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Eyes on Washington: December 18th, 2017

Tuesday, December 19, 2017   (0 Comments)
Posted by: TCAA Staff
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EYES ON WASHINGTON

 

December 18, 2017

 

In This Issue:

·         The Week Ahead

·         House and Senate Prepare to Vote on Final Tax Bill

·         Government Funding Set to Expire; House and Senate Introduce Continuing Resolutions

 

The Week Ahead

 

While the House and Senate floor schedules for this week remain fluid, Congress is targeting December 22, 2017, as the beginning of the holiday recess. Before leaving for the year, Congress must still resolve multiple pending legislative deadlines and will vote on a tax reform bill. The Second Session of the 115th Congress will convene on January 3, 2018. 

 

Eyes on Washington will not be published on December 25 or January 1, and will return on January 8, 2018. 

 

House and Senate Prepare to Vote on Final Tax Bill

 

House and Senate Republicans have reached consensus on The Tax Cuts and Jobs Act. The compromise on the tax reform bill was reached without input from Democratic conferees, and the Conference Committee only held one pro forma meeting on December 13, 2017. Following a series of caucus meetings, details of the final bill were made public in the evening of December 15, 2017, with the release of the conference report. Changes in the final plan were included to appease several Republican holdouts, including Sens. Marco Rubio (R-Fla.) and Mike Lee (R-Utah), who sought a greater refund for the Child Tax Credit. Democratic members have maintained their opposition to the bill, though it is expected to move through Congress as Republicans have reportedly secured votes to aid its passage. 

 

Senate Budget Committee Chairman Michael Enzi (R-Wyo.) said rank-and-file Republicans were briefed on the report through the weekend of December 15, 2017. Despite previous potential obstacles to a Senate vote, including the health-related absences of Sens. Thad Cochran (R-Miss.) and John McCain (R-Ariz.), the Senate is anticipated to proceed with voting on Tuesday evening or Wednesday morning. Vice President Mike Pence announced on December 14, 2017, that he would delay a previously scheduled trip to preside over the Senate vote, a sign that Senate Republicans are expecting a tie-breaking vote may be necessary. 

 

The final agreement has retained more provisions from the Senate's version of the bill, though Conference Committee Chairman Kevin Brady (R-Texas) said the final bill marked a mix between House and Senate plans. Democrats argue that the bill would be a break for corporations and wealthy individuals; House Democrats have also said Democratic support is not guaranteed for waiving some mandatory spending cuts that would be enacted without congressional action, because of the projected impact the bill would have on the deficit. 

 

Below are relevant provisions from the conference report:

Provision

House Bill

Senate Bill

Conference Report

Corporate Tax Rate

Decreased from 35 percent to 20 percent, taking effect in 2018

 

Decreased from 35 percent to 20 percent, taking effect in 2019

 

Decreased from 35 percent to 21 percent, taking effect in 2018

 

Individual Rates

 

12 percent, 25 percent, 35 percent, 39.6 percent

 

10 percent, 12 percent, 22 percent, 24 percent, 32 percent, 35 percent, 38.5 percent

 

Seven rates, starting at 10 percent and reaching 37 percent for incomes above $500,000 for singles and $600,000 for married and joint filers

 

The seven rates are: 10 percent, 12 percent, 22 percent, 24 percent, 32 percent, 35 percent and 37 percent

Personal Exemptions

Repealed

 

Repealed through December 31, 2025

Suspended through 2025

 

State and local tax deductions

 

Repealed, except for property and sales taxes in operating a trade or business, and for up to $10,000 in other property taxes

Same as House

 

Allows a property tax deduction, in addition to deducting either income taxes or sales taxes, up to a $10,000 limit for all combined

 

Charitable deductions

 

Increases limit on cash contributions to qualified organizations from 50 percent to 60 percent of taxable income

Allows adjustments to vehicle mileage rate in connection with providing volunteer services

 

Denies deduction for purchase of college athletic seating rights

Same as House, except no change to mileage rate and provisions expire after December 31, 2025

 

Increases the limit on the amount of charitable cash contributions a taxpayer can deduct to 60 percent of adjusted gross income (AGI), from 50 percent, through 2025

 

Charitable contributions to colleges could no longer be deducted if the donation was related to seating at an athletic event

 

Corporate Alternative Minimum Tax (AMT)

 

Repealed

 

Repealed

 

Repealed

 

Corporations could continue to use their AMT credits to offset their regular tax liability.

 

Credits would be partially refundable in tax years 2018 through 2021.

Individual AMT

 

Repealed

 

Repealed through December 31, 2025

 

Retained; increasing the exemption to $500,000 for single taxpayers and $1 million for couples

From 2018 through 2025, a higher AMT exemption would apply to income, beginning with $109,400 for joint filers and $70,300 for other taxpayers in 2018.

 

Thresholds would be adjusted for inflation using the chained consumer price index.

