On November 9, the Senate Finance Committee released a draft of its tax reform bill. Although the bill is not expected to pass in its current form, it provides insight into what certain Republican Senators on this committee consider important elements of the final legislation and continues the tax reform discussion in Congress.
Since the bill is in its infancy, we are sharing a few selected highlights with you, which are subject to change as the bill moves through the legislative process.
Individuals
- Revises tax rates to 10%, 12%, 22.5%, 25%, 32.5%, 35%, and 38.5%. Current rates are 10%, 15%, 25%, 28%, 33%, 35%, and 39.6%.
- Eliminates state and local property, sales tax, and income tax deductions unless the property or sales taxes are paid or accrued as part of a trade or business.
- Increases the standard deduction to $12,000 (single) and $24,000 (married filing joint) and eliminates the personal exemption.
- Adds new deductions for individuals with certain pass-through income.
- Repeals the alternative minimum tax.
- Doubles the estate and gift tax exemption.
Businesses
- Eliminates the graduated rate structure and taxes corporate taxable income at 20%. Current graduated rates are 15%, 25%, 34%, and 35%.
- Increases Section 179 expense and investment limitations to $1,000,000 and $2,500,000, and expands and modifies bonus depreciation rate from 50% to 100% for limited time period.
- Limits interest expense deduction (similar to House bill).
- Eliminates “worldwide” income double taxation.
- Repeals the domestic production activity deduction.
- Repeals DISCs and IC-DISCs.
- Repeals the alternative minimum tax.
Ultimately, the bill will need to be passed in the Senate and agreed upon by the House before it reaches the President for his approval. We expect to see additional significant changes before it is finalized as Republican and Democrats work together over the next several weeks.
The entire release can be found on the Senate Finance Committee website. We will continue to monitor the progress and will provide updates as soon as they are available.
