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September 11, 2018

Tax Reform 2.0 House Vote Expected This Month, Ryan Says (article)

Man holds building blocks that spell reform.

The House is expected to vote on a "Tax Reform 2.0" measure this month, House Speaker Paul Ryan, R-Wis., told reporters on September 5. Additionally, legislative language for the Tax Reform 2.0 package is expected to be unveiled "early next week," a House Ways and Means Committee spokesperson told Wolters Kluwer on September 5.

Tax Reform 2.0 House Floor Vote

The House Ways and Means Committee will markup the Tax Reform 2.0 package during the week of September 10, Chairman Kevin Brady, R-Tex., told reporters earlier this week. Further, the package will be "ready for leadership to bring to the floor this month," he added.

Brady unveiled a framework for the Tax Reform 2.0 package in July, which is expected to consist of three separate bills. Making permanent the individual and small business tax cuts, enacted temporarily through 2025 under the Tax Cuts and Jobs Act (TCJA), will be the "centerpiece," of the next tax reform package, according to Brady.

Speculation has been circulating on Capitol Hill about whether Republicans will move forward with a full House vote on Tax Reform 2.0 prior to midterm elections in November. However, Ryan, in a September 5 press briefing, seemed to attempt to lay those concerns to rest. When asked whether leadership is still planning a full House vote on Tax Reform 2.0 in September, Ryan replied, "Yes, we are."

GOP SALT Cap Woes

However, House GOP leadership may be unable to garner full Party unity on the next tax reform measure. Several Republican lawmakers from high-tax states voted against last year’s tax reform because of its state and local tax (SALT) deduction cap provision. The TCJA put in place a $10,000 cap ($5,000 married filing separately) on the SALT deduction. The Tax Reform 2.0 package is expected to make permanent the SALT cap.

The possibility of Republican no-votes are fueling "talks" on Capitol Hill that a full House vote on the 2.0 measure could be delayed until after midterm elections in November. However, Ryan seemed to have rebutted those claims during the September 5 leadership press conference. The SALT cap has remained one of the most controversial provisions of the TCJA.

IRS Clarifies SALT Deduction Cap Guidance

Meanwhile, the IRS on September 5 issued clarifications on the SALT deduction cap and related business expenses. "Business taxpayers who make business-related payments to charities or government entities for which the taxpayers receive state or local tax credits can generally deduct the payments as business expenses," the IRS said.

The IRS released proposed regulations last month that aim to curb certain SALT deduction cap "workarounds." The controversial proposed rules would prevent taxpayers, effective August 27, 2018, from using certain charitable contributions to work around the new cap on SALT deductions.

Senate: Tax Reform 2.0 Faces Uphill Battle

"It's full steam ahead on 2.0 because the main question here is, will we make tax cuts for families and small businesses permanent as we did for corporations? The answer is yes," Brady said. However, the measure as a whole is not expected on Capitol Hill to receive much, if any, Democratic support. Not one Democrat voted for the TCJA, and it is considered unlikely Democrats will vote to make permanent the TCJA’s provisions.

Little to no Democratic support will provide for an uphill battle in the Senate where at least nine Democratic votes would be needed for approval. Reportedly, Sen. John Thune, R-S.D., has predicted that a year-end tax bill including Democratic priorities could serve as a bipartisan legislative vehicle for Tax Reform 2.0.

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