House approves several tax bills

The House has approved a tax bills that would make permanent the Tax Cuts and Jobs Act (TCJA) (P.L. 115-97) individual and small business tax cuts enacted last December. The bill is part of Republican’s three-bill “Tax Reform 2.0″ package, two of which cleared the House on September 27. The following three House-approved bills make up the 2.0 package, which now heads to the Senate. At this time, the Senate is neither expected to vote on the Tax Reform package before midterm elections in November nor approve the Tax Reform 2.0 package in its entirety.

  • Protecting Family and Small Business Tax Cuts Bill of 2018 (HR 6760);
  • Family Savings Bill of 2018 (HR 6757); and
  • American Innovation Bill of 2018 (HR 6756).

Individual, small business tax cuts

HR 6760 would make permanent the individual and small business tax cuts enacted temporarily through 2025 under the TCJA. These TCJA provisions were made temporary to comply with certain Senate budget rules applicable to the reconciliation process Republicans used to pass tax reform with only a simply GOP majority. Notably, TCJA provisions that would be made permanent under HR 6760 include the lowered individual income tax rates and the 20 percent deduction of income for certain passthrough entities. Additionally, the bill would extend the currently temporary $10,000 annual cap on the state and local tax (SALT) deduction.

Savings accounts

HR 6757 proposes an expansion of certain savings incentives. Among other things, the bill would eliminate the age limit on individual retirement account (IRA) contributions. Additionally, it would create a Universal Savings Account (USA), to which individuals could contribute up to $2,500 annually. Withdrawals from the USA accounts would be tax-free. Tax-advantaged funds in the USA could be used for purposes other than retirement. Also, the bill would expand Code Sec. 529 Plans to permit use for expenses related to trade schools, home schooling, and up to $10,000 in total distributions for repayment of student loans.

Business innovation

HR 6756 would improve the tax treatment of certain start-up business expenses. The bill would allow new businesses to write off up to $20,000 of start-up and organization expenditures. Additionally, HR 6756 would allow for a change in start-up ownership without triggering limits on certain tax benefits.

White House

The Trump administration announced its support of the Tax Reform 2.0 package in a September 26 Statement of Administration Policy. The White House praised HR 6760 for “preventing a tax increase on millions of middle-income families and small businesses after 2025.” Additionally, the Trump administration praised HR 6757, saying it would” assist start-up companies and entrepreneurs by allowing them to write off more costs associated with starting their new business and by allowing them to raise capital and expand without losing their previously accrued tax benefits.”

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