The House Ways and Means Committee has released the text of its long-awaited tax reform bill.
Key business provisions of the bill include:
— Reducing the 35% corporate income tax rate to 20% beginning in 2018 and repealing the corporate alternative minimum tax (AMT), also beginning in 2018
— Modifying the current worldwide taxation system to: (i) exempt from US tax dividends paid by foreign subsidiaries paid from foreign earnings; and (ii) tax, on a current basis, potentially significant amounts of foreign income under anti-base erosion provisions and modifications to subpart F
— Imposing a one-time 12% tax on accumulated foreign earnings, reduced to 5% for illiquid assets
— Allowing businesses to expense the cost of certain new property placed in service after September 27, 2017, and before January 1, 2023
— Eliminating various deductions and credits, such as the Section 199 domestic production deduction, the work opportunity tax credit and the new markets tax credit (but not the research credit)
— Limiting the net interest expense deduction
— Limiting the tax rate applied to a portion of a pass-through entity’s business income to 25%
Key individual provisions of the bill include:
— Replacing the seven income tax brackets for individual taxpayers with four rates of 12%, 25%, 35% and 39.6%
— Repealing the individual AMT
— Limiting deductibility of interest on new home mortgages of $500,000 or more and further limiting the exclusion of gain on the sale of principal residences
— Repealing the estate tax in six years
— Limiting the individual itemized deduction for state and local taxes to $10,000 in property taxes
Please contact Caroprese & Company for more information on how The House Ways and Means Committee’s tax reform bill may impact you.