The Senate on December 2, 2017, passed its version of the Tax Cuts and Jobs Act (TCJA) by a vote of 51-49 after adopting a manager's amendment that differs from the version passed by the Senate Finance Committee on certain issues. The House and Senate will now seek to reconcile differences between their two bills.

Key changes from the Senate Finance Committee bill include:

— Reinstating the corporate alternative minimum tax (AMT)

— Increasing the one-time transition tax on deferred foreign earnings from 10% to 14.5% for liquid assets and from 5% to 7.5% for illiquid assets

— Modifying the limitation on net interest deductions, for US shareholders that are members of worldwide affiliated groups, so the calculation cannot be less than "1" and phasing in the "110%" in the calculation of excess domestic indebtedness between 2018 and 2021 (130%, 125%, 120%, and 115%, respectively)

— Reinstating the IC-DISC regime

— Extending the placed-in-service date for certain property to be eligible for expensing from 2023 to 2027, but gradually phasing out the amount expensed from 100% in 2022 to 0% in 2027

— Delaying repeal of the Section 199 domestic production deduction until 2019 for corporations

— Increasing the amount of "domestic qualified business income" that certain pass-through business owners may deduct from 17.4% to 23%

— Reinstating the individual AMT and increasing the "exemption amounts" for tax years beginning after 2017 and before 2026, including the amounts at which the exemption phases out

— Allowing individuals who itemize deductions to deduct up to $10,000 in property taxes

— Extending the medical expense deduction floor of 7.5% of adjusted gross income to individuals in 2017 or 2018

Key business provisions in the bill passed by the full Senate include:

— Permanently reducing the 35% corporate income tax rate to 20% beginning in 2019

— Imposing a new base erosion minimum tax that would be calculated by reference to all deductible payments made to a foreign affiliate for the year and apply to certain US corporations with average annual gross receipts of $500 million or more over three years

— Creating an incentive for US companies to sell goods and provide services abroad by effectively taxing income from those activities at 12.5%

— Allowing US companies generally to repatriate their intangible property tax-free

— Repealing the DISC regime

— Limiting NOL usage to 80% of taxable income for losses arising in tax years beginning after 2022, eliminating NOL carrybacks and allowing indefinite carryforwards for NOLs generated after December 31, 2017

— Expanding the $1 million deduction limit on compensation paid to certain top executives of publicly traded companies to include compensation paid to the CFO, as well as deferred compensation paid to individuals who previously held those top-level positions (does not apply to remuneration under a written binding contract that was in effect on November 2, 2017, and was not materially modified thereafter)

— Requiring partners who receive certain carried interests to hold those interests for three years in order to treat any gain as capital gain

Key individual taxpayer provisions in the Senate bill include:

— Modifying the current seven income tax brackets for individual taxpayers to rates of 10, 12, 22, 24, 32, 35 and 38.5 until after 2025

— Repealing the "individual mandate" under the Affordable Care Act, which requires individuals to purchase health insurance or pay a tax

— Retaining the current deduction for interest on mortgages of $1 million or less but eliminating the ability to deduct home equity interest

— Doubling the child tax credit to $2,000

— Retaining the estate tax but doubling the exclusion and adjusting it for inflation

— Retaining the work opportunity credit

The Senate bill does not alter the current tax treatment of nonqualified deferred compensation.

Join EY, Monday, December 4 at 1:00 p.m. ET, for a rapid response discussion of the amendments adopted by the Senate, the legislative process and what companies need to do now to prepare for the changes that could come from enacted legislation.

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