — Two-thirds of tax departments aren’t yet using generative AI (GenAI), according to the report. And among the one-third that are, usage clusters around research, document summarization, drafting, and some analytical support. The next step up the AI chain is for departments to move from individual experiments to standardized, governed workflows that scan legislation, prepare first drafts of memos, or interrogate large data sets for anomalies.

What high-performing hybrid tax departments do next

Departments that feel well-resourced, allocate more time for their professionals to conduct proactive work, and invest deliberately in technology and skills are significantly more confident in their ability to forecast accurately, avoid penalties, and minimize tax liabilities, the report shows.

Indeed, these high-performing hybrid tax departments:

• • • invest ahead of crises in people, tech, and processes
    • treat external providers as capability partners, not emergency relief
    • actively protect time for strategic work by automating or outsourcing routine tasks
    • insist on a durable seat at the strategy table, not just one for compliance reporting
    • experiment with automation and AI in focused, repeatable use cases

It is worth noting that smaller companies (those under $50 million in annual revenue) and the largest one (those with more than $5 billion in revenue) are leading the way by securing leadership buy-in early and leveraging specialized external expertise rather than trying to build everything in-house. Midsize companies, by contrast, are more likely to rely on in-house teams to lead automation efforts and less likely to use third-party vendors — a cautious approach that risks having them fall too far behind to catch up.

The message: Design the ecosystem, don’t just work harder

For corporate tax professionals, the message may be harsh but hopeful: You cannot work your way out of structural constraints by effort alone. Rather, a well-designed hybrid ecosystem can turn those constraints into a catalyst that will allow the department to deliver more value to the business. In fact, the modern corporate tax department is hybrid by necessity; but the question is whether it’s hybrid by design — or just by accident.

You can learn more about the challenges facing modern corporate tax departments here

Key takeaways:

• • • Real-time oversight and strict compliance — Mexico’s SAT now requires digital platforms to provide real-time access to transaction data and withhold taxes at the source, with severe penalties, including service blocking, for non-compliance.

    • Major technological and operational demands — Platforms must invest in secure, scalable systems for data sharing, billing, and cybersecurity, and small businesses likely will face extra challenges adapting to these requirements.

    • New roles for legal and tax professionals — Lawyers and accountants will be essential in guiding businesses through compliance, privacy, and operational risks, as well as supporting technology integration and adapting to the demands of Mexico’s digital tax environment.

Mexico’s digital tax overhaul is more than a regulatory update — it’s a fundamental shift that will reshape how businesses in that country operate online. By granting the Tax Administration System (SAT) real-time access to platform data, the government aims to curb tax evasion and strengthen collection in the digital economy. This means platforms like Amazon, Uber, Netflix, TikTok, DiDi, and Mercado Libre must now share transaction details as they happen, which will mean unprecedented compliance, technology, and operational challenges for companies and professionals alike.

Platforms must also — 2.5% for income tax (ISR) and 8% for value added tax (IVA). If a seller does not give a tax ID number (RFC), the platform will keep up to 20% of the payment; and, if the platform does not comply, SAT can block the service in Mexico until the problem is fixed. That means users will not be able to access the platform until it follows the law.

The goal of all this is to make tax collection fair and stop fake invoices and false transactions. The law also adds ; now, selling fake tax documents online can lead to two to nine years in prison.

These new tax measures also raise questions about with the United State-Mexico-Canada Agreement (USMCA or T-MEC), because some proposals — such as increased data access and stricter penalties for digital platforms — could conflict with the treaty’s provisions on cross-border data flows and platform liability.

Indeed, this shift is part of a wider digital transformation in Mexico, as seen not only with the new biometric CURP for identity verification, but also with SAT’s adoption of AI-driven smart auditing — both of which bring new opportunities and challenges for compliance, security, and public trust.

Technological impact on companies

These latest rules mean big changes for tech systems. Platforms must create secure connections for SAT to access their data, although they may use APIs or that send transaction details in real time.

Companies will need stronger cybersecurity policies because opening a permanent link to SAT creates risks, especially considering the high value of data that will be flowing through the system en masse. At a minimum, businesses will need to invest in heightened encryption to protect data, authentication systems to control access, and monitoring tools to detect unusual activity

Platforms also need to update their . Every sale must include correct tax retention and generate a digital invoice (CFDI). For larger platforms that process millions of transactions daily, this means building high-capacity systems to avoid delays or errors. These platforms will also need data pipelines to handle the huge volumes of information and, in turn, send that to SAT without slowing down the services of SAT or themselves.

Small companies and startups may face extra challenges. They might not have the money or staff to make these changes quickly; and they likely will require the assistance of technology providers or consultants to implement new solutions such as compliance-as-a-service and automated tax reporting software.

Challenges and opportunities for tax and legal professionals

For lawyers, these rule changes will create new work areas. Companies will need legal advice to comply with the new rules and protect user privacy. Lawyers, for example, can help draft policies, negotiate limits on data sharing, and design compliance programs.

