November 17th Tax Reform Roundup Update

On November 16th, the “Tax Cuts and Jobs Act” tax reform bill was passed by the House of Representatives, making its way to the Senate Finance Committee. That evening, the Senate Finance Committee approved its tax bill, sending it to the full Senate where consideration of a tax reform bill is not expected until after Thanksgiving. Here are the key provisions of the House tax bill:

Key Business Provisions of the House Bill

• Cut corporate income tax rate from 35% to 20% and repeal Alternative Minimum Tax (AMT) – both beginning in 2018
• Modify the current worldwide taxation system to exempt from US tax dividends from foreign subsidiaries from foreign earnings and tax on a current basis potentially significant amounts of foreign income
• Impose a one-time 14% tax on accumulated foreign earnings, reduced to 7% for illiquid assets
• Allow businesses to expense the cost of certain new property placed in service after September 27, 2017, and before January 1, 2023
• Eliminate various deductions and credits including the Section 199 domestic production deduction, the work opportunity tax credit (WOTC) and the new markets tax credit
• The R&D tax credit remains in the House bill
• Require certain research or experimental expenses to be capitalized over five years
• Limit tax rate applied to a portion of a pass-through entity’s business income to 25%

Key Individual Provisions of the House Bill

• Reduce the number of income brackets from seven to four rates – 12%, 25%, 35% and 39.6%
• Repeal individual AMT
• Limit interest deductions on new home mortgages of $500,000 or more and also limit the exclusion of gain on the sale of principal residences
• Repeal the estate tax starting in 2025
• Limit individual itemized deduction for state and local taxes to $10,000 in property taxes

If you have any questions about the provisions of the House tax bill, please contact Debbie Torrance at 404-874-6244 or fill out the form below.