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Government & Industry Relations

Weekley Legislative Update

Week of November 20, 2017

House Passes Tax Reform, Senate Version

The House passed their version of the Tax Reform and Jobs Act (H.R.1) by a vote 227-205; 13 Republicans voted no with all 192 Democrats. Republicans voting no were primarily from CA, NJ, NY, states with high state taxes. See how your Representative voted here.

As tax reform continues to develop, I wanted to update you on the Senate version that is being marked-up (debated and amended in committee) by the Senate Finance Committee this week. There are some key differences between the House and Senate version.

See a long summary of the Senate version here.

See the section by section of the Senate version here.

Some key differences between the House and Senate version:

  • The Senate version maintains 7 tax brackets at 10% (under $9,525 for individuals and $19,050 for married), 12% (under $38,700 ind., $77,400 mar.), 22% (under $70k ind., $140k mar.), 24% (under $160k ind., $320k mar.), 32% (under $200k ind., $400k mar.), 35% (under $500k ind., $1m mar.), 38.5% (above $500k ind., $1m mar.)
  • The Senate will ease the burden of the Death Tax only until 2025. The House version would lift the exemption, then repeal it permenantly. Both increase the exemption of estates to about $10m. 
  • The Senate will eliminate all deductions for state and local taxes (SALT). The House would allow up to $10,000 in property tax deductions.
  • The Senate maintains the mortgage interest deduction on property valued under $1m, but eliminates the eligibility of home equity loan interest. The House lowers the threshold to $500k property for new purchases.
  • The Senate won’t lower the corporate rate to 20% until 2019.

Under the Senate plan, pass-through businesses will be able to reduce their income by 17.4% (Certain service businesses will be excluded) but taxes them according to the individual tax brackets. This provision has earned NFIB’s support, a key critic of the House version. The House plan caps the pass-through tax rate at 25%.

  • The Senate has a higher Child Tax Credit increase to $2,000 ($1,600 in the House) and increases the eligibility to under $500k from $110k (increased to $230k in the House).
  • The Senate will allow the immediate expensing of 100% of the cost of qualified property until 2023. The House does not sunset this provision.
  • The Senate will limit like kind exchanges to real estate property only.
  • The Senate will repeal the individual mandate of Obamacare. The House does not address the individual mandate.
  • The Senate would implement a one-time repatriation tax of all foreign earnings at 10% for all liquid assets and 5% for all other assets. The House sets these rates at 14% and 7% respectively.

These are likely the major negotiating pieces for what is expected to be a conference between House and Senate once the full Senate takes action. However, this is not and will not be the final version in the Senate, especially considering Senate leadership will likely need to negotiate with GOP Senators for their support.

Sen. Ron Johnson (WI), announced on Wednesday that he would oppose the current tax plan; the first Republican Senator to openly oppose. Senators Collins (ME) and Corker (TN) have also voiced concerns, but have not yet committed.

As we continue through this process, I continue to have discussions with House and Senate leaderships, coalition partners, and industry stakeholders on concerns with the elimination of Private Activity Bonds, a significant financing tool for the building of infrastructure, especially at the state and local level; how eliminating like kind exchanges and the immediate deductibility of capital expenditures will impact the construction industry in terms of equipment upgrades; and how the tax reform package will help rebuild America’s infrastructure.

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