There will also be litigation opportunities. Many that real-time accesses could violate privacy rights and even the Mexican Constitution, with legal challenges likely by companies as a result. However, due to the recent amendments to the Amparo Law, many of these lawsuits could be frustrated at the outset, because the new Amparo requirements demand the claim of direct and personal harm and impose stricter limits on judicial suspensions, making it harder for platforms to obtain effective protection against real-time monitoring.

For accountants and tax advisors, the challenge is operational. They must help businesses manage new tax retentions and keep accurate records. Many smaller businesses, especially in retail, will need help registering with SAT, issuing invoices, and recovering taxes withheld. Accountants will also need to plan for their clients’ as a result of the retentions potentially reducing liquidity.

Both professions are likely to see more demand for their respective services. Lawyers will focus on compliance and defense matters, while accountants will handle routine tax activities; however, both will be involved in technology integration. Professionals who combine legal or tax knowledge with these needed tech skills will have a big advantage.

Adapting to Mexico’s real-time tax landscape

Real-time tax monitoring is a major shift for Mexico’s digital economy, and it aims to increase tax collection and reduce fraud, but it also brings big risks and costs. And the success of this big fiscal change depends on balance. Authorities must ensure strong security and clear limits on data access, and they should also offer support to small businesses, either in educational or instructional fashion, to help those enterprises that may have fewer resources at their disposal to navigate this turbulence.

If implemented well, however, this system could make Mexico’s tax collection more efficient and fairer. If not, these changes could lead to privacy violations, higher costs, and even less participation in the digital economy by smaller entities.

Indeed, Mexico is entering new territory with these rule changes, and the world will be watching carefully as this could become a model for other countries’ digital tax compliance — or it could become a cautionary tale of what happens when technology and regulation collide without enough safeguards.

You can find out more about theĚýregulatory and legal issues impacting MexicoĚýhere

Key takeaways:

• • • Invest in your data before adopting AI — Without clean, organized, and accessible data, AI solutions will not deliver the desired results.

    • People are the ultimate differentiator — Fostering curiosity and continuous learning are essential for tax professionals to thrive in the AI era.

    • Successful AI integration requires commitment to change — Transparent change management and a willingness to experiment can help build trust and buy-in across the tax team and the organization.

SAN FRANCISCO — As corporate tax departments continue to undergo AI-driven technology transformation, industry leaders gathered at the recent to discuss how tax professionals can successfully navigate this new era. Their insights crystallized into three essential takeaways that all corporate tax teams should consider as they embark on their AI journey.

1. Data is your new currency

The first and most critical takeaway was simple: Data is your new currency, and you must invest in it before you invest in AI. Most tax departments are starting the conversation around what AI tools they need to buy, with all the talk being about efficiencies and how AI can help. Indeed, many organizations are rushing to implement AI solutions without first ensuring that their foundational data infrastructure is sound. The result is often disappointing — garbage in, garbage out, as the old saying goes.

The tax function of the near future will face increasing demands for real-time information from tax authorities around the world. For systems and data that aren’t clean, organized, and accessible, implementing AI may not only fail to solve the problems it was employed for but possibly exacerbate them. Before deploying any AI solution, tax departments must ask themselves critical questions, including: Do we have a single source of truth for our data? Is our data structured in a way that AI can effectively process it? Can we trust the accuracy and completeness of our information?

The message is clear: You should pause before rushing into AI implementation. Audit your data landscape and identify gaps, inconsistencies, and quality issues. Invest the time and resources necessary to create a solid data foundation. This groundwork may seem tedious, but it’s absolutely essential for AI success going forward.

2. People are your differentiator

The second key takeaway addresses a common fear about AI, that it will replace human workers. The reality presented at the conference was far more nuanced and optimistic. People remain the ultimate differentiator in tax departments, but the skills that define success are evolving. Curiosity and continuous learning will separate thriving tax professionals from those who get left behind.

Conference panelists explained that AI should be viewed as a tool for augmentation, not replacement. The most successful tax departments will be those that embrace a human + machine model, on in which AI handles the repetitive, data-intensive tasks while humans focus on judgment, strategy, and relationship-building. Tax, after all, is fundamentally about social engineering — understanding not just the letter of the law, but how regulations are interpreted and applied in real-world contexts. This requires human insight, empathy, and strategic thinking that AI cannot replicate.

However, leveraging AI effectively does require a mindset shift. Tax professionals must become comfortable with technology, willing to experiment, and committed to understanding how AI tools work. This doesn’t mean everyone needs to become a data scientist, but it does mean cultivating genuine curiosity about technology and its applications.

In this way, change management emerges as crucial component in this dynamic. Building trust in AI systems requires taking baby steps and bringing your tax team along on the journey. Transparency is essential — you must explain what the AI is doing, why certain approaches were chosen, and what the limitations are. When people understand the why behind AI implementation, buy-in follows more naturally.

Leaders should focus on the process, not just the outcomes, panelists said, adding that corporate tax leaders should identify key touch points where AI can create meaningful intelligence without overwhelming the organization. Remember, it’s not about automating everything. Some processes benefit tremendously from AI; others may not. Using human judgment to guide these decisions is precisely the kind of value that distinguishes exceptional tax professionals.

