Tax Reform Links and Examples

Written by Annette Nellen | Posted in Senate • Tax Reform • United States

UPDATED 12/2/17: Tax reform is moving along. The House Ways and Means Committee introduced its bill – H.R. 1, on November 2 and the House passed it on November 16. The Senate Finance Committee released its proposal on November 9 and passed it on November 16. Late on 12/1/17, the Senate passed a bill that made numerous amendments to the bill passed by the Senate (see the list of amendments in this JCT document). Now the House and Senate need to create a conference committee to work out the differences among the bills and that version will go back to House and Senate for votes. Or, perhaps the House will just pass the Senate version, but I don’t think so. I think there are some items the House doesn’t like such as the corporate rate reduction not starting until 2019.

Following are links to the key documents on the bills and Joint Committee on Taxation analysis. I also show examples of how two different families fare under the House and Senate Finance Committee bills. Please note that there are many variations possible depending on how many children a family has and their ages, the types of itemized deductions they have, and their income level and its nature. I have kept the examples simple with the individuals only have wage and interest income.

Links:

H.R. 1 passed by the House on 11/16/17 (227-205). This link includes the legislative text and the House Report 115-409
JCT, Description of H.R. 1 before amendment (JCX-50-17; 11/3/17)
JCT, Estimated Revenue Effects for H.R. 1 (JCX-54-17; 11/11/17)
JCT, Distribution Effects of H.R. 1 (JCX-53-17; 11/11/17)
Bill passed by Senate Finance Committee on 11/16/17
Section-by-Section analysis of SFC bill
SFC bill summaries from JCT: 253-page description of original proposal (JCX-51-17; 11/9/17) + 103-page Chair mark (JCX-56-17; 11/14/17)
JCT, Estimated Revenue Effects of the SFC bill (JCX-59-17; 11/17/17)
JCT, Distribution Effects of SFC bill (JCX-60-17; 11/24/17)
CBO, Distribution Analysis of SFC bill (11/27/17) + 11/17/17 letter to Senator Wyden
Bill passed by the Senate on 12/1/17 (479 pages)
JCT, Estimated Revenue Effects of the Senate bill (JCX-62-17; 12/1/17)
Tax reform links of the House Ways and Means Committee + Senate Finance Committee

H.R. 1 – Two examples of individuals:

Family of 4, wages $100K, state taxes $8K, mtg int $10.5K, charitable $500		Family of 4, wages $250K, mtg int $40K, State tax $35K, charitable $5K, misc $3K
	2018 current law	H.R. 1	2018 current law	H.R. 1
Taxable income	$64,400	$75,600	$150,400	$205,000
Tax	$8,708	$9,072	$28,908	$39,550
Child credit	$2,000	$3,200	$0	$3,200
Non-child dependent credit	—	$600	—	$600
AMT	$0	—	$3,372	—
Net tax	$6,708	$5,272	$32,280	$35,750

Note: The family above with $40,000 of mortgage interest has a debt greater than the new $500,000 limit allowed by H.R. 1, but falls under the transition rule. If this taxpayer instead had a new mortgage, the tax would be higher because H.R. 1 limits mortgage interest to a debt of $500,000.

SFC (not the Senate version which increased the child credit to $2,000) – Same examples as above:

Family of 4, wages $100K, state taxes $8K, mtg int (AI) $10.5K, charitable $500		Family of 4, wages $250K, mtg int (AI) , $40K, State tax $35K, charitable $5K, misc $3K
	2018 current law	SFC	2018 current law	SFC
Taxable income	$64,400	$75,600	$150,400	$205,000
Tax	$8,708	$8,739	$28,908	$39,742
Child credit	$2,000	$3,300	$0	$3,300
Non-child dependent credit	—		—	—
AMT	$0	—	$3,372	—
Net tax	$6,708	$5,439	$32,280	$36,442
Tax HR 1		$5,272		$35,750

There are numerous changes for individuals, businesses, estates, and exempt entities in the proposals. The above examples aim to illustrate that not everyone gets a tax cut; it depends on the mix of their income and current deductions.

Have a question? Contact Annette Nellen

Your comments are welcome!

Annette Nellen

Annette Nellen, CPA, Esq., is a professor in and director of San Jose State University’s graduate tax program (MST), teaching courses in tax research, accounting methods, property transactions, state taxation, employment tax, ethics, tax policy, tax reform, and high technology tax issues.

Annette is the immediate past chair of the AICPA Individual Taxation Technical Resource Panel and a current member of the Executive Committee of the Tax Section of the California Bar. Annette is a regular contributor to the AICPA Tax Insider and Corporate Taxation Insider e-newsletters. She is the author of BNA Portfolio #533, Amortization of Intangibles.

Annette has testified before the House Ways & Means Committee, Senate Finance Committee, California Assembly Revenue & Taxation Committee, and tax reform commissions and committees on various aspects of federal and state tax reform.

Prior to joining SJSU, Annette was with Ernst & Young and the IRS.