Private Activity Bonds

Repealed for new bonds issued after December 31, 2017

No change

 

Retained

 

Tax Credit Bonds

 

Authority to issue New Clean Renewable Energy Bonds

 

Qualified energy conservation bonds, qualified zone academy bonds and qualified school construction bonds are repealed

No change

 

 

Preserves governmental use bonds issued to finance professional sports stadiums

 

Eliminates tax-exempt advance refunding bonds

 

Student Loan Interest

 

Above-the-line deductions for student loan interest and qualified tuition expenses repealed

No change

 

Retained

 

Medical Expense Deductions

Repeals deduction for medical expenses that exceed 10 percent of adjusted gross income (AGI)

Maintains medical expense deduction through December 31, 2025

 

Reduce the threshold to 7.5 percent of AGI for tax years 2017 and 2018

 

Affordable Care Act (ACA) Individual Mandate

No change

 

Repealed

 

Repealed after 2019

 

Estate Tax

 

Doubles estate tax exemption after December 31, 2017; repeals after December 31, 2024

Doubles estate tax exemption after December 31, 2017, through December 31, 2025

Retained, with exemptions doubled

 

The higher thresholds would be phased out in 2026

Child Tax Credit

 

$1,600 per child under the age of 17 not indexed, refundable up to $1,000 indexed to next $100

 

$300 nonrefundable family credit for each parent and nonchild dependent, not indexed expires after December 31, 2022

$2,000 per child under the age of 18, not indexed, refundable up to $1,000, indexed to next $100

$500 nonrefundable credit for nonchild dependents

 

Double the credit to $2,000 and provide it for each child under 18 through 2024

 

Raise the phaseout amount to $500,000

 

Cap the refundable portion at $1,400 in 2018

 

Historic Rehabilitation Tax Credit

 

Repealed

 

Restores the credit, which it previously proposed to cut from 20 percent to 10 percent, with a 10 percent credit for pre-1936 buildings

 

Repealed for nonresidential pre-1936 properties

 

Investors would claim the credit over five years

 

New Markets Tax Credit

Repealed

 

Repealed

 

Retains 2018 and 2019 allocations

Renewable Energy Investment Tax Credit

Repealed

 

Retained

 

Retained

 

Business pass-throughs

 

Maximum 25 percent rate on qualified business income, other than income from personal services

 

17.4 percent deduction of domestic nonservice income, capped at 50 percent of taxpayer's total share of wages paid by business

 

A 20 percent deduction can be applied to business income, available to business owners who are married and have an income less than $315,000 or less, or half that ($157,500) for single taxpayers

Mortgage Interest Deduction

 

Deductions for second home, home equity debt repealed

 

Limits applicability to principal residence debt up to $500,000

Repeals deduction for home equity debt through December 31, 2025

 

Deductible mortgage interest for new purchases of homes capped at $750,000

 

 

The House Rules Committee will meet in the evening of December 18, 2017, to set the rule for floor consideration, and it is expected that the House will vote on the conference report the next day. The Senate will begin consideration of the report on the afternoon of December 19, 2017, and has up to 10 hours of debate. It is expected that the Senate will vote on the evening of December 19, 2017, unless all 10 hours of debate are used. 

 

Government Funding Set to Expire; House and Senate Introduce Continuing Resolutions

 

Government funding is set to expire on December 22, 2017. With work on a final FY 2018 appropriations omnibus still ongoing, the Senate is preparing to pass another continuing resolution (CR) until January 19, 2018. The legislation is not expected to include the House-passed Defense appropriations bill, nor a measure reauthorizing the Children's Health Insurance Program (CHIP). Moreover, the CR may not include topline spending levels to aid in the preparation of a final spending bill. 

 

Separately, House Republicans introduced a CR on December 13, 2017, which extends current government funding until January 19, 2018. It included the Defense appropriations bill, additional funding for missile defense as requested by the administration, and a House CHIP bill, as well as $2.1 billion for the Veterans Choice Program. Democrats have argued against including CHIP in the House bill, as it seeks offsets by increasing Medicare premiums for higher-income beneficiaries, and shortens the grace period for individuals to pay their premiums through a tax credit. Senate Homeland Security Appropriations Chairman John Boozman (R-Ark.) said the Senate is unlikely to pass the House bill, explaining the Senate's decision to work on their own CR. Senate Commerce Justice-Science Appropriations Chairman Richard Shelby (R-Ala.) also indicated that if the House does not attach a third disaster relief aid bill to its CR, then Sens. Ted Cruz (R-Texas) and John Cornyn (R-Texas) will attach it to a Senate bill. The Senate will also add an extension of the Foreign Intelligence Surveillance Act (FISA), which is set to expire this year. 

 

Democrats have also criticized the lack of inclusion of a legislative fix for the Deferred Action for Childhood Arrivals (DACA) program. Senate Minority Leader Chuck Schumer (D-N.Y.) said that a bipartisan immigration deal may advance separately, citing positive negotiations between Democrats and Republicans. Democrats have said they will not fund President Donald Trump's proposed border wall, but an immigration deal may include funding increases for border security. It is not likely that DACA reform legislation will be introduced before the end of the year, given the already packed congressional schedule.  


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