Congress nears final agreement on tax bill, enactment likely
TAX ALERT |
As of Dec. 13, Republican members of the House and Senate conference committee report that a deal on final tax reform legislation is close, and that enactment following a final vote by both chambers is very likely to occur next week. Conference committee members held a public meeting on Dec. 13, as part of their negotiation over the conflicting provisions of the House and Senate tax reform proposals. While negotiations continue, it is rumored that compromises on some of the various debated items have been reached. Subject to possible correction or clarification, we have heard that the following may have been tentatively agreed to:
- Cutting the corporate tax rate from 35 percent to 21 percent – not 20 percent – but starting the cut in 2018 – not 2019, as under the Senate bill.
- Setting the top individual rate at 37 percent, down from 39.6 percent under current law, and lower than the top rate in either bill.
- Repealing the corporate alternative minimum tax (AMT), not preserving it as the Senate bill would have done.
- Retaining the individual AMT, as the Senate bill would have done, but enlarging the exemption amount on the individual AMT to $500,000.
- Agreeing to the Senate’s approach to the taxation of pass-through business income by allowing a 20 percent deduction, which applied to a 37 percent top rate produces a top rate of under 30 percent for qualified pass-through and sole proprietorship income. Allowing that rate for trusts as well as individuals. The details of the ‘guardrails’ that may apply including possible wage requirements, industry limitations and other rules remain unclear.
- Largely following the Senate’s approach to the taxation of multinational companies.
- Adjusting the mortgage interest deduction to apply to new home loans only to the extent they do not exceed $750,000.
- Permitting taxpayers to deduct up to a total of $10,000 of state taxes, but including income, sales or property taxes, as long as the total does not exceed $10,000.
- Repealing the individual mandate in the Affordable Care Act.
- Continuing to allow waivers on tuition received by graduate students and deductibility of student loan interest.
- Permitting the deductibility of out-of-pocket medical expenses.
However, with these changes, the price of the legislation increased and negotiations going forward are said to involve finding additional ways to raise more revenue to offset the costs.
It has been reported that a conference committee report will be released by the end of this week, which will explain the compromises to the final legislation.