As a tax leader, you should encourage your team to be curious. Create safe spaces for experimentation in which failure is seen as a learning opportunity rather than a career risk. Those tax professionals who will thrive in the AI era are those who approach new tools with enthusiasm rather than apprehension, who ask questions rather than resist change, and who see continuous learning as a professional imperative rather than an occasional activity.

3. Partnership is your strategy

The third critical takeaway recognizes that successful AI implementation within tax departments cannot happen in isolation. Partnership is your strategy, and collaboration across tax departments, IT teams, and external advisors is how organizations will scale AI responsibly and effectively.

Tax departments have traditionally operated with significant autonomy, but the AI era demands that these silos be broken down. Tax professionals bring domain expertise and understand the nuances of compliance, planning, and tax controversy. IT teams bring technical knowledge about infrastructure, security, and integration. And external advisors offer perspective on industry best practices and emerging technologies. None of these groups can successfully implement AI in the tax function without the others.

This collaborative approach should begin before any AI tool is selected. Tax, IT, and external advisors should jointly define the problem that tax leaders are trying to solve. What specific pain points does AI need to address? What does success look like? How will you measure ROI? These conversations ensure alignment and prevent the common pitfall of implementing technology in search of a problem.

Internal audit functions also play a crucial role in the AI journey, particularly regarding risk management and controls. As AI becomes more embedded in tax processes, audit teams need to understand how these systems work, what risks they introduce, and how to verify their outputs. This requires ongoing dialogue between tax and audit functions — another partnership that’s essential for responsible AI scaling.

The partnership model extends to managing relationships with tax authorities as well. As jurisdictions increasingly demand real-time data and embrace their own specific AI tools for compliance monitoring, corporate tax departments must work closely with legal and government affairs teams to understand evolving requirements and ensure that their organization’s systems can meet them.

Scaling AI responsibly means implementing appropriate governance frameworks, establishing clear accountability for AI outputs, and maintaining human oversight of critical decisions. It also means being thoughtful about which processes to automate and which to keep human driven. And perhaps most importantly, it means investing in training across all partner groups, so everyone understands their role in the AI ecosystem.

The path forward

The transformation of corporate tax through AI is not a distant future scenario — it’s happening now. Organizations that embrace these three principles — investing in data before AI, fostering an environment of curiosity and continuously learning, and building strong partnerships across organizational functions — will position themselves to thrive in this new landscape. And those that rush ahead without proper preparation or try to go it alone will likely struggle.

The message from TEI’s conference is ultimately one of optimism tempered with pragmatism. As panelists noted, AI offers tremendous potential to make tax functions more efficient, insightful, and strategic; however, realizing that potential requires thoughtful preparation, human-centered change management, and collaborative execution. The future of corporate tax is bright for those willing to do the work.

You can find out more about the work of the Tax Executives Institute here

Key points:

• • • Technological transformation — SAT is modernizing its auditing with machine learning and graph analytics to detect fiscal risks and tax evasion networks.

    • Greater operational demands — Taxpayers and accounting firms must adapt to faster, more precise reviews that will be driven by AI.

    • Efficient and preventive auditing — AI enables SAT to anticipate irregularities, promote self-correction, and maintain effective tax collection at low cost.

In 2024, Mexico’s tax authority, the Tax Administration Service (SAT), introduced its Master Plan, marking a new chapter in tax auditing. This plan includes the integration of technologies such as machine learning to identify high-risk taxpayers who potentially could be involved in illicit activities. The aim of the plan is to detect complex structures of tax evasion and avoidance through the analysis of transactional patterns and relationships among entities.

Additionally, the plan seeks to uncover inconsistencies in Digital Tax Receipts (CFDI) that may indicate simulated operations, smuggling, or the use of shell companies, thereby strengthening fiscal oversight and the prevention of financial crimes.

This approach relies on large-scale data analysis, with AI playing a central role. Through algorithms that learn from historical patterns, SAT aims to anticipate irregular behavior and act proactively. Indeed, this represents a profound shift in how tax auditing is understood and executed.

Although AI is a major innovation in the field, it’s not the starting point. Since 2020, SAT has been consolidating its four-pronged strategy, aimed at i) increasing collection efficiency; ii) reducing tax evasion; iii) combating corruption; and iv) improving taxpayer service. This strategy has supported the development of programs such as Compliance Monitoring, Deep Surveillance, and Coercive Collection, which have enabled the authority to act with greater precision and speed.

To better understand the scope of this transformation, certified public accountant Roberto Iván Colín Mosqueda, a member of the Mexican Institute of Public Accountants, shares his expert insights on how these tools are redefining tax auditing and what they mean for taxpayers and professionals in the field.

The role of advanced analytics

SAT’s 2024 Master Plan places special emphasis on machine learning to strengthen auditing. This approach is divided into two main models:

1. 1. 1. Analytical techniques, which allow the review of large volumes of data from CFDIs, tax returns, and audit reports. The goal of this is to detect irregularities in real time, especially in sensitive sectors like fuel distribution, where illegal trade and irregular commercialization are targeted.
      2. Statistical learning models, which enable AI to identify previously detected tax evasion patterns and apply them to uncover new networks or similar schemes. This model is particularly useful for identifying operations linked to fake invoicing companies or importers engaged in irregular practices.

