Yesterday the Joint Committee on Taxation released a description and revenue estimate of the Senate Finance Committee Chairman's mark of the Tax Cuts and Jobs Act. The Senate Finance Committee has not released bill language yet but may do so as early as next week. The Senate bill differs in significant respects from the House bill, which we summarized in our prior alert.
PTC and ITC
Unlike the House bill, the Senate bill would not change the PTC or ITC.
Corporate Tax Rates
Like the House bill, the Senate bill would lower the highest corporate tax rate from 35% to 20%. However, the Senate bill would not reduce the rate until tax years beginning after 2018, one year later than the House bill.
Like the House bill, the Senate bill would increase bonus depreciation from 50% to 100% effective for property acquired and placed in service after September 27, 2017 and before January 1, 2023 (subject to an exception for regulated public utilities). However, unlike the House bill, the Senate bill would not extend bonus depreciation to used property. Otherwise, the Senate bill is generally similar to the House bill with respect to bonus depreciation.
Like the House bill, the Senate bill would disallow a deduction for net interest expense in excess of 30 percent of a business's adjusted taxable income (subject to an exception for regulated public utilities). However, unlike the House bill, adjusted taxable income would take into account depreciation, amortization, and depletion (a less taxpayer-favorable provision) and disallowed amounts could be carried forward indefinitely (a more taxpayer-favorable provision). Otherwise, the Senate bill is generally similar to the House bill with respect to interest deductions.
The Senate Finance Committee is expected to mark up the Senate bill the week of November 13. The House Ways and Means Committee passed the House bill yesterday, and the full House is expected to take up the bill the week of November 13. We note that there are significant challenges to passing the legislation. First, there remain significant differences between the two bills (among other things, concerning key individual provisions including the state and local tax deduction). Second, the bills likely will require significant changes to enable them to comply with reconciliation instructions in the fiscal 2018 budget resolution, which require that the bills not increase the deficit outside the 10-year budget window. Nevertheless, the push to enact tax reform legislation appears to be gaining momentum.
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