The Senate passed its version of the Tax Cuts and Jobs Act at approximately 2 a.m. on the morning of December 2, 2017, almost entirely along party lines. The final vote was 51-49 with only Senator Bob Corker (Republican, Tenn.) defecting. The House is scheduled to vote December 4, 2017 regarding conferencing with the Senate on the tax reform bill. Crucial differences to be reconciled include the proposed tax rates/number of brackets, AMT, and rates for pass-through entities. The GOP remains confident the House and Senate will be able to rectify the two bills and roll out legislation by the end of the year. The following are highlights of the Senate’s proposed legislation.
- The Senate bill notably has individual tax cuts expiring after 2025.
- The Senate bill preserves the current medical expense deduction and provides that, beginning after December 31, 2016 and ending before January 1, 2019, the 7.5% AGI limit applies in the case of any taxpayer. The House bill, in contrast, eliminates the itemized deduction for medical expenses for tax years after 2017.
- The Senate bill increases the federal estate and gift tax exclusion amount to $11.2 million for decedents dying and gifts made after 2017. Unlike the House bill, the Senate bill does not repeal the estate tax at any point in the future.
- The Senate bill effectively repeals the ACA individual mandate by reducing the shared responsibility payment to $0.
- The individual and corporate AMT are retained. Both were scrapped in the original bill. The individual AMT exemption amounts and phaseout thresholds are increased, and the corporate AMT remains unchanged.
- The repatriation rates of offshore earnings are 14.5% for cash and 7.5% for other earnings.
Nick Spoltore is Senior Director of Tax & Advisory Content for Surgent CPE. Mr. Spoltore is a graduate of the University of Notre Dame and of Delaware Law School. Before joining Surgent, he practiced tax and business law at the firm of Heaney, Kilcoyne in Pennsylvania and also in Delaware.