House and Senate Move Ahead on Tax Reform
Congressional Republicans and the Trump Administration are maintaining an aggressive timetable for tax reform. The House Ways & Means Committee approved the Tax Cuts and Jobs Act (H.R. 1) on November 9, 2017. The lower chamber is expected to approve the legislation the week of November 13, 2017.
For its part, the Senate Finance Committee has released its own plan and working toward approving it. The goal is for the Senate to consider a tax reform bill after Thanksgiving. If the legislation does pass the House and Senate, a Conference Committee will be needed to reconcile the different versions. The White House and House Republican Leaders remain committed to having a tax reform bill signed into law before the end of the year.
Below is a side-by-side table comparing several notable provisions in the House and Senate versions.
|House of Representatives
|Approximately doubles the standard deduction. $12,000 for single filers. $24,000 for married couples filing jointly.
|Same as the House plan.
|New Tax Rate for Small Businesses
|Caps the pass-through rate at 25 percent and adds a lower minimum rate. Seventy percent of pass-through income is subject to individual tax rates, while 30 percent is business income subject to the new pass through rates.
|Establishes a new 17.4 percent deduction of qualified business income from certain pass-through businesses. Permits the use of the cash method of accounting for businesses with gross receipts of up to $15 million.
|Corporate Income Tax Rate
|Lowers the corporate income tax rate to 20 percent starting in 2018.
|Lowers the corporate income tax rate to 20 percent starting in 2019.
|Individual Income Tax Brackets
Consolidates tax brackets from seven to four: 12 percent, 25 percent, 35 percent, and 39.6 percent.
|Maintain seven tax brackets but lowers some rates, which would be 10 percent, 12 percent, 22.5 percent, 25 percent, 32.5 percent, 35 percent, and 38.5 percent.
|Repeals the estate tax and generation-skipping transfer tax starting in 2024. Immediately doubles the estate tax exemption levels ($11.2 million for individuals, $22.4 million for couples) and indexes for inflation.
|Doubles the estate tax exemption levels ($11.2 million for individuals, $22.4 million for couples) and indexes for inflation.
|Full “Expensing” of Capital Investments
|Allows businesses to immediately write-off (or “expense”) the cost of new qualified property through 2022.
|Same as the House plan.
|Deductibility of Interest Expense for Businesses
|Businesses would be subject to a disallowance of a deduction for net interest expense in excess of 30 percent of the adjustable taxable income. Businesses with less than $25 million in revenue are exempt from the changes.
|Similar to House proposal. Businesses would be subject to a disallowance of a deduction for net interest expense in excess of 30 percent of the adjustable taxable income. Businesses with less than $15 million in revenue (indexed for inflation) are exempt from the changes.
House Passes Joint Employer Bill Supported by BSCAI
On November 7, 2017, the House of Representatives passed the Save Local Business Act (H.R. 3441), which clarifies what constitutes a “joint employer” under federal labor law. Introduced by Rep. Bradley Byrne (R-AL), chairman of the Subcommittee on Workforce Protections, the bill rolls back the National Labor Relations Board’s (NLRB) vague and expansive joint employer standard and provides certainty for local businesses and their employees. The bill passed by a bipartisan vote of 242 to 181.
BSCAI supports the legislation and is pleased to see the action taken by the House of Representatives. Click here to view a multi-industry letter signed by BSCAI in support of the bill.
House Passes Bill Addressing Sue and Settle Lawsuits
On October 25, 2017, the House of Representatives passed the Sunshine for Regulations and Regulatory Decrees and Settlements Act of 2017 (H.R. 469), which would discourage the use of “sue and settle” lawsuits to alter federal rules. In recent years, such tactics have been used by outside groups to establish expedited rulemakings though settlement agreements.
The legislation brings greater transparency and public input to sue and settle lawsuits, and allows for increased judicial review that agencies properly complied and did not circumvent the normal rulemaking process. A Senate version of the legislation (S. 119) was introduced by Sen. Charles Grassley (R-IA) in January and has 10 Republican cosponsors.
Executive Order Intends to Expand Association Health Plans
On October 12, 2017, President Donald Trump signed an Executive Order intended to allow individuals and small businesses to buy insurance through plans sponsored by trade associations, community organizations, and other groups. Often called association health plans, they can be sold across state lines and exempt from the Affordable Care Act’s requirements on essential benefits. Such plans could lower costs and improve access to care but may do not provide as much coverage.
Health policy experts warn it is unclear what kind of effect the order would have without knowing what sorts of regulations could come of it. Issues that will need to be resolved through the rulemaking process include the following: 1) whether individuals (such as those who are self-employed) would be able to join an association health plan, 2) how long an individual could be covered by a short-term health insurance plan, and 3) expanding health reimbursement arrangements (HRAs) so that employers could set aside pre-tax dollars to reimburse employees for premiums, which is not allowed under current law.