Cruise operators may yet avoid paying more U.S. corporate taxes despite threats from U.S. Commerce Secretary Howard Lutnick to close favorable loopholes. 

Lutnick’s comments on Fox News Wednesday that U.S.-based cruise companies should be paying taxes even on ships registered abroad sent shares lower, though analysts indicated the worry may be overblown.

“We would note this is probably the 10th time in the last 15 years we have seen a politician (or other DC bureaucrat) talk about changing the tax structure of the cruise industry,” Stifel Managing Director Steven Wieczynski wrote in a note to clients. “Each time it was presented, it didn’t get very far.”

Industry shares fell sharply Thursday. Royal Caribbean Cruises Ltd. closed 7.6% lower, the largest drop since September 2022. Peers Carnival Corp. and Norwegian Cruise Line Holdings dropped by at least 4.9%.

All three continued slumping Friday, trading lower by around 1% each.

Cruise companies often operate their ships in international waters and can register those vessels in tax haven countries to avoid some U.S. corporate levies. It’s exactly those sorts of practices with which Lutnick has taken issue. 

“You ever see a cruise ship with an American flag on the back?,” Lutnick said during the interview which aired Wednesday evening. “They have flags like Liberia or Panama. None of them pay taxes.”

“This is going to end under Donald Trump and those taxes are going to be paid.” He also called out foreign alcohol producers and the wider cargo shipping industry. 

The vessels are embedded in international laws and treaties governing the wider maritime trades, including cargo shipping. Targeting cruise ships would require significant changes to those rule books to collect dues from the pleasure crafts, analysts noted. The cruise industry represents less than 1% of the global commercial fleet, according to Cruise Lines International Association, an industry trade group.

They also pay significant port fees and could relocate abroad to avoid new additional taxes, according to Wieczynski, who sees the selloff as a buying opportunity. 

“Cruise lines pay substantial taxes and fees in the U.S. — to the tune of nearly $2.5 billion, which represents 65% of the total taxes cruise lines pay worldwide, even though only a very small percentage of operations occur in U.S. waters,” CLIA said in an emailed statement. 

Should increased taxes come to pass, the maximum impact to profits would be 21% on US earnings, Bernstein senior analyst Richard Clarke wrote in a note. That hit wouldn’t be enough to change their product offerings, though it may discourage future investment. Recently, U.S. cruise companies have spent billions beefing up their operations in the U.S. and Caribbean. 

Cruise lines already employ tax mitigation teams that would work to counteract attempts by the U.S. to collect taxes on revenue generated in international waters, wrote Sharon Zackfia, a partner with William Blair.

Royal Caribbean did not respond to requests to comment. Carnival and Norwegian directed Bloomberg News to CLIA’s statement. 

Artificial intelligence took the business world by storm in 2024. Content creation companies received powerful new AI-powered tools, allowing them to crank out high-quality images with simple prompts. AI also helped cybersecurity companies filter email for phishing attempts. Any company engaging in online meetings received an ever-ready assistant eager to show up, take notes and highlight the most important talking points.

These and countless other AI-driven tools that emerged during the past year are boosting efficiency in virtually every industry by automating the tasks that most often bog down business processes. Essentially, AI takes on the business world’s day-to-day dirty work, delivering with more accuracy and speed than human workers are capable of providing.

For accounting, AI couldn’t have come at a better time. Recent reports show that securing capable accounting staff is becoming more challenging due to a high number of retirees and a low number of new accounting graduates. At the same time, globalization, the rise of the gig economy, the shift to remote work and other recent developments in the business landscape have increased both the volume and complexity of accounting work.

As companies struggle to do more with less, AI offers solutions that promise to reshape the accounting world. However, putting AI to work also forces companies to accept some new risks.

“Bias” has become a huge buzzword in the AI arena, forcing companies to consider how the automation tools they bring in to help with processing data may introduce some questionable or even dangerous ideas. There are also ethical issues associated with next-level AI-powered data processing that have some concerned that achieving AI-assisted business efficiency also means risking consumer privacy.

