House Republicans Pass Tax Bill

Chris Gaetano
Published Date:
Nov 17, 2017
House Republicans yesterday passed their version of the tax reform bill 227 to 205, according to Bloomberg. The vote fell largely along party lines, with every Democrat opposing it, though they were joined by 13 other Republicans who also came out against the bill. Of the 13 Republican “no” votes, five are from New York, four are from New Jersey and three are from California, which Bloomberg pointed out were the three states that use the state and local tax deduction the most, which would be scrapped under this new plan. The bill, the Tax Cuts and Jobs Act, introduces a wide variety of changes to the U.S. tax code. Regarding individual taxation, the bill: 

  • * replaces the seven existing tax brackets (10%, 15%, 25%, 28%, 33%, 35%, and 39.6%) with four brackets (12%, 25%, 35%, and 39.6%),
  • * increases the standard deduction,
  • * repeals the deduction for personal exemptions,
  • * establishes a 25% maximum rate on the business income of individuals,
  • * increases the child tax credit and establishes a new family tax credit,
  • * repeals the overall limitation on certain itemized deductions,
  • * limits the mortgage interest deduction for debt incurred after November 2, 2017, to mortgages of up to $500,000 (currently $1 million),
  • * repeals the deduction for state and local income or sales taxes not paid or accrued in a trade or business,
  • * repeals the deduction for medical expenses,
  • * consolidates and repeals several education-related deductions and credits,
  • * repeals the alternative minimum tax, and
  • * repeals the estate and generation-skipping transfer taxes in six years.

For businesses, the bill:

  • * reduces the corporate tax rate from a maximum of 35% to a flat 20% rate (25% for personal services corporations),
  • * allows increased expensing of the costs of certain property,
  • * limits the deductibility of net interest expenses to 30% of the business's adjusted taxable income,
  • * repeals the work opportunity tax credit,
  • * terminates the exclusion for interest on private activity bonds,
  • * modifies or repeals various energy-related deductions and credits,
  • * modifies the taxation of foreign income, and
  • * imposes an excise tax on certain payments from domestic corporations to related foreign corporations. 

The bill also would repeal the individual mandate in the Affordable Care Act, a provision that was only recently inserted into the legislation

On the other side of the legislature, the Senate Finance Committee approved their own version of the bill with significant differences from that which the House approved, according to Accounting Today. Some of the biggest differences include delaying the cut in the corporate tax rate by one year, and to make certain individual tax breaks despite by 2026. However other points of contention may emerge as the Senate negotiates with the House on some of the finer details. There has already been grumbling over how the House bill treats partnerships and other pass-throughs, as well as how the mechanics of how the individual mandate repeal would work, plus concerns over how much the plan will add to the deficit. 

Click here to see more of the latest news from the NYSSCPA.