November 9, 2017 House Ways & Means Committee passes 'Tax Cuts and Jobs Act' The House Ways and Means Committee on November 9, 2017, approved the "Tax Cuts and Jobs Act" on a party-line vote of 24-16. The vote came on the fourth day of the Committee's markup, and the bill is expected to be considered by the full House next week. Committee approval followed adoption, also by a 24-16 vote, of Chairman Kevin Brady's (R-TX) manager's amendment to the bill that included changes to the corporate and international tax provisions. "Similar to the amendment I offered on Monday, this amendment will refine several provisions in the Tax Cuts and Jobs Act. It also takes action on three crucial priorities — helping American families, providing tax relief to Main Street startups, and increasing American competitiveness," Brady said. Chairman Brady had said the amendment would bring the bill within the $1.5 trillion reconciliation limit, and a Joint Committee on Taxation estimate showed that it would add $1.44 trillion to the deficit over 10 years. Mandatory toll charge The mandatory toll charge on tax-deferred foreign earnings would be set at 14% on earnings held in liquid assets (cash) and 7% on earnings held in illiquid assets; the previous version set the rates at 12% and 5%, respectively. Excise tax The Tax Cuts and Jobs Act, as approved, retains the excise tax on amounts paid by domestic corporations to related foreign corporations. The excise tax provision remains, as originally proposed, either a 20% tax on the gross amount of the payment made, or via an election into the ECI regime, a 20% tax on the amount of the payment with a reduction equal to the deemed expenses amount. Chairman Brady's amendment offered on Monday attempted to soften the impact of the excise tax provision by increasing the deemed expenses amount and allowing a portion of FTCs to be used — equal to the lesser of 50% of the foreign corporation's foreign ETR (a defined term in the Amendment that considered, in part, the taxes paid worldwide) or 20%. The amendment adopted today removed the increase to the deemed expense amount and revised the FTC allowance. In lieu of calculating the foreign corporation's foreign ETR and taking the lesser of the amount described above, the provision now allows a foreign corporation to use 80% of the foreign taxes paid or accrued by the foreign corporation. Other provisions An additional provision from former House Ways and Means Committee Chairman Dave Camp's (R-MI) 2014 tax reform bill was added to the House bill, requiring that research or experimental expenditures be capitalized and amortized over a 5-year period (15 years in the case of expenditures attributable to research conducted outside the United States). This applies to research or experimental expenditures paid or incurred during taxable years beginning after 2023. An exclusion from the limitation on deductibility of net interest expense under the bill, generally set at 30% of adjusted taxable income, would be provided for interest on "floor plan financing indebtedness," which is common among automobile and agricultural equipment dealers and other businesses. Among other things, the amendment would also preserve the adoption tax credit and the exclusion for moving expenses for members of the Armed Forces for a move pursuant to a military order. The Committee also defeated, along party lines, Democratic amendments on the tax credit for wind energy production, the estate tax, and the domestic production deduction. The Brady amendment and a summary are attached, along with the JCT estimate. ———————————————
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Summary of Chairman Amendment
JCT Score
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