Senate Unveils Tax Reform Details, Doubles Estate Tax Exemption without Full Repeal

November 10, 2017

On the heels of the House of Representatives’ release of the Tax Cuts and Jobs Act (H.R. 1) last week, the Senate Finance Committee began to roll out details related to its tax reform bill on Thursday afternoon, not releasing text and an official revenue “score” until Thursday night.  There are some major differences between the two bills that both chambers must reconcile prior to presenting legislation to the president’s desk for his signature.   Notably for the equine and broader agriculture sectors, the senate plan would double the exemption for the estate tax without eliminating it altogether, as provided in H.R. 1. The Senate Finance Committee will begin to mark-up the legislation on Monday, November 13. Please see the below highlights, outlining some key provisions that will impact the equine industry: 

Business Provisions

  • Corporate Tax Rate: The senate bill delays reduction of the corporate tax rate from 35 percent to 20 percent until 2019. By contrast, H.R. 1 provides an immediate corporate tax cut, effective in 2018.  
  • Expensing: The senate bill provides “100% bonus depreciation within five years,” which is similar to a provision in H.R. 1.     
  • Business Interest: The plan states that small businesses will be able to deduct interest on loans intended to finance the growth of operations and inventory. 
  • Alternative Minimum Tax (AMT) – Like H.R. 1, the senate bill eliminates the unpopular AMT, which doubles the amount of time taxpayers must spend to calculate their business or individual tax liability within any given year.

Individual Provisions

  • Estate Tax: The senate bill doubles the amount of the estate tax exemption, currently valued at $5.49 million for individuals, but falls short of an outright repeal.  By contrast, H.R. 1 eliminates the estate tax within six years of enactment.  AHC partners are already reaching out to senators to offer a repeal amendment during the mark up scheduled to begin early next week.                    
  • State and Local Taxes (SALT) – The senate bill includes a full repeal of the SALT deduction for individuals.  The House bill, however, includes a compromise provision allowing limited deductions for state and local property taxes.    
  • Mortgage Interest: Senators state that the provision will cap the deduction for mortgage interest indebtedness at $1 million.  H.R. 1, however, establishes a $500,000 cap on interest from new home purchases, a provision drawing criticism from the homebuilders. 
  • Charitable Contributions:  In cases of individual cash contributions, the senate bill increases the percentage-limit deduction from the current rate of 50% to 60%. 

Next Steps

Because of the major differences between the House and Senate tax bills, the two chambers will likely convene a conference committee to negotiate a final package to send to the president.  The House Ways and Means Committee concluded its four day mark-up of H.R. 1 on Thursday afternoon, and will send the bill to the floor for a vote next week.  This puts the House on track to pass its tax bill prior to the Thanksgiving Holiday.   The Senate, however, will likely vote on its final package after Thanksgiving, according to a statement from Senate Majority Whip John Cornyn (R-TX).     

To keep track of ongoing tax policy developments, AHC is conducting a webinar  featuring congressional and industry presenters on Monday, November 13 at 3:00 PM ET.  To view a copy of an outline of the bill’s key provisions and revenue impacts, please click here: https://www.finance.senate.gov/imo/media/doc/11.9.17%20JCT.pdf. To see a two-page copy of the plan’s “policy highlights,” please click here:  https://www.finance.senate.gov/imo/media/doc/11.9.17%20Policy%20Highlights.pdf 

To view a 253-page description of the bill’s provisions, please click here:

https://www.finance.senate.gov/imo/media/doc/11.9.17%20Chairman’s%20Mark.pdf 

For more information, please contact Bryan Brendle, Director of Legislative Affairs, at bbrendle@horsecouncil.org.