The combination of these models allows SAT not only to react to non-compliance but to anticipate it, resulting in smarter, less invasive, and more resource-efficient auditing.

“The authority has been closing gaps and tightening controls, and the reality is that electronic invoicing now provides highly reliable information,” explains Colín. “Based on this, along with tax returns and other data it receives, SAT can implement artificial intelligence to develop analytical and statistical learning models that will undoubtedly continue to deliver strong results.”

Direct impact on taxpayers & accounting firms

SAT’s technological transformation doesn’t only affect large taxpayers or strategic sectors. It also has direct implications for ordinary taxpayers and the accounting firms that support them.

Indeed, Colín warns that this new auditing will be more dynamic and demanding. “In the daily life of a regular taxpayer, this will mean increased auditing,” he says. “The authority will detect non-compliance and omissions more quickly, which will generate more work for both taxpayers and accountants, who will need to constantly review and correct.”

Additionally, accounting firms must adapt to a more sophisticated auditing process that goes beyond numbers to better analyze relationships between data, behavioral patterns, and connections among taxpayers. This implies greater responsibility in validating transactions, ensuring consistency in reported information, and maintaining traceability of digital tax receipts.

“These analytical techniques will allow the authority to detect irregularities more quickly. Today we already see reminders before a tax declaration is due, and invitation letters requesting explanations. With artificial intelligence, this pace will intensify,” Colín adds.

Efficient collection and preventive auditing

One of SAT’s most notable achievements is its operational efficiency. Currently, for every 100 pesos collected, the authority spends only 28 cents, compared with the United States’ Internal Revenue Service (IRS) which . This figure reflects a modern fiscal management model based on the strategic use of technology to maximize results with limited resources.

Preventive auditing, supported by AI, allows SAT to expand its coverage without significantly increasing its operational structure. By detecting irregularities before they become serious omissions, it encourages taxpayer self-correction, reducing the need for formal audits and improving voluntary compliance.

This proactive approach not only optimizes government resources but also fosters a more transparent and collaborative relationship between the authority and taxpayers.

Preparing for the future of tax compliance

SAT’s technological evolution presents new challenges for all actors in the tax system. For taxpayers, it means maintaining more rigorous accounting, staying alert to messages in the tax mailbox, and responding quickly to any requests. For accounting firms, it’s an opportunity to strengthen their services, adopt analytical tools, and provide more strategic advice to their clients.

Smart auditing works to move revenue services beyond enforcement, enhancing the ability of auditors to prevent, educate, and collaborate. In this new environment, transparency, traceability, and cooperation will be key to building a fairer, more modern, and efficient tax system in Mexico.

You can find out more about the regulatory and legal issues impacting Mexico here

Key takeaways:

• • • Technology leads the way — Companies are prioritizing system upgrades and digital tax management tools to meet new compliance demands under the 2025 reform.

    • Strategic planning is key — Early adopters are integrating reform into their business strategies, while others risk disruption by delaying action.

    • Talent development follows infrastructure — Workforce training is expected to grow as organizations solidify their systems and prepare for long-term success.

Corporate tax departments in Brazil are responding to the country’s sweeping tax reform in myriad ways, upgrading their abilities in both talent and infrastructure, according to a new report from the Thomson Reuters Institute. This reform, approved by Brazil’s National Congress in late-2023, marks a significant departure from the country’s historically fragmented tax system and aims to simplify compliance and improve efficiency across federal, state, and local levels.

Jump to ↓

Brazil Tax Reform for Corporate Professionals 2025

At the heart of the reform is the introduction of a dual Value-Added Tax (VAT) structure — comprising the Goods and Services Tax (IBS) and the Contribution on Goods and Services (CBS) — alongside a new excise tax (IS) targeting products with health or environmental implications. These changes are expected to reshape how companies manage tax obligations, credits, and incentives, particularly as the reform phases in between 2026 and 2032.

This new report draws on survey responses from professionals in corporate tax departments across Brazil, offering a snapshot of how organizations are preparing for the transition. While some companies remain in early planning stages, others have already begun adapting their systems and strategies. The report’s findings suggest a growing awareness of the reform’s potential impact and a shift from passive observation to active preparation.

Corporate response in motion

One of the most consistent themes across the report is the prioritization of technology. As Brazilian companies prepare for new tax structures and digital compliance requirements, many are investing in system upgrades and modern tax management solutions. These efforts include refining enterprise resource planning (ERP) systems and their ensuring infrastructure can accommodate new electronic tax documentation formats. The report shows that technology is not just a support function — it’s emerging as the backbone of reform readiness.

Also, the report highlights a clear divide between organizations that are proactively preparing and those that are still waiting for greater regulatory clarity. Early movers are integrating reform considerations into their strategic planning and positioning themselves to turn regulatory change into competitive advantage. Meanwhile, companies that delay action may face higher costs, operational disruption, and even legal risks as deadlines approach.

