Sikich Series on Tax Reform – House-Senate Conference Adopts Compromise Tax Reform Bill

 Legislation Set for Final Votes in Congress Next Week

The “Tax Cuts and Jobs Act” (H.R. 1) is one step closer to passage. The House-Senate Conference has completed its work of reconciling the two separate tax reform bills passed in each chamber. The Conference included members of both the House and Senate and was led by House Ways and Means Committee Chairman Kevin Brady. These conferees worked through early December to come up with a compromise tax bill that will now be sent to the House and Senate for an up or down vote the week of December 18, 2017. No other change will be allowed to the bill produced by the Conference. The bill was approved today by the conferees along party lines with Republican conferees supporting the plan and Democrat conferees opposing it.

The conferees addressed each provision in the separate tax bills and needed to resolve the various differences and issues. In some cases they were in agreement and they retained the provision; in other cases they took the House provision or the Senate provision; or they came up with a new compromised provision. All changes were made keeping in mind: (1) the overall budget cap of $1.5 trillion in the tax cuts permitted in the plan, and (2) what impact any change might have on the prospects for passage of the bill, especially in the Senate.

Some of the key issues facing the conferees in ironing out differences between the two tax bills were:

• The tax rates for corporations and the effective date;
• The tax rates for individuals;
• The tax treatment of “pass-through businesses”;
• Limits on the deduction for state and local taxes;
• The corporate and individual alternative minimum tax (“AMT”);
• The child tax credit;
• The repeal of the estate tax; and
• The repatriation tax rate on foreign earnings.

There were many other provisions that needed to be worked out, but these maintained a lower profile as the drama played out this week in Congress.

Business Provisions

We have included the chart below which presents selected business provisions and what the House and Senate versions of tax reform offered, and then what was ultimately agreed upon in the Conference. Here are selected business changes in the compromised tax bill:

Individual Provisions

We have included another chart below which presents selected individual provisions; it compares the House and Senate versions for tax reform. The last column shows what was ultimately agreed upon by the Conference. Here are selected individual changes in the agreed upon tax bill:

Here are links to the full legislative text as well as a brief description of the changes as provided by the Joint Committee on Taxation (JCT) in Congress that was released today (December 15, 2017):

1. The full legislative text of the Tax Cuts and Jobs Act
2. Two-page summary of the new bill

Next Steps 

The agreed upon tax bill now moves to the House and Senate for final votes. The votes are tentatively scheduled for Tuesday or Wednesday next week, but this could change. A simple majority vote is needed in each chamber on what comes out of the Conference; no other amendments or changes can be made to the tax bill. The exact same bill must pass the House and Senate. If it passes both, it moves to the President for his signature. It is unclear now whether the House will vote first, or if it will wait until after the Senate has passed it. The timing depends in part on the Senate, as two Senators have been in the hospital in recent days, which may impact the voting logistics.

Prospects for passage. The bill will likely have enough support to pass in the House, but the drama will rest in the Senate where the political spotlight has been for most of the year. Look for a close vote, and Vice President Pence will be on hand to cast a tie-breaking vote if necessary. In fact, Pence delayed a Middle East trip next week to be available if needed. At this point, it seems there is enough support for passage in the Senate, but it will be a narrow vote, and things could change before the vote next week. If the tax bill secures enough votes in Congress for passage next week, there will then be a major signing ceremony with the President later in the week. Stay tuned . . .

If you have any questions regarding Tax Reform, please contact your local Sikich Tax Advisor or visit www.sikich.sikichdevelopment.com for more information.