Key issues that must be negotiated in a single tax reform bill
With the passage of the House of Representatives’ Tax Cuts and Jobs Act on November 16, and the passage of the U.S. Senate’s bill, also titled the Tax Cuts and Jobs Act, on December 2, the goal is to have a single bill negotiated for President Trump to sign on or before Christmas. Key areas of importance to Californians include: preserving the State and Local Tax Deduction, without which could double the taxes of residents. Other areas to be negotiated include Corporate Tax Cuts would begin in 2018 under the House Plan and 2019 under the Senate’s plan. OCBC asserts that 2018 would best, but there is understanding of potential revenue challenges; the Senate bill would leave the Mortgage Interest Deduction essentially unchanged whereas the House plan would only allow borrowers to deduct interest on up to $500,000 in home loans; next, the House bill preserves the ACA’s individual mandate while the Senate bill repeals it; while both the House and Senate bills cut corporate taxes and taxes on individuals, the House makes them permanent whereas the Senate bill only makes the corporate tax cut permanent, but the individual tax expires in 2025; there is discrepancy in the plans for the estate tax as the House Bill would allow for a doubling of the amount to be passed on and capitol gains from the selling of stocks would be tax free, while the Senate bill would allow up to $11 million to be passed on tax free; the House plan collapses the seven tax brackets into four, with the top tax rate at 39.5 percent, meanwhile the Senate place drops the highest tax rate to 38.5 percent; lastly, House and Senate bills both effectively repeal Section 409A of the Internal Revenue Code, which currently allows employees and other service providers to defer compensation earned in one year to future years to delay taxation. For more information, contact Alicia Berhow, Sr. Vice President, Government Affairs.