You can access a full copy of the Thomson Reuters Institute’s “Brazil Tax Reform for Corporate Professionals 2025” in Portuguese here

While talent development is acknowledged as important, it currently trails behind technology and strategy in most organizations’ reform plans. Companies appear to be focusing first on system upgrades and compliance frameworks, suggesting workforce training is expected to follow once foundational changes are in place. However, there is growing recognition that skilled personnel will be essential for sustaining success under the new tax regime. The report suggests that nurturing in-house talent — rather than relying solely on external hires — will be key to the long-term resilience of corporate tax functions and their organizations.

Preparing for transition

Brazil’s sweeping tax reform is reshaping the priorities and operations of the country’s companies and their corporate tax departments. As organizations prepare for the transition, tax professionals across the industry are focusing on strategies that combine regulatory awareness, technological modernization, and strategic investment.

As departments seek to upgrade their tax systems, refine financial planning, and gradually expand their talent development initiatives, they are positioning themselves to navigate the reform with confidence. By aligning internal capabilities with external expertise and embracing automation, our research shows that many corporate tax teams are taking a structured, forward-looking approach that will be essential to ensure compliance, minimize disruption, and unlock long-term efficiencies in Brazil’s evolving tax landscape.

You can download

a full copy of the English-language version of the Thomson Reuters Institute’s “Brazil Tax Reform for Corporate Professionals 2025” by filling out the form below:

Key points:

• • • C-Suite priorities — C-Suite leaders are prioritizing customer satisfaction and retention as key measures of business success.

    • Leveraging internal metrics —ĚýMost corporate function teams currently emphasize internal efficiency metrics over customer-centric outcomes when adopting new technologies like GenAI.

    • Aligning functions with company goals —ĚýC-Suites are calling on their legal, tax, and risk departments to align technology strategies with customer-focused goals, such as investment in improved data flows and integrated workflows.

At their core, the purpose of all corporate functions (sometimes called enabling functions) should be to provide the outcomes that their business leadership needs. Sometimes those are simple problems, and sometimes they can be bet-the-company disasters. However, for in-house legal, tax, and corporate risk & fraud departments alike, company success should be the primary goal.

That then begs the natural question: What does success actually mean? Companies want to make money, while not spending too much money, and they want to accomplish their legal and financial goals in the most efficient and cost-effective ways possible. And by and large, enabling functions have become attuned to those realities, increasingly leveraging technology to perform work quicker, cheaper, and with more overall efficiency.

In reality, however, the definition of success is more complicated. Clients want a strong bottom line, of course, but according to the recent 2025 C-Suite Survey from the Thomson Reuters Institute (TRI), there is another goal that’s top of mind among C-Suite leaders: customer satisfaction and retention. And unless legal, tax and corporate risk & fraud departments are aligning themselves to customer goals — and even more crucially, aligning their technology needs to customer goals — then they may not be achieving true success for their organization.

C-Suite definitions of success: Customer focus

It’s no surprise that C-Suites are focused on customers, of course; but there may be a misalignment between how much C-Suites want their business functions to focus on customers, and how much customer-focus those functions are actually doing. Past versions of the C-Suite Survey have found that while C-Suite leaders say they want their legal and tax departments to be more focused on customer-centric initiatives, legal and tax departments in actuality are more focused on risk mitigation tactics — even more so than their C-Suites desire.

This year’s version of the C-Suite Survey reveals similar priorities. While the financial bottom line remains paramount, most C-Suite leaders are also defining success directly via their customers. About two-thirds of C-Suite executives said they now include customer satisfaction in their definition of success, and more than half said they consider customer retention metrics.

Interestingly, this customer-centric focus does not only play out in conceptual definitions of success, or even primarily in the metrics surrounding success in the organization. Yet, this focus on customers directly impacts how C-Suites view their internal functions’ impact to the overall objectives of the company.

For example, when asked the extent to which certain functions contribute to the overall objectives of the company, in-house departments such as risk, legal, and tax all performed admirably, with more than half of C-Suite leaders saying they believe those departments to either significantly or moderately contribute to company objectives. Yet, the C-Suite still views some functions’ contributions with much more enthusiasm, with almost all (94%) of C-Suite respondents saying their customer success function — which often includes customer on-boarding, retention, marketing, and relationship management — significantly or moderately contributes to the overall objectives of the company.

Notably, however, it’s not just customers that catches the C-Suites’ attention. Ranking second is the technology function, which 90% of respondents say significantly or moderately contributes to overall company objectives. The fact that these two functions are seen as the top contributors (along with operations) is not an accident. Customer success and technology are increasingly intrinsically linked, with many C-Suite technology initiatives aimed directly at enhancing customer experience. As companies heavily invest in technology, they increasingly see their investment echoing what they believe customers want at the same time.

As legal, tax, and risk & fraud departments embark on their own technology journeys, it’s important for them to link technology initiatives to company objectives at large. And increasingly, that means not only thinking internally about technology use, but externally as well.

