Senate Passes Tax Cuts and Jobs Act

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The Senate passed the Tax Cuts and Jobs Act in the early morning hours of Saturday, December 2, marking a major legislative win for the Republican majority.  The final vote on passage was 51-49, with Sen. Bob Corker (R-TN) the only Republican vote against, and no Democrats voting for the bill.

A manager’s amendment making significant changes to the bill was adopted.  In addition, two other amendments were adopted, one by Sen. Ted Cruz (R-TX) allowing section 529 education plans to be used to pay for K-12 education expenses, including home schooling, and a Democratic amendment by Sen. Jeff Merkley (D-OR) striking a provision that would have allowed colleges that do not participate in the federal financial aid program to be exempt from the endowment  tax in the bill.

The manager’s amendment may be found at Senate Manager’s Amendment Text.  The Joint Committee on Taxation score for the bill including the managers amendment may be found  at  JCT Revenue Table.  The revenue table provides a quick, helpful guide to the changes made by the manager’s amendment.

The House and the Senate will formally vote on motions to proceed to conference next week (the House vote is scheduled for Monday evening).  Pre-conference discussions to resolve differences between the two bills have already been in progress.  The process is expected to move fairly quickly and may not follow the format of a traditional conference.

A preliminary high level summary of changes in the manager’s amendment is below.  Please note that this is not comprehensive and does not reflect all details.

Highlights of Key Changes to the Tax Cuts and Jobs Act in the Manager’s Amendment:  Please note  that, as under the bill as approved by the Senate Finance Committee, provisions in the individual title of the bill generally sunset at the end of 2025.

  • Retains the Corporate AMT. (The individual AMT  is also retained,  but with increased exemption amounts and phase-out thresholds.
  • Increases the deduction for qualified business income of pass-through entities from 17.4% to 23%.
  • Increases the tax rates on deemed repatriation amounts to 7.5% for non-cash amounts and 14.5% for cash amounts.
  • Includes an extension and modification of the phase down of bonus depreciation.
  • Moves the effective date of the repeal of the section 199 manufacturing deduction up  to 2018 for certain types of entities, including taxpayers that are not C corporations.
  • Includes a provision relating to overall domestic losses.
  • Restores the itemized deduction for medical expenses to 7.5% of AGI for 2017 and 2018 (as under the Finance Committee bill, the threshold is 10% of AGI for later years)
  • Restores the itemized deduction for state and local property taxes up to $10,000