On December 10, 2018, House Ways and Means Committee Chairman Kevin Brady (R-TX) released a modified year-end tax package that, from the previous version released on November 26, omits the titles on extension of expired tax provisions and innovation provisions and adds delays in Affordable Care Act (ACA) taxes. The package continues to address retirement policy, Tax Cuts and Jobs Act (TCJA) technical corrections, IRS reform provisions, and disaster relief. A section-by-section summary is attached.

House Republican leaders will likely gauge support for the plan within their caucus as House business proceeds this evening, setting up a possible vote in the chamber later this week. While this most recent package excludes tax extenders, which generally comprise a slate of 20-plus provisions that expired at the end of 2017, further discussion and consideration of the issue may ensue.

With regard to ACA taxes, the package would provide:

• an additional five-year delay of the medical device excise tax, through 2024
• an additional one-year delay of the excise tax on high cost employer-sponsored health coverage (known as the "Cadillac Tax"), through 2022
• an additional two-year delay of the annual fee on health insurance providers (known as the "Health Insurance Tax" or "HIT"), through 2021
• repeal of the 10% excise tax on indoor tanning services

A new proposed technical correction added to the revised package would seek to alleviate certain issues with the so-called downward attribution rule that applies to controlled foreign corporations arising under the TCJA.

TCJA technical corrections carried over from the previous package provide that:

• the Section 199A pass-through deduction for qualified REIT dividends applies to both direct holders of REIT stock and indirect shareholders of REITs through mutual funds
• qualified improvement property is 15-year property under the modified accelerated cost recovery system (MACRS), which also would make such property eligible for 100% bonus depreciation
• modifications made to NOL carryforwards and carrybacks apply to net operating losses arising in tax years beginning, not ending, after December 31, 2017
• attorney's fees related to sexual harassment or abuse cases are deductible by victims
• any non-Section 965 tax payments (e.g. estimated taxes) will not be applied by the IRS to a taxpayer's Section 965 tax liability

Additionally, Veterans' housing is considered to comply with the general public use requirements of the low-income housing tax credit, as well as for exempt facility bonds in the same manner.

Retirement savings provisions are essentially the same as proposed in the November 26 version of the bill and include multiple employer plan provisions, a fiduciary safe harbor for the selection of a lifetime income provider, and a requirement that benefit statements include a lifetime income disclosure that would convert a participant's current account balance into a monthly annuity at retirement age.

Added in the latest version is a set of provisions from the Family Savings Act approved by the House in September under which Section 529 plans would be expanded to cover apprenticeships, homeschooling expenses, and student loan repayments, and under which an unborn child can be treated as a designated beneficiary for a 529 account.

The bill also newly includes language targeting the so-called Johnson amendment and the tax-exempt status of churches that make statements related to political campaigns. The bill would allow a Section 501(c)(3) organization to make statements relating to political campaigns in the ordinary course of carrying out its tax exempt purpose.

The new package includes essentially the same version of the IRS reform package included previously, highlighted by provisions to establish an IRS Independent Office of Appeals and to implement an absolute right to go to Appeals in certain limited circumstances.

With regard to disaster relief provisions, the Committee noted the package includes "targeted and needed temporary tax relief for folks hit by storms and natural disasters in Alabama, California, Florida, Georgia, Hawaii, Indiana, North Carolina, South Carolina, Texas, Virginia, Wisconsin, American Samoa, Guam, and the Northern Mariana Islands."

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Tax and IRS Reform