What it means for in-house departments of the future

When many professional services approach technology, particularly newer technologies such as generative AI (GenAI) and agentic AI, they often approach use cases that emphasize internal efficiency over any sort of external touchpoints.

For example, look at how these in-house departments defined success within TRI’s 2025 Generative AI in Professional Services Report. Just less than one-third of corporate respondents said their departments currently were measuring return on investment (ROI) of GenAI tools in the first place, meaning that many departments have no idea how GenAI initiatives are performing or even how that connects to the rest of the business. Further, among those respondents that said their departments were collecting ROI metrics, internal metrics (cost savings, employee usage, employee satisfaction) are far outpacing any external metrics (client satisfaction, external revenue generation, new business won) within most departments.

Of course, many enabling functions would argue that they’re inherently internal, and that they should not be expected to interface with customers. However, respondents to the C-Suite Survey would likely counter that if legal, tax, and risk departments want to contribute to company success, they should be more focused on customers — that’s how C-Suite leaders are defining business success overall, after all.

So, what does a customer-centric technology strategy look like for corporate functions? A look into how C-Suites believe these functions are constrained may shed some light.

C-Suite respondents identified a number of different constraints on enabling functions, ranging from compliance & regulatory issues to the alignment of risk appetite. With respect to technology, however, one stands out: A need for more effective data and information flows. In fact, a majority (52%) of C-Suite respondents said they believe ineffective data flows are significantly or moderately inhibiting enabling functions.

This is one example in which legal, tax, and risk functions can bolster not only internal efficiency, but align with customer-facing business needs as well. Bolstered data collection abilities and creating more integrated workflows allows for quicker and more accurate answers to customers, more complete financial information for reports and tax returns, and better overall decision-making around customer initiatives with more comprehensive data in mind.

There are other ways for enabling functions to be customer-centric with their technology as well, of course; but the overall goal is to be actively contributing to the C-Suite’s idea of success, and that means keeping customers top of mind when developing a technology strategy.

“It is clear that C-Suite leaders have established priorities for their businesses and measures for success. It is equally clear that many of the enabling functions could do a better job of working towards these broader corporate objectives,” the report states. “In digital transformation and AI, C-Suite leaders may have found the tools to mitigate or perhaps remove constraints from the organization’s enabling functions, ultimately helping those functions make more substantive contributions toward the organization’s overarching goals.”

You can download a copy of the Thomson Reuters Institute’s recentĚý2025 C-Suite SurveyĚýhere

On April 2, President Donald J. Trump announced the most sweeping tariffs since the 1030s, impacting all United States trading partners. Now, as the world adjusts amid tariff retaliation likely coming from several countries, the issues of trade, tariffs, and their implication on corporate tax departments will continue to be to have a significant impact in the coming months and years.

Yet, even before this announcement, tariffs were the topic of numerous discussions in several sessions at the recent Tax Executives Institute 2025 Midyear Conference. Indeed, the ongoing proposed tariffs among the United States and some of its key trading partners now have multinational companies scrambling at a heightened degree. In this environment, corporate tax leaders are not only seeking to understand how their businesses should respond, but also how to remain in compliance and what new strategies are needed to optimize their businesses’ tax liabilities while simultaneously enhancing operational efficiency.

Foreign tax policies that may be impacted due to tariffs

There are several tax policies that are likely to be strongly impacted by the ongoing tariff dispute, including:

Pillar 1 and digital services taxes

An increasingly central component of the Organisation for Economic Co-operation and Development’s (OECD’s) Pillar 1 is the . The OECD in partnership with the G20 formed a coalition to create a single set of agreed-upon international tax rules to prevent businesses from shifting their profits to certain tax jurisdictions in efforts to minimize tax liabilities. The OECD and G20 felt the rule was needed given the global digital economy creating a framework for how taxes can be assessed beyond the traditional systems (which typically involved an organization paying taxes in those jurisdictions in which it had a physical presence). In 2017, the European Commission lead the charge with its introduction of digital services taxes marking a pivotal shift in how digital revenue is taxed.

As of 2024, there are about 20 countries that have implemented digital services taxes. On February 21, President Donald J. Trump issued signaling his Administration’s plan to “take action regarding tax and regulatory measures .” As the Trump considers extending tariffs to the European Union, some EU member nations are reconsidering on digital services taxes on US-based tech companies. a financial bill, which went into effect April 1, that removes their digital services taxes.

Pillar 2

A key part of the OECD’s Global Anti-Base Erosion Model Rules (GloBE), Pillar 2, was agreed to by more than 135 jurisdictions. In 2021, these jurisdictions pledged to update and modernize their international tax systems to better reflect a global digital economy, including establishing a global minimum tax. On January 20, on his first day in office of his second term, President Trump withdrew the US from the OECD’s and suggested imposing retaliatory that impose a global minimum tax on US businesses.

US responses: Section 899 and tariffs

In response to what’s perceived as international tax challenges, the US has proposed (the Defending American Jobs and Investment Act), which imposes additional taxes on the US income of foreign individuals and entities from jurisdictions that have extraterritorial or discriminatory taxes, such as the OECD’s Pillar 2 undertaxed profits rule or digital services taxes. The tax would increase by 5% each year for four years, culminating in a 20% additional tax annually.

