Senate Unveils Tax Reform Bill; House Committee Passes Tax Plan
November 13, 2017
As the legislative process continues for the first major tax code overhaul in three decades, Senate Finance Committee Chairman Orrin Hatch (R-Utah) on Thursday released his own draft of tax reform legislation. Meanwhile, the House Ways and Means Committee voted to approve an amended version of the tax plan its leaders released last week. The bill is expected to see a vote on the House floor late this week. The committee vote was 24-16 along party lines.
“We applaud Chairman Hatch and the Senate Finance Committee for unveiling a comprehensive tax reform proposal to grow the economy and create jobs, and we congratulate Chairman [Kevin] Brady and the House Ways and Means Committee for successfully passing the House proposal out of committee,” ABA President and CEO Rob Nichols said. “We are encouraged by the progress to date and the administration’s willingness to make tax reform a top priority.”
Key provisions in the Senate bill include:
- A corporate income tax rate for C corporations of 20 percent, but not implemented until 2019
- A 17.4 percent deduction for business income from “pass-through” entities, including Subchapter S banks -- limited to 50 percent of the individual taxpayer’s W-2 wages -- a different structure for pass-through taxation than in the House bill
- Restrictions on net interest deductibility similar to the House bill, with taxpayers prohibited from deducting net interest expense exceeding 30 percent of adjusted taxable income
- The same homeownership provisions but subject to different caps -- higher than in the House bill -- going forward
- Eliminating the deduction for deposit insurance premiums for banks with over $50 billion in assets and phasing in the elimination for banks with $10-50 billion in assets
- Broadening the tax base by partially eliminating historic tax credits and repealing net operating loss carrybacks
“As with the House proposal, we are carefully reviewing specific provisions in the Senate bill that could affect our members and our customers, including the treatment of pass-throughs, interest deductibility and limits on the deductibility of FDIC premium payments,” said Nichols. “We are particularly concerned that the current pass-through treatment in both bills could have unintended consequences on community banks that operate as Subchapter S businesses. We appreciate the willingness of the committees to work with us on this issue.”
Nichols also expressed his disappointment that the Senate bill fails to address the outdated, distortionary tax subsidies to credit unions and the Farm Credit System. “Lawmakers looking for appropriate and responsible ways to pay for tax reform should start with the billions in misguided tax subsidies these groups receive while offering the same services as taxpaying bank,” he commented.
The Senate Finance Committee is expected to begin considering its bill today, and the House bill is expected to receive a vote on the House floor later this week. Nichols sent a CEO Update to all bank CEOs on Friday afternoon outlining the current status of tax reform and ABA's advocacy thus far.
Read the Senate bill.
Read more about the House bill.
Read Nichols' CEO Update.