CARH’S BROADCAST EMAIL – Legislative Update

September 27, 2017

Today, the White House formally released its framework for reforming the country’s current tax code. The framework entitled, Unified Framework for Fixing Our Broken Tax Code, was created with the assistance of senior members of the House Ways and Means Committee and the Senate Finance Committee (the so-called Big Six). It will now be the responsibility of these committees to take the framework and craft its concepts into legislation.

While we will not know many of the specifics until there is an actual bill introduced in Congress, the framework includes the following:

• Doubling the standard deduction for individuals to $24,000 for married taxpayers filing jointly, and $12,000 for single filers;
• Under current law, taxable income is subject to seven tax brackets. The proposal would consolidate the current seven brackets to three: 12%, 25%, and 35%;
• Retaining the mortgage interest and charitable giving deductions. Most other deductions would be eliminated, including deductions for state and local taxes. The Alternative Minimum Tax (AMT) for individuals would also be eliminated;
• Maximum tax rate structure for small businesses conducted as sole proprietorships, i.e., pass through entities such as partnerships and S corporations, to 25%, with measures that will ensure that personal income are not re-characterized as corporate rates;
• Corporations tax rates would be reduced to 20%;
• Allow immediate expensing of new investments for at least five years and partially limit interest deductibility (so-called full expensing);
• Eliminate most business credits except the framework explicitly preserves credits in two areas. Specifically, it states “tax incentives have proven to be effective in promoting policy goals important to the American economy: research and development (R& D) and low-income housing;”
• Repealing the estate tax;
• Providing a larger child tax credit. Credit would be expanded from $1,000 per child under 17 to an unspecified amount so that family income limits could be adjusted thus allowing eligibility of more families.

In formally announcing this tax reform framework, the Administration has indicated that they would like Congress to pass tax reform by the end of the year. This is an aggressive schedule, but may be possible if Congress is able to develop wide-spread bi-partisan support. Under the Constitution, tax measures must originate in the House, thus, we expect the Ways and Means Committee to begin consideration and writing specific legislative language very soon, with the Senate Finance Committee likely to hold parallel hearings and potentially drafting its own legislation at the same time.

Prior to the House and Senate voting on the tax legislation, both chambers must pass a budget resolution and then resolve any differences, which will allow both chambers to approve a joint budget resolution. This resolution would include what is known as a reconciliation instruction, which is the procedural mechanism that will allow the tax reform package to move through the Senate with 50, rather than the typical 60 votes. We expect both chambers to begin moving their budget resolutions as soon as next week. These resolutions will provide some additional context to the framework and any final legislation.

As noted, the goal would be to have votes in both chambers before the end of the year with a conference and then the President signing something soon after, but this is a very aggressive schedule given the commitment to go through regular order and the different procedural requirements necessary to enact the final bill.

It is very good news that the low-income housing tax credit (LIHTC) was specifically retained in the framework. Nevertheless, we must remain vigilant and continue our efforts to ensure that as negotiations begin to take place in both chambers with discussions about rates and other deductions such as the state and local taxes, the LIHTC continues to receive a high-level of support and remains in the final legislation. The framework is silent on the tax exemption for private activity bonds, a vital tool in the preservation of aging rural housing properties throughout the country. The proposal does indicate that “while the framework envisions repeal of other business credits, the committees may decide to retain some other business credits to the extent budgetary limitations allow.”

CARH members must continue their grassroots and federal efforts, which have largely been successful as evidenced by having the LIHTC in the initial framework.  Members must also explain the importance of private activity bonds for rural transactions.  One key method to continue our effort is to continue to develop support for Senators Cantwell and Hatch’s bill, S. 548 and Representatives Tiberi and Neal’s bill, H.R.1661. Current co-sponsors for S. 548 can be found here and current co-sponsors for H.R. 1661 can be found here.

To contact your Senators, click here.

To contact your Representatives, click here.

If you have any questions or comments, please contact CARH at 703-837-9001 or carh@carh.org.