Furthermore, Section 899 includes treaty override language, which would deny these foreign entities and individuals the benefit of reduced withholding taxes under any treaty with the United States. This provision is intended to reinforce the OECD Global Tax Deal Executive Order and counteract foreign measures perceived as undermining US economic interests.

What should corporate tax departments do?

There are several actions that corporate tax departments can take now to help them navigate the current environment, including:

Scenario planning and strategic decision-making

For corporate tax departments, tax planning and tax modeling has always been an essential component of determining their companies’ financial strategy. With additional considerations of tariff and trade wars, that planning becomes even more essential. In-house tax departments now must be able to fine tune their scenario planning to not only anticipate but quickly pivot when new information becomes available.

Departments also will need to have several models that can be changed and adjusted so that a clear picture of how their businesses may mitigate the impact of tariffs on operations. For example, understanding what counts as manufacturing rather than assembly, and where these activities take place, can influence tariff rates and eligibility for trade agreements. Tax professionals must weigh the trade-offs between income tax and tariffs, considering the overall tax burden and operational efficiency of their companies.

Collaboration and strategic alignment

Corporate tax departments must collaborate with various business units within their organizations to ensure strategic alignment in managing trade and tariffs. This involves working with supply chain teams to optimize classifications and origins, exploring opportunities for tariff reduction, and understanding the implications of manufacturing and assembly decisions.

As businesses around the globe navigate what some might say is a new era in trade and tariffs, it is the corporate tax departments that will play a pivotal role in helping businesses manage the impact of trade and tariffs on their operations. Department leaders who are able to leverage their people and technology to keep up with the rapid changes will be able to optimize tax strategies and ensure compliance in the jurisdiction in which their businesses operate.

You can download a copy of the Thomson Reuters Institute’sĚý

With this in mind, it’s no surprise that many corporate tax professionals believe their departments are behind the curve of technological innovation. The recently released 2025 Corporate Tax Technology Report from the Thomson Reuters Institute and Tax Executives Institute finds that more than half (57%) of corporate tax professionals rate their department’s technology maturity as chaotic or reactive. Just 6%, meanwhile, call their department’s tech position optimized or predictive.

So, with few resources to devote to technology, how are today’s tax departments looking to keep up with innovation? The answer comes with dual tax/technology roles — and it’s a skill set that tax professionals may need to adopt sooner rather than later.

The tax technologist

According to the 2025 Corporate Tax Technology Report, tax departments are undertaking a wide variety of strategies around hiring technology resources. Some (17%) survey respondents said their departments are outsourcing technology services entirely, while slightly fewer (15%) reported their departments had hired technology consultants within the past year.

But far and away, the most common strategy for tax departments is to try and tackle innovation through in-house resources. “It is going to become more and more necessary, as new laws and initiatives role out (ex: Pillar 2),” said one survey respondent. “Businesses may not want to spend on new technology but will need to if they don’t want to outsource the work. I believe if the department has the capability to do the work in-house, getting functioning software is the best option, instead of outsourcing it completely.”

In practice, that has meant having personnel with dual roles — those who conduct tax work but are also in charge of innovation.

The preponderance of these sorts of roles is not particularly surprising. Given the resource limitations at many corporate tax departments — and especially smaller departments — it is still rare to see dedicated IT job functions solely within the tax department. Given the unique nature of tax work, however, less than one-third (28%) of respondents said their department primarily relies on shared IT job functions for technology personnel resourcing.

Today’s tax department wants somebody who can do both. Sometimes, that means finding a tax professional who is drawn to the technology, then empowering them to lead innovation. “I’m happy to be part of transforming tax department functions,” said one respondent to the report. “I started by learning processes and improving them over time with technology, and now I lead a team with a focus on how we can use technology to be more efficient and re-use data in multiple processes.”

Increasingly, however, many tax departments are taking the opposite approach: hiring a technologist and teaching them tax rules. In fact, of respondents who said their department had hired a technology professional solely for the tax department, 57% said the hire had come with a primarily technology background, 24% came from a tax background, and the remaining 19% were from another background or unknown.

For these departments, the goal is to be able to teach a technologist what can be automated, and what should stay the purview of the tax professional. “Technology will transform the tax department,” said one respondent. “There will be a bigger shift to all staff being even more analytical compared to their abilities now. The technology will do all the nonanalytical work.”

The future of tax/tech jobs

The fact that more than half of tax departments now rely on dual tax/technology roles may be a surprise to those used to a more reserved department posture — but corporate tax professionals say they believe this may only be the beginning.

In line with current resourcing trends, fewer than half of all respondents said they believe their departments will have new job roles due to technology within the next 3 to 5 years. Notably, however, the total that do expect new job roles has risen seven percentage points in the past year alone — to 39% in 2025 from 32% in 2024.

Even greater is the proportion who said they believe technology will change current job roles within the next 3 to 5 years, which now stands at more than half of respondents (55%), compared to just 41% who said they anticipated role changes in 2024.

Already, some departments are hoping that infusing technology into tax work will help close the resource gap. One survey respondent said they were “hopeful that it will bring efficiency and better ROI [return on investment]. It is difficult to find good employees in accounting and tax, and leveraging AI and tech will bridge that gap.”

For tax professionals themselves, however, there is also a lesson: The time to begin acquiring technology skills is now. Especially with so many tax department leaders moving towards dual tax/tech roles — and with more likely on the way — training on technology can be a surefire way to make a resume more attractive. Those who become fluent in new technologies such as generative AI (GenAI) will automatically stand out in a market desperate for tax workers already, let alone those who can conduct work more efficiently and skillfully.

And those who don’t adapt to this new tax technology paradigm may slowly start to be left behind. “A lot of our lower-level positions will be replaced by technology,” one survey respondent said. “The people holding those positions seem to be ignoring that reality. It will pose significant challenges in developing talent to fill senior positions.”

You can download a full copy of the 2025 Corporate Tax Technology Report here

One of those aspects has been Section 174. First enacted in 1954, Section 174 allowed a deduction of expenditures related to research and development (R&D) in the year the expense occurred. The upgrade to Section 174 under the TCJA eliminated the ability to deduct R&D cost as an expense in the year the expense occurred, and instead the cost would have to be amortized over a five-year period for domestic research and 15 years if it was outside of the United States.

Over the years, the IRS has released guidance several times on how best to approach Section 174 R&D capitalization, including its most recent guidance, issued December 17, 2024, that discussed the required accounting method used with Specified Research or Experimental Expenditures.

However, since the changes to Section 174 which took effect in 2018, businesses have struggled to track R&D costs, including what should be excluded or included as a cost. Some tax experts believe that this year and next could bring significant changes to the tax & accounting industry with a new presidential administration — as well as the fact that some key provisions of the TCJA are set to expire later this year.

President-elect Donald Trump has made it clear that his intentions are to extend all the expiring provisions, but the potential impact of this on the national debt could make this a more difficult task.

Planning for uncertainty

Although there is a unified Congress going into 2025 (with Republicans having a slim majority in the House), there previously was a to reverse Section 174. However, because the cost to the government of implementing a more favorable R&D expensing rule is uncertain, it is questionable whether it would pass.

While much of the upcoming year may be steeped in uncertainty, especially around tax policies, companies now need to strategically plan for and mitigate any possible changes that may be on the horizon and that could impact their business.

Indeed, there are ways that corporate tax departments can plan and prepare for potential changes. Today, many corporate tax departments already feel taxed, no pun intended, and more than half say their work is primarily reactive, with more than 70% expressing a desire to do more proactive work, according to the Thomson Reuters Institute’s most recent .

In 2025 and beyond, tax professionals will have to work differently to be compliant, with Section 174 only being a part of the potential changes that may be coming down the pike for businesses.

Here are a few more considerations for corporate tax department leaders to worry over:

• • • Understanding qualified research — The tax department must understand what is considered qualified research and development. This involves staying current on all guidelines issued by the tax authorities. Also, it is essential to work with the company’s R&D team to understand the research being done and then advise that team on the kinds of expenditures that need to be captured, or which costs do or don’t qualify for deductions. This information also should be communicated to upper management when considering product expansion or enhancements.
    • Documentation & recordkeeping — Making sure there is concise documentation of any apparent expense activity — and, for good measure, require documentation even if there is some uncertainty over whether the related expense is an R&D activity. Capture now, and decide later — because it’s better to have the data than not. This requires working closely with the various internal teams responsible for those activities. And for any R&D activity that takes place outside of the US, all data should be captured in the same manner domestic documentation. In short, corporate tax departments should be systemizing documentation, collection, and storage of any R&D expense-related information.
    • Scenario planning — Departments should also develop multiple financial models based on different potential outcomes of Section 174 adjustments. This will help the company understand the range of impacts and prepare accordingly. Scenario planning can help the company decide on the timing of developing or enhancing products because the data points from the modeling can reveal potential tax savings or liabilities that could impact cash flow.
    • Other tax incentives — Depending on the industry in which the company operates, there may be other tax credits and incentives to consider, like Section 41, which provides tax credits for increasing research activities. Tax teams should ensure that claiming one credit does not adversely affect eligibility for others. Evaluate how R&D activities can be structured to maximize available tax incentives.

In conclusion, tax professionals must adopt a proactive approach to remain agile amid shifting tax policies, including potential changes to Section 174 and sunsetting provisions of the TCJA.

Corporate tax departments can navigate uncertainties effectively by staying informed about legislative developments, engaging in continuous learning, and leveraging advanced tax planning strategies. Also, collaboration with internal teams and external advisors will be crucial in identifying opportunities and mitigating risks.

Ultimately, establishing and fostering a proactive and nimble mindset will enable tax professionals to optimize their positions and drive business success in an ever-evolving regulatory landscape.

You can find more information about how corporate tax departments manage Section 174 rules here.