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Tax Reform Heads to the President

Posted @ Wednesday, December 20, 2017    By Aindriu Colgan
Posted in [ Blog, Legislative, Tax, Economic and Community Development, Energy, Water and Natural Resources, Healthcare and Social Services, Transportation ] | 0 Comments

Congress has officially passed H.R. 1, the Tax Cut and Jobs Act. After making a few last minute changes to accommodate Senate rules and procedures, Senate Republicans passed the bill Tuesday night along party lines, 51-48. Today, the House passed the bill with those changes by a vote of 224-201.

Once the paperwork is finished, the bill will head to President Trump, who will sign it into law. It is unclear, at this point, when that will be. Spokespeople for the Administration have indicated that the President Trump may wait to sign the legislation until the New Year in order to delay automatic spending cuts triggered by the bill’s $1.5 trillion in revenue losses until 2019; however, if Congress includes language waiving those cuts in the year-end government funding bill, President Trump will likely sign the bill in 2017.

Once the Tax Cuts and Jobs Act has been signed into law, the Internal Revenue Service (IRS) will begin writing rules for the new and updated provisions. Many of the provisions go into effect on January 1, 2018, which requires the IRS to do a significant amount of work in a short amount of time and with a much smaller budget than in 1986, the last time significant changes were required.

Additionally, the House Ways and Means Committee and the Senate Finance Committee will begin working on a technical corrections package to fix problems that have already been, and are expected to be, identified in the Tax Cuts and Jobs Act. The catch, however, is that these technical corrections will need Democrat support in the Senate, and Democrats are not expected to help Republicans fix a bill that they passed without Democratic support — just like Republicans have refused to fix any problems with the Affordable Care Act.

A table of the bill's major provisions is included below.  If you would like more information, please contact our team.

 

Provision

House

Senate

Conference Report

Individual Income Taxes

Reduced to 12%, 25%, 35%, and 39.6%.

Reduced to 10%, 12%, 22%, 24%, 32%, 35%, 38.5%

Reduced to 10%, 12%, 22%, 24%, 32%, 35%, 37%

Individual AMT

Repealed

Graduated AMT

Maintained; exemption and phase-outs temporarily increased.

Standard Deduction

Doubled to $12,000 for individuals and $24,000 for joint filers.

Doubled to $12,000 for individuals and $24,000 for joint filers.

Doubled to $12,000 for individuals and $24,000 for joint filers.

Child Tax Credit

Increased to $1,600 per child; starts phasing out at $230,000 for joint filers.

Increased to $2,000 per child; starts phasing out at $500,000 for joint filers.

Increased to $2,000 per child ($1,400 refundable); starts phasing out at $400,000 for joint filers.

State and Local Tax Deduction

Repealed except for a maximum $10,000 property tax deduction.

Repealed except for a maximum $10,000 property tax deduction.

Reduced to maximum $10,000 deduction for property and income taxes.

Home Mortgage Interest Deduction

Preserved for existing mortgages; reduced to $500,000 for new mortgages; limited to one home.

Preserved (i.e. $1 million cap maintained).

Preserved for existing mortgages; reduced to $750,000 for new mortgages.

Municipal Bonds

Tax exemption maintained (except for professional sports stadiums).

Tax exemption maintained.

Tax exemption maintained.

Advanced Refunding Bonds

Tax exemption repealed for new issues.

Tax exemption repealed for new issues.

Tax exemption repealed for new issues.

Private Activity Bonds

Tax exemption repealed for new issues.

Preserved.

Preserved.

Affordable Care Act’s Individual Mandate

Not addressed.

Repealed

Repealed

Misc. Tax Provisions

Repealed: the New Market Tax Credit, Work Opportunity Tax Credit, and Rehabilitation Credit for Historic Buildings.

Preserved: New Market Tax Credit, Work Opportunity Tax Credit, and Rehabilitation Credit at 10% for certified historic buildings only.

Preserved: New Market Tax Credit, Work Opportunity Tax Credit, and Rehabilitation Credit at 10% for certified historic buildings only.

Corporate Income Tax

Reduced permanently to 20%.

Reduced permanently to 20%; delayed to 2019.

Reduced permanently to 21% on January 1, 2018.

Corporate AMT

Repealed

20% AMT

Repealed.

Passthroughs

Maximum 25% rate for qualified business income.

23% deduction for qualified business income.

20% deduction for qualified business income.

Business Interest

Limited to 30% of U.S. taxable income or 110% of EBIDTA for multinationals.

Limited to 30% of U.S. taxable income or debt-to-equity differential percentage* for multinationals.

Limited to 30% of adjusted taxable income.

 

*Debt-to-equity differential is equal to the excess domestic indebtedness of the group divided by the total indebtedness of the domestic corporations that are members of the group.

 

 

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