Conference Committee Tax Bill Released: Today, the House and Senate Conference Committee released the Conference Agreement, including statutory language for the GOP’s tax reform bill and a Joint Explanatory Statement. The Conference Agreement generally follows the Senate amendment of the House bill with a number of changes.
Some of the key elements of the Conference Agreement are as follows:
- Establishes corporate tax rate of 21% effective after December 31, 2017
- Establishes individual rate brackets similar to the Senate bill with certain differences, including a lower highest individual tax bracket of 37% for income of joint filers in excess of $600,000
- Limits the deduction for mortgage interest paid to interest on indebtedness of $750,000
- Eliminates the alternative minimum tax for corporations and increases the alternative minimum tax exemption for individuals
- Does not repeal the estate tax, but doubles the estate tax exemption until 2026 when it returns to the current level
- Expands the child tax credit to a maximum amount of $2,000 and provides for a refundable portion up to $1,400
- Retains the medical expense deduction and lowers the threshold for the deduction to 7.5% of adjusted gross income for 2018 and 2019 and returns the threshold to 10% of adjusted gross income starting in 2020
- Limits the state and local tax deduction to $10,000 of income, sales, or property taxes paid by individuals
- Adopts a territorial system of taxation for US corporations
- Provides for mandatory repatriation of foreign earnings and profits and taxes such amounts at a rate of 15.5% for cash and 8% for all other assets
- Provides a deduction for certain foreign-derived intangible income and imposes a tax on global intangible low-taxed income (GILTI), similar to the Senate version with certain changes
- Provides a base erosion minimum tax, also referred to as a base erosion anti-abuse tax (BEAT), similar to the Senate version with certain changes
- The conference agreement follows the Senate version and does not contain modifications to the energy credit provisions
Proposed Partnership Audit Regulations Provide 'Push Out' Election Rules: Today, the IRS released proposed regulations implementing the new centralized partnership audit regime enacted as part of the Bipartisan Budget Act of 2015. Specifically, the proposed regulations provide rules addressing how pass-through partners should take into account adjustments under the alternative to payment of the imputed underpayment described in section 6226 (the so-called “push-out” election). Under the proposed rules, each pass-through partner in an ownership chain is given a choice to either (i) push the adjustments to its partners, shareholders, or beneficiaries, or (ii) pay tax with respect to the adjustments. The proposed regulations provide similar rules for pass-through partners to take into account adjustments requested in an administrative adjustment request under section 6227, if the partnership elects to have its partners take into account the adjustments (or if the partnership is required to have its partners take into account the adjustments). The proposed regulations also make corresponding changes to portions of the previously proposed regulations released earlier this year and provide rules regarding assessment and collection, penalties and interest, and period of limitations under the new centralized partnership audit regime.
EU Court Rejects US Bid to Intervene in Apple Case: Today, the European Union’s General Court issued an order rejecting a bid by the US government to intervene in the appeal by Apple of the European Commission’s order to pay 13 billion euros of back taxes. The General Court ruled that the United States failed to establish the existence of a direct interest in the result of the case, because it did not prove that repatriation of profits from Apple’s off-shore subsidiaries would occur.