November 13, 2017 EY Center for Tax Policy: This Week in Tax Reform for November 10 This week (November 13-17) Congress: The House and Senate are in session. Senate Finance Committee markup: The "Tax Cuts and Jobs Act" is scheduled to be marked up by the Senate Finance Committee beginning on Monday, November 13 at 3 p.m. House consideration: House Republican leaders would like to bring H.R. 1, the "Tax Cuts and Jobs Act," to the House floor late next week. The House Rules Committee is set to meet on Wednesday, November 15 at noon regarding the rule for House floor consideration. Last week (November 6-10) Senate Finance Chairman's Mark: Senate Finance Committee Chairman Orrin Hatch (R-UT) released late on November 9 his Chairman's Mark of the "Tax Cuts and Jobs Act," which adheres to the same basic tax overhaul framework as the tax bill approved by the House Ways and Means Committee but includes significant differences in the design of provisions and their timing. The maximum individual rate is 38.5% and the Senate Finance version contains a different set of income tax brackets. Notably, the statutory corporate tax rate would be reduced to 20% but not until 2019, and while the Senate proposes moving to a territorial tax system for foreign earnings, the plan includes different rates for the mandatory transition tax and different approaches to preventing base erosion. In addition, the Chairman's Mark takes a different approach with regard to pass-through entities, and adds numerous changes to business and partnership provisions of current law that are not included in the Ways and Means plan. The Finance Committee will mark up its plan beginning on Monday, November 13 at 3 p.m. and Chairman Hatch said he hopes to report the legislation by the end of the week. A list of filed amendments and a Chairman's Modification may be issued prior to then. Changes are possible during the Committee process. Finance Committee member and second-ranking Republican Senator John Cornyn (R-TX) has said the full Senate would likely consider the final product of the Finance Committee deliberations after Thanksgiving. Reconciliation focus in Senate: The FY 2018 budget included reconciliation instructions for a tax bill that can add to the deficit by no more than $1.5 trillion over the first 10 years, which the plans adopted by Ways and Means and proposed by the Finance Committee adhere to. However, the Byrd Rule under the reconciliation process precludes any title of the tax bill from adding to the deficit beyond the 10-year budget window, and how the Senate proposal fares in relation to that requirement will be of great interest as the process moves forward. It is likely that changes will have to be made to the Chairman's Mark prior to the bill being brought to the Senate floor in order to accommodate this rule. Ways & Means Committee passes tax reform bill: Chairman Hatch's Mark was released several hours after the House Ways and Means Committee approved its own version of the Tax Cuts and Jobs Act on a party-line vote of 24-16 November 9, following a four-day markup and multiple revisions made in an effort to solidify support for the bill. Committee approval followed adoption of Chairman Kevin Brady's (R-TX) manager's amendment with changes to the corporate and international tax provisions. Ways and Means also defeated along party lines more than 20 Democratic amendments on various topics. House Republican leaders would like to bring the bill to the House floor late next week. While the bill will likely be considered under a "closed rule" that will not permit floor amendments, it is possible that further changes to the bill could be made prior to final House passage as part of the adoption of that rule, meaning that adoption of the rule for House consideration of the bill would automatically incorporate changes developed by the leadership over the next few days. Speaker Paul Ryan (R-WI) said a House-Senate conference would follow Senate approval, and both he and Brady played down differences between the two chambers as simply reflective of the normal legislative process. Still, the differences between the House and Senate plans would need to be ironed out in a compromised version prior to a final bill being in a position to be approved by both chambers and sent to the President for his signature. Quote of the Week "We've preserved and even strengthened incentives that ease financial burdens associated with growing families and ensured Americans can save for their retirement and invest in their future. The Senate proposal levels the playing field for Main Street and modernizes the tax system in a way that will shift our economic landscape to make America a more inviting place for businesses to invest, keeping jobs from being shipped overseas." — Senate Finance Committee Chairman Orrin Hatch (R-UT), November 9 ———————————————
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