Will Congress Deliver on Tax Reform?
By Amber Thomas, Vice President – Marketing, Communications & Advocacy at AMT – The Association For Manufacturing Technology, which owns IMTS – The International Manufacturing Technology Show
House Ways and Means Committee Chairman Kevin Brady (R-TX) finally introduced the Republican leadership’s long-awaited tax reform bill, entitled the Tax Cuts and Jobs Act (H.R. 1). It is expected to cost about $1.5 trillion over the next decade. The President praised the bill as one that stimulate the economy and create jobs. The Senate is expected to introduce its own version of tax reform soon. Enacting a bill before the end of the year is still a long shot, given the complicated budget process and the opposition of powerful constituencies. If legislation is eventually enacted, it may look very different that the current proposal. Below are highlights of the business tax provisions as they stand now.
· Permanently cuts the corporate rate to 20 percent from the current 35 percent.
· Creates a new 25 percent maximum rate on pass-through business income, subject to new anti-abuse rules. The small business community, led by the National Federation of Independent Businesses, currently opposes the bill due to these rules.
· Allows 100 percent bonus depreciation for five years. Increases Section 179 expensing from $500K to $5M and increases the phaseout threshold from $2M to $20M. These provisions are strongly supported by AMT.
· Retains the R&D tax credit.
· Increases the estate tax (“death tax”) exemption to $10M, indexed for inflation, and fully repeals the tax after six years. The Senate leadership is reportedly considering preserving at least part of the tax.
· Eliminates the Section 199 manufacturing deduction,
· Limits the deductibility of net interest expense on future loans to 30 percent of earnings before interest, taxes, depreciation, and amortization (EBITDA), with a five-year carryforward for all businesses with gross receipts of $25M or more.
· Sets a deemed repatriation rate of 12 percent on liquid assets (cash and cash equivalents). Other assets would be taxed five percent.
Please review the current proposal (www.waysandmeans.house.gov) and let your members of Congress how your company would be impacted. If you have any questions or comment, please write me at firstname.lastname@example.org. I am eager to know your thoughts on H.R.1.