On November 16, the House of Representatives passed their tax reform proposal, the “Tax Cuts and Jobs Act” (H.R. 1), bringing Congress one step closer to reforming the U.S. tax code. The Senate plan also continues to move forward, securing its passage in the Senate Finance Committee on the same day.
The House and Senate bills handle business taxes differently. Both plans present the same decrease in the maximum corporate tax rate from 35 to 20 percent, but the Senate proposes the change begin in 2019, one year later than the House’s proposal of 2018. Furthermore, the House bill would tax certain “business income” from pass-through entities at 25 percent, while the Senate instead proposes a 17.4 percent deduction. Both plans feature provisions designed to prevent pass-through compensation from being taxed at rates lower than the owners’ individual rates, subject to certain thresholds.
At MFA, we continue to monitor these reform developments closely, and will share our insights as appropriate to assist you in determining the potential and eventual impacts on both your personal and business tax obligations. Our side-by-side comparison below highlights key provisions from the House and Senate proposals with regard to business tax reforms. For a comparison of individual tax proposals, click here.
If you have any questions regarding these impending tax reform changes, please contact us.