To make AI worthwhile as an accounting tool, companies must find ways to balance gains in efficiency with the ethical risks it presents. The following explores the growing role AI can play in business accounting while also pointing out some of the downsides that should be carefully considered.

AI upside: Increased accuracy and efficiency

Accounting isn’t accounting if it isn’t accurate. Miskeyed amounts or misplaced decimal points aren’t acceptable, regardless of the company’s size or the business it is doing. When the numbers are wrong, the decision-making that relies on those numbers suffers.

Consequently, manual accounting typically moves slowly to avoid errors. Business leaders have learned to wait on financial reporting prepared by hand. They’ve also learned that because of processing delays, they may not have the numbers they need to take advantage of unexpected opportunities.

AI changes the equation by improving the speed and accuracy of reporting. AI-powered data entry automatically extracts numbers from invoices and other financial statements, eliminating the need for manual entry and the mistakes that can occur when an accountant is distracted, tired or just having an off day. AI can also detect errors or inconsistencies in incoming documents by comparing invoices and other documents to previous records, providing a second set of eyes for accounts as they ensure companies aren’t being overbilled or under-compensated.

When it comes to increasing the pace of accounting, AI’s capabilities are truly astonishing. As Accounting Today has reported, in the past, the type of robotic process automation AI empowers can be used to drive automated processes 745% faster than manual processes. And AI accounting programs never clock out or take a lunch break. They work 24/7, even on bank holidays, to keep the books up to date.

AI accounting gives business leaders accurate financial data in real time, meaning they have relevant and reliable accounting intel when they need it rather than requiring them to wait until the end of the month to have a report on where their cash flow stands. It also has the potential to give a glimpse into the future by drawing upon historical data to drive predictive analytics. AI can look at what has been unfolding in a business and its industry to plot the path forward that makes the most financial sense. It’s not exactly a crystal ball, but it’s as close as most businesses should expect to get.

AI upside: More time for high-level engagement

As AI began to make inroads in the business world, experts warned it would ultimately replace hundreds of millions of jobs. While the consensus seems to be that AI doesn’t have what it takes to replace an accountant, it certainly has the potential to reshape the profession in a positive way.

The manual work typical of conventional accounting is tedious, tiresome and time-consuming. Doing it well eats up much of the energy accountants could otherwise apply to higher-level activities. By using AI automation for those tasks, accountants gain the resources needed for high-level engagement.

Accountants who partner with AI gain the capacity to shift their role from bookkeeper to financial advisor. Rather than focusing all of their energy on preparing reports, they are freed up to interpret the reports. Delegating data entry and other day-to-day tasks to AI allows accountants to become strategic partners with the businesses they serve, whether as in-house employees or external advisors.

Financial forecasting becomes much more doable when AI is in play. Accountants can develop comprehensive financial models that forecast future revenue and expenses. They can also assess investment opportunities, such as determining the viability of mergers and acquisitions, and help with risk management and mitigation.

Tax planning and optimization will also become more manageable once AI automations have been added to the mix. Automating data extraction and categorization streamlines the process of classifying expenses for tax purposes and identifying expenses that are eligible for deductions. AI automation can also be used for tax form completion, adding speed and a higher level of accuracy to a process that very few accountants look forward to completing manually.

AI downside: Higher data security risks

Accountants are well aware of the dangers of data breaches. Allowing financial data to fall into unauthorized hands can lead to financial loss, operational disruption, reputational damage and regulatory consequences. Shifting to AI accounting can potentially increase the risk of data breaches.

Changing to AI accounting often means concentrating financial and other sensitive data and moving it to interconnected networks. Concentrating data creates a target that is more desirable to bad actors. Shifting it to the cloud or other interconnected networks creates a larger attack surface. Both factors create situations in which higher levels of data security are definitely needed.

