Senate Passes Tax Bill - What Did They Change?

On November 9^th, the Joint Committee on Taxation released the Description of the Chairman’s Mark of the Tax Cuts and Jobs Act, revealing the Senate’s version of proposed tax reform. On December 2, 2017, the Senate passed a tax bill by a vote of 51-49. Prior to passage of the bill, during the Senate debates, there were changes made in order to secure enough votes to pass the bill. This alert highlights some of the changes that could most significantly affect your business.

	Senate Finance Committee Bill	Difference between Committee Bill and Senate Bill (passed in the Senate on 12/2/2017)
Corporate Tax Rates & AMT	Eliminates graduated rate structure and instead taxes corporate taxable income at 20% effective for taxable years beginning after 12/31/2018 No special rate for personal service corporations Corporate AMT repealed for taxable years beginning after 12/31/2017	Corporate AMT is not repealed
Cost Recovery / Full Expensing	100% expensing for qualified property placed in service after 9/27/2017 and before 1/1/2023 Excludes property used by a regulated public utility but does not exclude property used in a real property trade or business or floor plan financing indebtedness Does not extend to used property; retains requirement that original use begin with the taxpayer	Applies a phase-down (in 20% increments) of 100% expensing for five-year period beginning in 2023
Pass-Through Taxation	Senate Bill establishes a new 17.4% deduction for “qualified business income” from a pass-through or sole proprietorship The deduction is generally limited to 50% of the taxpayer’s allocable share or pro rata share of “W-2 wages” paid by the partnership, S corporation or sole proprietorship; thus, if the partnership, S corporation or sole proprietorship does not pay W-2 wages, the owner/taxpayer’s deduction would be zero W-2 wage limit would not apply in the case of a taxpayer with taxable income not exceeding $500,000 (for married individuals filing jointly) or $250,000 (for other individuals), but the application of this wage limit would be phased in for individuals with taxable income exceeding those amounts The deduction applies to specified service businesses only for those taxpayers whose taxable income does not exceed $500,000 for married individuals filing jointly or $250,000 for other individuals. The benefit of the deduction for service businesses is phased out over the next $100,000 of taxable income for married individuals filing jointly or $50,000 for other individuals This provision would expire 12/31/2015	Increases deduction from 17.4% to 23% *Extends application of the deduction to “qualified publicly traded partnership income,” as specifically defined*
Repatriation “Toll Tax”	Previously untaxed foreign E&P earnings: 10% cash and cash-equivalents 5% non-cash assets Payable over 8 years on a back-loaded basis Proportional reduction in foreign tax credits attributable to previously untaxed foreign earnings	Increases the 10% and 5% rates to 14.5% and 7.5%

Buchanan’s tax team and Government Relations specialists are committed to closely monitoring the legislative process and providing you with information regarding the most recent developments. When and if Congress passes a tax reform bill, we will be poised to help you understand what has changed and the impact of those changes on your business and wealth and succession planning.