United States: Republican Leaders Release Tax Reform Framework

Summary

The White House and Republican congressional leadership released an outline this week to guide forthcoming legislation on tax reform. This outline will serve as a useful framework in structuring what will be an active, and likely contentious, phase of reform activity.

In Depth

On September 27, 2017, the White House and Republican congressional leadership released a nine-page outline (the Framework) to guide the coming legislative effort on comprehensive tax reform. While the Framework offers few surprises and leaves critical details open, it does represent incremental progress toward achieving comprehensive tax reform and signals a major intensification of tax reform activity in the coming weeks and months.

Key Elements of the Framework

Individuals and Estates

  • Three tax brackets (12 percent, 25 percent and 35 percent), with bracket income levels unstated
  • Potential surtax or fourth bracket higher than 35 percent for highest-income taxpayers
  • Increased standard deduction amount and expansion of child tax credit
  • Modified approach to indexation throughout the tax code
  • Repeal of the individual alternative minimum tax (AMT)
  • General direction to eliminate itemized deductions, presumably including the deduction for state and local taxes, but not including mortgage interest and charitable gift deductions
  • No suggestion of any (previously rumored) "Rothification" of retirement plans
  • Elimination of estate and generation-skipping transfer taxes

General Business Taxation

  • Corporate income tax rate reduced to 20 percent
  • Pass-through tax rate (for sole proprietorships, subchapter S corporations and businesses taxed as partnerships) reduced to 25 percent, with unspecified restrictions to limit use of the pass-through rate to avoid the top individual rate
  • Repeal of the corporate AMT
  • Potential consideration of measures to reduce the double taxation of corporate earnings (an area of particular interest to Senate Finance Committee Chairman Orrin Hatch, who has been developing a corporate integration proposal)
  • Accelerated recovery of certain capital expenses, including full expensing for at least a five-year period
  • Partial and unspecified limits on deductions for net interest expense
  • General direction to eliminate special deductions and credits, including the section 199 deduction for domestic production activities, but not including the R&D credit and the low-income housing credit
  • Unspecified modernization of special tax regimes for specific industries

International Taxation

  • Territorial dividend exemption for 100 percent of dividends received from foreign subsidiaries (in which a US parent owns at least 10 percent of the stock)
  • Transition tax on currently accumulated foreign earnings under a deemed-repatriation model, employing a bifurcated rate (higher rate for earnings considered as held in the form of cash or cash equivalents), with rates and other details unspecified
  • Imposition of a minimum tax on foreign earnings on a current basis, at a reduced rate, with rate and other details unspecified
  • General direction to adopt measures to "level the playing field" between US-headquartered and foreign-headquartered parent companies

Observations and Likely Next Steps

Although the Framework remains a very high-level outline and provides little indication of whether and how its various desired tax-cutting measures might be achieved in view of budget and political limitations, the Framework is a useful first step in structuring what is sure to be an active and contentious phase of tax reform activity as the congressional tax writing committees get down to work.

The next hurdle will be congressional agreement on a budget resolution, which is needed in order for tax reform to proceed under a budget reconciliation process (requiring only a simple majority, rather than 60 votes, to clear the Senate). This resolution could accommodate a large, temporary overall tax cut, or it could require revenue neutrality. A key part of this discussion will be what revenue estimating approaches will apply for purposes of fitting the substantive legislation within whatever budget reconciliation instructions are ultimately adopted.

Meanwhile, the tax writing committees will be hard at work in developing detailed legislative language to implement the high-level concepts set forth in the Framework. As these details are filled in, hard choices will need to be made in order to fit a tax reform package within any realistic budget parameters, and countless important technical, timing and transition issues will inevitably arise.

The process is sure to be contentious, and the outcome uncertain, but it is safe to say that it is time for taxpayers to pay close attention to what is a rapidly intensifying tax reform effort. The McDermott Tax team is closely monitoring activity in this area, and is advising clients on potential impacts and planning responses. We will continue to provide general tax reform updates as circumstances warrant, as well as more detailed examinations of specific aspects of tax reform.

Republican Leaders Release Tax Reform Framework

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
McDermott Will & Emery
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
McDermott Will & Emery
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions