United States: Congress Releases Revised Conference Bill On Tax Reform

Thomas M Reynolds is a senior policy advisor and Nicole M Elliott is a partner both in our Washington DC office. William B Sherman is a partner and Daniel L Janovitz is an Associate both in our Fort Lauderdale office.

Congress released the "Tax Cuts and Jobs Act" on late Friday evening, Dec. 15, 2017. This version of the bill is the result of a conference committee process to marry the different bills previously passed by the U.S. House of Representatives andi the U.S. Senate. The House is expected to vote on Tuesday, Dec. 19, and the Senate will likely vote on the bill Tuesday, Dec. 19, or Wednesday morning, Dec. 20, depending on the length of the debate. The margin of error in the Senate, however, is slim. With no support from Senate Democrats, Republicans can stand to lose only two votes. Nevertheless, it is expected that the bill will be passed by both chambers and sent to President Donald Trump for his signature before the Christmas holiday.

Although the bill is not a complete overhaul of the U.S. Tax Code, the bill contains significant changes to many provisions of the Code and impacts every individual and business. If signed into law, the next challenge will be implementation – many of the provisions are effective in 2018 and much of the statutory language will need to be flushed out by the U.S. Department of the Treasury and the Internal Revenue Service (IRS) through the regulatory process.

Holland & Knight will provide further analysis. However, below is a look at how the House and Senate bills compare with the revised conference bill:

 

House Bill

Senate Bill

Conference
(Final Bill)

Individual Tax Rates

Four brackets:
12 percent,
5 percent,

35 percent and
39.6 percent,
with clawback of income taxed at the 12 percent rate for taxpayers in the 39.6 percent bracket

Seven brackets:
10 percent,
12 percent,
22.5 percent,
25 percent,
32.5 percent,
35 percent,
38.5 percent

Seven brackets:
10 percent,
12 percent,
22 percent,
24 percent,
32 percent,
35 percent,
37 percent

Capital Gains and Qualified Dividends Rates

Zero percent if in 12 percent bracket;

15 percent if in 25 percent bracket;

20 percent if in 35 percent bracket

Zero percent for taxpayers with income of $38,700 or less;

15 percent for taxpayers with income of $426,700 or less;

20 percent for taxpayers with income of more than $426,700

Zero percent for taxpayers with income of $38,600 or less;

15 percent for taxpayers with income of $425,800 or less;

20 percent for taxpayers with income of more than $425,800

Personal Exemption

Repealed

Suspended through 2025

Suspended through 2025

Standard Deduction

$12,200 for single taxpayers, $18,300 for heads of household and $24,400 for married filing jointly

$12,000 for single taxpayers, $18,000 for heads of household and $24,000 for married filing jointly

$12,000 for single taxpayers, $18,000 for heads of household and $24,000 for married filing jointly

Itemized Deductions

Eliminates deduction for medical expenses, state and local income taxes, property tax of more than $10,000, mortgage interest expense on acquisition debt of more than $500,000, certain personal casualty losses, unreimbursed employee expenses and tax preparation fees;

Overall limitation on itemized deductions repealed

Eliminates deduction for state and local taxes, property tax of more than $10,000, unreimbursed employee expenses and tax preparation fees;

Overall limitation on itemized deductions suspended until 2026

Limits combined deduction for state and local taxes and property taxes to $10,000 from 2018 to 2025 and eliminates deduction for mortgage interest expense on acquisition debt of more than $750,000, unreimbursed employee expenses and tax preparation fees through 2025;

Overall limitation on itemized deductions suspended until 2026

Alternative Minimum Tax (AMT)

Repealed

Retained with increased exemptions for individuals through 2025

Retained with increased exemptions for individuals through 2025

Repealed for corporation

Carried Interest

Partnership interests received in exchange for services must be held for at least three years to be eligible for long-term capital gain tax rate

Partnership interests received in exchange for services must be held for at least three years to be eligible for long-term capital gain tax rate

Partnership interests received in exchange for services must be held for at least three years to be eligible for long-term capital gain tax rate

Corporate Tax Rate

20 percent starting in 2018

20 percent starting in 2019

21 percent starting in 2018

Depreciation

Immediate deduction of capital expenditures for property placed in service in the next five years up to $5 million per year with phaseout for income of more than $20 million

Immediate deduction of capital expenditures for property placed in service in the next five years up to $1 million per year with phaseout for income of more than $2.5 million. Starting in 2024, the percentage of a property's cost that may be deducted immediately decreases 20 percent each year

Immediate deduction of capital expenditures for property placed in service in the next five years up to $1 million per year with phaseout for income of more than $2.5 million. Starting in 2023, the percentage of a property's cost that may be deducted immediately decreases 20 percent each year

Pass-Through Taxation

Maximum tax rate of 25 percent on business income of S corporation shareholders, partners of partnerships and sole proprietorships if owners are passive investors and based on capital percentage;

Owners of businesses other than personal-service businesses can elect to apply a default capital percentage of 30 percent or establish the capital percentage based on facts and circumstances; owners of personal-service businesses must establish the capital percentage based on facts and circumstances

S corporation shareholders, partners of partnerships and sole proprietorships can deduct 23 percent of business income, but deduction is limited to 50 percent of wages paid;

Owners of personal services businesses are ineligible unless income is less than $75,000

S corporation shareholders, partners of partnerships and sole proprietorships can deduct 20 percent of business income, but deduction is limited to a percentage of wages paid for taxpayers with income exceeding 157,500 ($315,000 if married) that is phased in to 50 percent over the next $50,000 ($100,000 if married) of income;

For owners of personal services businesses, deduction is phased out over the next $50,000 ($100,000 if married) of income if income exceeds $157,500 ($315,000 if married)

Interest Deduction

Interest deduction limited to 30 percent of earnings before interest, tax, depreciation and amortization (EBITDA) for businesses with gross receipts of more than $25 million

Interest deduction limited to 30 percent of earnings for businesses with gross receipts of more than $15 million

Interest deduction limited to 30 percent of EBITDA for businesses with gross receipts of more than $25 million; depreciation, amortization and depletion are counted toward earnings beginning in 2022

Net Operating Losses

Eliminates net operating loss carrybacks; net operating loss carry forward deduction made indefinite but limited to 90 percent of the taxpayer's taxable income

Eliminates net operating loss carrybacks; net operating loss carry forward deduction made indefinite but limited to 90 percent of the taxpayer's taxable income; starting in 2023, carry forward deduction is reduced to 80 percent of taxable income

Eliminates net operating loss carrybacks; net operating loss carry forward deduction made indefinite but limited to 80 percent of the taxpayer's taxable income

Section 199 Gross Production Activities

Repealed

Repealed

Repealed

Business Tax Credits

R&D and low-income housing tax credits retained

R&D and low-income housing tax credits retained

R&D and low-income housing tax credits retained

Taxation of International Income

Territorial system

U.S. shareholders must include 50 percent of excess returns earned by controlled foreign corporations

Territorial system

Minimum base erosion tax equal to 10 percent of the excess of modified taxable income over regular tax liability

Territorial system

Minimum base erosion tax equal to 10 percent of the excess of modified taxable income over regular tax liability

Earnings of Foreign Subsidiaries

One-time deemed repatriation tax of 14 percent on income held as cash and 7 percent on non-cash holdings of foreign subsidiaries payable over eight years

One-time deemed repatriation tax of 14.49 percent on income held as cash and 7.49 percent on non-cash holdings of foreign subsidiaries

One-time deemed repatriation tax of 15.5 percent on income held as cash and 8 percent on non-cash holdings of foreign subsidiaries payable over eight years

Dividends from Foreign Subsidiaries

Excluded from income of U.S. corporations that own at least 10 percent of the foreign subsidiary

Excluded from income of U.S. corporations that own at least 10 percent of the foreign subsidiary

Excluded from income of U.S. corporations that own at least 10 percent of the foreign subsidiary

Foreign-Derived Intangible Income and Global Intangible Low-Taxed Income

50 percent of foreign high-return amounts included currently in income of U.S. shareholders of a controlled foreign corporation

Global intangible low-taxed income (GILTI) included currently in income of U.S. shareholders of a controlled foreign corporation. Domestic C corporations may deduct 50 percent of GILTI and 37.5 percent of foreign-derived intangible income (FDII) through 2025; deductions are reduced to 37.5 percent of GILTI and 21.875 percent of FDII after 2025

GILTI included currently in income of U.S. shareholders of a controlled foreign corporation. Domestic C corporations may deduct 50 percent of GILTI and 37.5 percent of FDII through 2025; deductions are reduced to 37.5 percent of GILTI and 21.875 percent of FDII after 2025

Subpart F Income

Retained

Retained

Retained

Gift Tax

Retained; rate decreased to 35 percent beginning in 2024; exemption amount increased to $10 million

Silent; exemption amount increased to $10 million

Silent; exemption amount increased to $10 million

GST

Repealed beginning in 2024; exemption amount increased to $10 million

Silent; exemption amount increased to $10 million

Silent; exemption amount increased to $10 million

Estate Tax

Repealed beginning in 2024; exemption amount increased to $10 million

Exemption amount increased to $10 million

Exemption amount increased to $10 million

Step-Up in Basis at Death

Retained

Silent

Retained

 
  

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
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
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