Payrolls are back to normal. Credit lines and loan covenants are in order. Balance sheets are stabilized and solidified. But that doesn’t mean chief financial officers can breathe easy.

After spending much of last year responding to a historic economic crisis brought on by the pandemic, CFOs face a new budgeting ordeal: a likely corporate tax hike under President Biden. It’s something they’ve been preparing for since the election in November, beefing up staffs and creating new forecast models. But no one has said how much the new rate may be. It's added uncertainty at a time where the pandemic is already having leaders revisit corporate budgets.

According to press accounts, it is likely to rise somewhere between the current 21% rate and 28%. That’s no small matter when one or two percentage points can put literally hundreds of millions of dollars at stake. Jeff Constable, a Korn Ferry senior client partner and coleader of the firm’s Global Financial Officers practice, likens the preparations CFOs must undergo now to those in 2017, when negotiations over reducing the corporate tax rate started. “They know the rate is going to change, they just don’t know what the change is going to look like, so there’s a frenzy of activity among finance teams playing out all sorts of scenarios,” Constable says. He points to how CFOs were exploring, and in some cases moving, jobs or headquarters overseas, or offshoring cash as examples of activity that are likely to be revisited. 

The difference this time around, however, is that COVID-19 and its punishing impact on the economy is still an ongoing concern. With unemployment claims rising and retail sales declining, any tax-increase budgeting scenarios that CFOs devise will be complicated by uncertainty around growth projections and potential layoffs. “COVID makes any financial models CFOs come up with more ambiguous, and layering tax-law changes on top of that is even trickier,” says Constable.

To be sure, the ambiguous environment has taken its toll on CFO turnover and retirement. Thirty-seven CFOs resigned from S&P 500 companies last year, the highest number in a decade. More than 80 CFOs left their positions last year when Fortune 500–listed firms are added to the tally. Barry Bregman, a senior client partner in Korn Ferry’s Financial Officers practice, cites the stress of the pandemic and the position’s evolution into a tougher strategic and creative function. “It used to be that CFOs could focus on reporting and analyzing their company’s business,” he says. “Now, there are so many external factors that they are deciding to use their skills for something different.” Many CFOs have left corporate roles for private equity firms, while others have found homes at start-ups in need of more traditional financial experience.

Still, as Constable sees it, while changes to the tax code will create more work and a certain level of angst, at least some CFOs may welcome some aspects of it. “Planning, forecasting, and modeling are what CFOs live for, so the activity around another tax change caters to their sweet spot,” he says.

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