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House Releases Tax Bill: Talking Points and Takeaways

On November 2, 2017, the House Ways and Means Committee released the “Tax Cuts and Jobs Act” (H.R. 1). Key elements include reducing the tax rate on corporations to 20%, and reducing the tax rate paid on income earned by pass-through entities (partnerships and most limited liability companies) to 25%.  For individuals, the bill would eliminate the alternative minimum tax and phase out the estate tax over six years.  The bill would also eliminate the deduction for state and local taxes, but preserves the deduction for property taxes up to $10,000. A more detailed explanation of the proposed changes is below.

Effective Date

The President’s goal is to sign the bill by Christmas. The House Ways and Means Committee’s markup is officially scheduled for Monday, November 6th, at noon EST. The Senate Finance Committee, the Senate counterpart to the House Ways and Means Committee, is expected to release its version of the tax bill the week of Nov. 13.

Provisions Affecting Businesses

The bill has a number of provisions that could reduce taxes on corporations and income earned by pass-through entities, and provisions that eliminates deductions.

  • The bill reduces the corporate tax rate to 20% and the rate on pass-through business income to 25%; 

  • The bill provides safeguards designed to ensure that the 25% tax rate applies only to business income and not to wage income.  The purpose of these guidelines is to stop people who provide services, like doctors, lawyers, accountants, etc., from changing their business organization to get the lower 25% tax rate.

  • The bill allows businesses to immediately write off the full cost of new equipment instead of depreciating it over the life of the equipment;

  • The bill eliminates the ability of many businesses to write off interest expenses, but preserves the interest deduction for small businesses;

  • The bill provides a one-time tax on earnings held abroad by US businesses, and modifies the rules on taxing foreign income earned by US businesses; the bill includes other provisions designed to stop businesses from relocating abroad, and exempts income from “routine” foreign operations from US tax.

Provisions Affecting Individuals

  • The bill provides five tax brackets:  0%, 12%, 25%, 35% and 39.5%; 

  • The bill eliminates the alternative minimum tax, doubles the estate tax deduction immediately, and completely eliminates the estate tax in six years; beneficiaries will continue to receive a stepped-up basis in estate property;

  • The bill eliminates the deduction for state and local taxes, medical expenses, and property casualty losses, but preserves a deduction for property taxes up to $10,000;

  • The bill eliminates the personal exemption but increases the standard deduction to $12,000 for individuals and $24,000 for families. The bill also provides a new family credit which includes an increase in the child tax credit to $1600. 

Many Deductions Thought to be at Risk are Preserved

Before the bill was released there was much discussion of various tax provisions thought to be at risk because of the need to pay for the tax cuts in the bill.  For example, the bill preserves the current treatment of 401(k) and IRA contributions. The bill also protects the mortgage interest deduction and the itemized deduction for charitable contributions.

© Polsinelli PC, Polsinelli LLP in California

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Jeffrey Goldman, Polsinelli Law Firm, Chicago, Tax Law Attorney
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Jeffrey Goldman has a wealth of experience in taxation of business enterprises, including corporate and partnership taxation, state and local tax, international tax and tax controversy. He has more than 25 years of experience representing clients in complex tax matters.

Jeff frequently advises clients on structuring complex domestic international transactions; mergers and acquisitions; and financing transactions, restructurings, and reorganizations. He also handles complex tax controversies at audit, before the IRS Appeals Division and in court...

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Julius W. Hobson, Jr., Polsinelli PC, Public Policy Attorney, Long Term Care Regulation Lawyer,
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Julius W. Hobson, Jr., strives to meet client public policy goals and objectives based upon the client needs and capabilities. Julius has more than 40 years’ experience in public policy, working both inside and outside of government. He has a deep-rooted understanding and compassion about the public policy process — both legislative and administrative. He primarily serves health care clients with particular emphasis on physicians, hospitals, home health, and long-term care providers. 

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D. Scott Lindstrom, Polsinelli PC, Tax Planning Attorney, Controversy Matters Lawyer
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Scott Lindstrom brings a personal and customized approach to each client’s unique situation. This defines how he handles tax and business matters for the wide variety of clients he serves. Scott helps businesses and individuals with a broad range of tax planning and controversy matters, estate planning, and business transactions. He also represents clients in many aspects of business and general corporate transactions, including formation, operation, disposition, business contractual matters, and international taxation matters.

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William J. Sanders, Polsinelli PC, Limited Liability Company Matters Lawyer, Tax matters Attorney
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Through over 30 years of practicing law, Bill Sanders has developed broad tax experience in corporate, partnership, limited liability company, complex business transactions, and workout and bankruptcy issues.

As chairman of the firm’s tax practice group and a licensed CPA in Missouri, Bill’s clients range from Fortune 100 companies to family-owned and tax-exempt organizations.

He regularly represents clients nationwide before the Internal Revenue Service at all levels including audits, the Appeals Division and...

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