September 13, 2018

Tax Reform 2.0 Heads to the House Floor

Casie Daugherty, Keith Smith

Today, the House Ways and Means Committee reported out a series of three bills that they have referred to as “Tax Reform 2.0.”

House leadership has already indicated that these bills will be on the floor the last week in September.

As expected, much of the debate and discussion during the mark-up was a continuation of the talking points and/or complaints that were features of last year’s tax reform debate. Below, you will find a rundown of each piece of legislation, as well as relevant documents produced by JCT, and any amendments that were offered. It should be noted that outside of the adoption of Amendments in the Nature of a Substitute, no amendments were added to the legislation.

H.R. 6760, the Protecting Family and Small Business Tax Cuts of 2018: 

This bill would make permanent a number of provisions found in last year’s TCJA, among them the individual tax brackets and the deduction for qualified business income of passthrough entities. Additionally, the legislation modifies the breakpoints between the zero and 15-percent rate on long-term capital gains and qualified dividends; modifies Section 15 of TCJA; and modifies the tax filing requirement for married taxpayers if the combined gross income is less than the standard deduction.

JCT Description Estimated Revenue Effects
Estimated Distribution Effects Amendment in the Nature of a Substitute
Green Sheet
Amendments Offered to H.R. 6760
  • Pascrell Amendment: Eliminate limitations for the SALT deduction by increasing the corporate rate. Amendment Rejected on a vote of 14-21.
  • Neal Amendment: Return the top income tax rate to 39.6% in order to expand the EITC, adoption tax credit, and the child and dependent care credit. Amendment Rejected on a vote of 14-21.
  • Thompson Amendment: Expand disaster tax relief. Amendment Rejected on a vote of 14-21.
  • Sanchez Amendment: Make the 7.5% AGI threshold for the medical expense deduction permanent. Amendment Rejected on a vote of 14-21.
  • Doggett Amendment: Require the release of President Trump’s tax returns. The amendment was ruled not germane and was tabled on a vote of 21-15.
  • Larson Amendment: Prohibit any portion of the legislation from going into effect unless the chief actuaries of the Medicare and Social Security certify that the bill will not harm the financial position of either trust fund. Amendment Rejected on a vote of 14-21.
  • Doggett Amendment: Suspend the tax rate on repatriated income found in TCJA until JCT certifies that the average household has experienced a $4000 wage increase, as promised by the Trump Administration. Amendment was ruled not germane.

H.R. 6760 (as amended by the Amendment in the Nature of a Substitute) was reported favorably out of committee by a vote of 21 – 15.

H.R. 6757, the Family Savings Act of 2018

This bill would make a number of changes to retirement savings. It makes changes to the tax treatment of multiple employer plans and pooled employer plans, and provides relief from the “one bad apple” rule for certain multiple employer plans. It makes changes to  the rules for the nonelective contribution 401(k) safe harbor; repeals the maximum age for traditional IRA contributions; expands 529 plans; allows for penalty-free withdrawals from retirement plans for individuals in the case of the adoption or birth of a child; and many others.

JCT Description Estimated Revenue Effects
Amendment in the Nature of a Substitute Green Sheet
 
Amendments Offered to H.R. 6757
  • Kind Amendment: Expands the number of changes made to retirement savings, including modifying premiums for Cooperative and Small Employer Charity pension plans. Amendment Rejected on a vote of 14-21.
H.R. 6757 (as amended by the Amendment in the Nature of a Substitute) was reported favorably out of committee by a vote of 21 – 14.

H.R. 6756, the American Innovation Act of 2018

The legislation consolidates the rules for start-up expenditures and organizational expenditures. It amends sections 382 and 383 to allow the pre-change net operating loss carryforwards, net operating losses, general business credit carryforwards, and general business credits of a start-up business to be available in a post-change year without limitation. It also allows unused general business credits earned by a start-up business prior to an ownership change to be used in a post-change year without limitation.

JCT Description Estimated Revenue Effects
Amendment in the Nature of a Substitute Green Sheet
H.R. 6756 (as amended by the Amendment in the Nature of a Substitute) was reported favorably out of committee by a voice vote.