The Tax Cuts and Jobs Act (TCJA)
Feb 20, 2018
The Tax Cuts and Jobs Act (TCJA) passed the House on December 19, 2017 by a vote of 227 to 203 (with no Democratic votes and with 13 Republican members voting “no”). The Senate Parliamentarian ruled that three provisions in the version passed by the House were “extraneous” to reconciliation (one of which was removing the short title) and were removed in the bill that passed the Senate early December 20, by a straight party-line vote of 51 to 48. This forced a House revote of the version passed by the Senate later that same morning. The President signed the TCJA on December 22, 2017.
Most of the provisions are effective for taxable years beginning after 2017. Most of the provisions regarding individual tax changes (including estate tax provisions) are effective for taxable years from 2018 to 2025. Those provisions sunset after that date in order to satisfy the “Byrd Rule” so that the TCJA could be passed with just a majority vote in the Senate under the reconciliation process. Most of the business and corporate changes are effective permanently.
Members of the Firm have been following the legislative process and trying to understand the new law. There are four things we can say about the TCJA, without question:
- The TCJA is massive. There were a myriad of changes made in the Internal Revenue Code (the “Code”). Those changes deal with everything from miscellaneous itemized deductions to seating at college athletic events. The enclosed Manuscript contains 54 numbered paragraphs. These paragraphs cover some, but not all, of the changes brought about by TCJA.
- The TCJA has not simplified anything. It has added more sections to the Code and made tax planning more complicated.
- On the whole, the TCJA will help individuals. There are certain provisions of the TCJA which will hurt many individual taxpayers. They include the limit on mortgage interest deductions, as well as the limit on the deduction for state and local taxes. However, the individual tax rates have been decreased and the brackets broadened. The much discussed new deduction for pass through income will also help many individuals. Until you “work through the numbers”, it is impossible to speculate how the TCJA will impact any particular individual taxpayer. However, many lower income earners will receive an income tax break.
- The TCJA will help most businesses and corporations. The flat 21% corporate rate will be a real boon. The alternative minimum tax has been repealed for corporations. Also, there are provisions for enhanced accelerated depreciation and enhanced qualification for cash basis accounting.
To help inform you of some of the major provisions of the TCJA, we are providing herein a Manuscript prepared by the Firm. Many of the paragraphs may not be applicable to you. No doubt some of the items will be of interest or concern. Hopefully, the Manuscript will help you identify items which you need to address further with your accountant. Obviously, we will be glad to assist you in any way we can.
Please click on the link below for an overview of the provisions: