December 4th Tax Reform Update
Early in the morning on Saturday, December 2, the Senate voted to pass its version of the Tax Cuts and Jobs Act, after the Senate Finance Committee finished its markup session earlier in the week and the Senate Committee on the Budget approved the bill on Wednesday, November 29.
Several amendments were made to the Act up until shortly before the vote was held, and many of the amendments were included as handwritten changes. As a result of the changes and late amendments, we are still working to analyze the final details of the Act that was passed. We note, in particular, the following provisions of the Senate version:
- A 20% corporate tax rate beginning in 2019.
- A 23% deduction for income of pass-through entities, with limits for large pass-through businesses.
- For individual taxpayers, there would still be seven tax brackets, but the tax rates are cut at every level. Rate cuts for individuals are set to expire in 2026.
- Retention of the alternative minimum tax – a last minute change which goes against a major policy objective to completely repeal the AMT and also will have to be reconciled with the House version, which eliminated the AMT.
- Similar to the House version, the Senate version limits individual’s state and local tax deduction to $10,000 of property tax only.
- Rather than eliminating the so-called “death” taxes, the Senate version doubles the per-person exemption amount to $11 million. The House version also doubles the per-person exemption amount but goes further by eliminating the estate and generation-skipping transfer taxes after 2023.
- Repeal of the “individual mandate” requiring individuals to purchase health insurance or pay a tax penalty.
Due to the numerous amendments and differences between the House’s version of the Act and the Senate’s version of the Act, the two versions will be reconciled by a conference committee comprised of members from both the House and the Senate. This committee will reconcile the differences between the two versions of the Act and finalize a version that would be voted on again in both chambers. Republicans in both chambers are hopeful that the committee will complete its reconciliation this week, so that the bill may be voted on in both chambers as early as next week. This timeline would likely allow the Act to be signed by President Trump before the end of the year.
For a more detailed analysis of the Acts, including a summary of the House’s original bill, changes made in the House markup, and some of the major differences between the two versions see our previous tax reform updates from November 2, November 10, and November 17.
The Tax attorneys at Koley Jessen are keeping a close watch on Tax Reform. Please contact us with any questions.