Tax reform took a major step forward early this morning as the Senate passed its version of tax reform legislation by a vote of 51-49. After several anxious days of debate and negotiations, the Republican leadership was able to push through the “Tax Cut and Jobs Act” (“H.R. 1”). A number of senators sought changes to the bill and threatened to vote against the bill unless their demands were heard, and this led to a number of revisions. The Senate tax bill differs from the House version (which was passed on November 16, 2017 – click here for a link to an article on this step) and the differences between the two bills will now need to be ironed out.
Update
On September 16, 2017 the Senate Finance Committee (SFC) approved its tax reform bill and sent the bill to the full Senate. The bill first passed a preliminary vote in the Budget Committee this week before moving to the Senate floor. As the debate began, the Senate leadership did not have sufficient votes to secure passage of the tax bill. There were several senators that wanted/demanded changes be made to the bill. With only a two vote margin to work with, the Senate leadership needed to address the concerns of certain senators without risking losing the support of other senators. It was a Rubik’s Cube loaded with political drama, but in the end the leadership was able to secure the 50 votes needed to pass the tax bill under the special reconciliation process.
As part of the negotiations, there were several late changes made to the tax bill that were adopted in the process. A few senators were concerned the tax cuts in the legislation may not produce sufficient economic growth, and thus could add to the federal deficit. This led to an attempt to add a “trigger” mechanism that would invoke tax hikes under certain conditions, but this procedure was ruled improper by the senate parliamentarian. Thus, several of the tax cuts needed to be scaled back and other changes made. Some of the selected final changes are as follows:
Next Steps and Outlook
Please keep in mind – tax reform legislation is not final. The Senate has now passed its version of tax reform and so has the House. The tax bills, however, have a number of differences and the same bill must eventually pass in both the House and the Senate. There are two possible alternatives that could be followed to resolve the differences in these tax plans.
The first, and most likely option, is for the tax bill to go through a House-Senate Conference. This Conference involves leaders of both the House and Senate who will work through the two bills and decide what to include in a final bill. This Conference could start as early as next week, and the House is considering a vote on Monday, December 4, 2017 to send the tax bill to Conference. Once an agreement is reached in the Conference, the compromise bill is put up for a vote in both the House and Senate where a majority vote in each chamber would be needed. The second possibility is for the Senate tax bill to move directly over to the House and not go to a Conference, although this route seems unlikely at this time. The bill, however, could not be amended at all and would be subject to an up or down vote in the House.
We will keep you posted as the process unfolds. Please consult your local Sikich tax professional with any questions you may have or visit www.sikich.sikichdevelopment.com for more information.
This publication contains general information only and Sikich is not, by means of this publication, rendering accounting, business, financial, investment, legal, tax, or any other professional advice or services. This publication is not a substitute for such professional advice or services, nor should you use it as a basis for any decision, action or omission that may affect you or your business. Before making any decision, taking any action or omitting an action that may affect you or your business, you should consult a qualified professional advisor. In addition, this publication may contain certain content generated by an artificial intelligence (AI) language model. You acknowledge that Sikich shall not be responsible for any loss sustained by you or any person who relies on this publication.