Addressing the heightened threat of cyberattacks requires a combination of tech tools and human sensibilities. To keep accounting data safe, encryption, multifactor authentication, and regular testing and update protocols should be used. Training should also help accounting teams understand what an attack looks like and how to respond if they sense one is being carried out.

AI downside: Less process customization

Developing the types of platforms that can safely and reliably drive AI automations is not an easy — nor cheap — undertaking. Consequently, many companies choose the economy of “off-the-shelf” platforms. However, opting for a standardized platform could mean closing the door on customized financial workflows a company has developed.

For example, an off-the-shelf platform may not have the option of accommodating the accounting rules of highly specialized industries. It may have a predefined chart of accounts structure that doesn’t fit the structure a company has traditionally used. It also may be limited in the formats that can be used for financial reporting, which could require business leaders to make peace with reports that don’t fit their personal tastes.

To avoid big problems that can surface after shifting to off-the-shelf solutions, companies should make sure to take their time and seek software that can scale with their plans for growth. Like any other technological innovation, AI is a tool meant to support and not supplant a company’s processes. The process of selecting an AI platform to improve accounting efficiency begins with mapping out a company’s unique process and identifying where AI can boost efficiency. If the platform you are considering can’t deliver, keep looking.

AI best practice: Take it slow and learn as you go

The biggest temptation for companies as they begin to embrace AI will likely be doing too much too fast and with too little oversight. Artificial intelligence is a remarkable tech tool, but still in its infancy. Taking advantage of its capabilities also requires managing some risks.

For example, AI has what some experts describe as an “explainability” problem. Developers know what AI can do but don’t always know how it does it. Companies that feel compelled to provide their clients or stakeholders with a solid explanation of the process behind their AI automations may be limited in how they can put AI to work.

Now is the time to begin integrating AI with your company’s accounting efforts, but take it slow and learn as you go. A solid best practice is to explore what is available, experiment with how it can help your business, and expect to make many adjustments before you arrive at an optimal process. Your accounting efforts will serve you best when they combine human and artificial intelligence.

Ascend, a private-equity backed accounting firm, added a vice president of partnerships to its leadership team.

Maureen Churgovich Dillmore will oversee the expansion of Ascend’s growth platform for regional accounting firms into new U.S. markets, effective Feb. 17. She was previously executive director of the Americas at Prime Global. Prior, she was executive director at DFK International/USA.

“I have dedicated a large part of my career to supporting firms that want to remain independent. The dynamics of achieving success in this area are evolving rapidly, and the Ascend model was created so that firm identity would not be at odds with accessing the community and resources needed to prosper. I am genuinely impressed by Ascend’s ability to assist mid-sized firms in making the necessary strides to stay relevant, sustain growth, and provide their staff and clients with top-tier shared services—all while preserving their unique brand and culture,” Churgovich Dillmore said in a statement.

Ascend has added 14 partner firms across 11 states since the company launched in January 2023.

“So much of association work is theoretical, advising member firms on best practices, and you don’t get to see the end game. What excites me about being on the Ascend team is the opportunity to be a force behind the change, to help enact the change and see where and how it comes in,” Churgovich Dillmore added.

“Maureen’s decision to join Ascend is rooted in her desire to serve the profession in a way that maximizes her impact. We are all excited to welcome someone into our Company who has been an advisor and friend to mid-sized CPA firms for over a decade, and it is all the more rewarding when you realize that the community and resources we are bringing to life will allow Maureen to have conversations with firms that she’s never had before. Her curiosity, commitment, and deep care for others are going to stand out in this role,” Nishaad (Nish) Ruparel, president of Ascend, said in a statement.

Ascend is backed by private equity firm Alpine Investors and works with regional accounting firms with between $15 and $50 million in revenue. It ranked No. 59 on Accounting Today‘s 2024 Top 100 Firms list, with $126 million in revenue and over 600 employees.