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House Releases Tax Reform Details

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The following is from the American Horse Council:

House Releases Tax Reform Legislation, Moves Forward with Small Business, Estate Tax Relief

The House Ways and Means Committee has shared highlights and text on historic tax reform legislation, the Tax Cuts and Jobs Act of 2017.  While highlights from the bill are outlined below, AHC is currently reviewing the fine print of the 429-page legislation, received from the tax committee shortly after 12:00 PM ET.  Today’s release initiates a long over-due effort to streamline the nation’s 70,000 page tax code.  In a move that is consistent with advocacy from the equine industry and its allies, the House bill will repeal the estate tax after six years, and reduce rates for small business, or so-called “pass through” entities.  Please see the below highlights, focusing on issues that have the most significant impact on the equine industry:

Business Provisions

  • Small Business: The bill sets a maximum tax rate of 25 percent on small business, or “pass through” entities.  Under current law, small businesses can pay federal taxes at rates as high as 39.6 percent.
  • Corporate Tax Rate: The bill lowers the corporate rate to 20 percent, down from the current 35 percent corporate tax rate.
  • Expensing: The plan will “allow business to immediately write off the full cost of new equipment.”
  • Business Interest: The plan also states that small business will be able to deduct interest on loans that allow job creators to “hire workers and increase paychecks.”

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Individual Provisions

  • Estate Tax: The House bill will repeal the estate tax after six years, and double the current exemption on estates valued at $5.49 million.  This is a positive development for family-owned farms and businesses.
  • Charitable Giving: The plan “continues the deduction for charitable contributions.”
  • Mortgage Interest: The bill preserves the deduction for existing mortgage interest, and establishes a $500,000 cap on interest from new home purchases
  • Streamlined Tax Brackets: The plan consolidates the number of individual brackets from seven to four.  Under the House bill, the IRS will create brackets at rates of 12 percent, 25 percent, 35 percent and preserve the 39.6 percent on higher income earners.
  • Retirement Savings: The plan “retains retirement plan options” including 401(k)s and Individual Retirement Accounts.
  • Alternative Minimum Tax (AMT) – The plan eliminates the unpopular AMT, which doubles the amount of time taxpayers must spend to calculate their tax liability within any given year.
  • In a compromise that has bogged down negotiations, the House plan will retain the deduction for state and local property taxes at amounts up to $10,000.

Path Forward

According to congressional sources, the Ways and Means Committee will mark up the legislation for four days, beginning the week of Monday, November 6.   The bill will go to the House floor for a vote before Thanksgiving, which falls on Thursday, November 23.  According to Senate Majority Whip John Cornyn (R-TX), the Senate will take up tax reform legislation after Thanksgiving.

To learn more about up-to-date activity related to tax reform, AHC is conducting a webinar on the issue featuring congressional and industry perspectives on Monday, November 13 at 3:00 PM ET.  To view a copy of a two-page summary of the bill’s highlights, please click here:  Tax Policy Highlights.  To review a copy of the bill, please click here: now available online.

For more information, please contact Bryan Brendle, Director of Legislative Affairs, at bbrendle@horsecouncil.org.

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GOP, Equine Industry Canter Toward Tax Reform

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The following is from the American Horse Council:

GOP, Equine Industry Canter Toward Tax Reform

The equine industry and its partners in the agriculture and small business sectors continue to engage Congress and the Administration on key elements of the GOP’s “unified framework for tax reform,” released on September 27.  While the framework outlines broad themes for reform, AHC and its partners are focusing efforts on repeal of the estate tax, also known as the “death tax,” as a pillar for a 21st century tax code.  Below are summaries of tactics used to move the legislative process forward, and highlights from conversations with congressional and administration officials.

Congress Hears from Small Business, Agriculture
On September 12 – two weeks prior to release of the GOP framework – AHC joined nearly 150 small business groups in a coalition letter to congressional leadership urging full repeal of the estate tax.  When the government imposes estate taxes on an equine operation, surviving family partners may be forced to sell equipment and other assets to save the family business.  Signatories represent a cross-section of American business, including builders and contractors, grocers, truckers and cattlemen.  Advocates emphasized the fact that repeal of the estate tax would not only cost the treasury relatively little revenue in the short term, but ultimately increase tax revenues by $145 billion over a ten year period.  Underscoring minimal, short-term impacts on the federal budget is crucial to moving tax reform through the budget reconciliation process, which requires Congress to demonstrate that the new and improved tax code will ultimately achieve deficit reduction.

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“Budget Reconciliation,” a Procedural High Jump
Before moving forward with a tax reform bill, Congress must first pass a federal budget for FY2018 which includes instructions for tax legislation.  The process, known as “budget reconciliation,” allows the Senate to pass a bill with 51 votes, therefore bypassing the 60 vote threshold necessary to avoid the filibuster that applies to most legislation.   This parliamentary tactic is crucial for tax reform legislation, where Republicans must receive the support of the vast majority of their Senate members to pass a bill.  On October 4, AHC joined more than 40 agriculture groups – including the American Farm Bureau Federation and American Veterinary Medical Association – in a letter to Congress expressing support for passage of a budget resolution with reconciliation instructions for tax reform.  On October 5, the House of Representatives passed its $1.132 trillion budget, which it claims will achieve $6.5 trillion in deficit reduction over ten years.

Attention now turns to the Senate, which is expected to consider a $1.5 trillion budget during the next four weeks.  To make sure lawmakers remain focused on the tax reform process, please call your senators and tell them “to pass a budget today that paves the way for tax reform.”  You can contact your senators’ Washington offices by calling the Capitol switchboard at 202-225-3121.

Status of the Debate
AHC and its partners have met this week with congressional leadership offices and White House staff, who remain optimistic that substantial progress toward tax reform will take place during the weeks ahead.  Policy makers have also made it clear that to push tax reform across the finish line, the legislation must include major provisions that bolster the middle class.  To that end, officials have underscored the importance of mortgage interest and charitable giving deductibility, the prospect of lower rates through consolidated deductions, and the overall simplicity of a streamlined code.  The House Ways and Means Committee has created a template “postcard” to illustrate the taxpayer-friendly approach favored by proponents of reform.  To view a copy of the proposed, streamlined tax form, click on the following link:  https://waysandmeans.house.gov/tax-form-simple-fit-postcard/.

Horsemen and horsewomen can deliver a timely message by contacting their elected officials and expressing the need to modernize the code in general, and specifically to repeal the outdated death tax .  Other issues that will emerge as the debate moves forward will include deductibility of business interest, expensing of depreciable assets, and establishing a top rate of 25% for sole proprietorships, Subchapter S-Corporations, and other small business entities.  If you would like more information related to tax reform, please contact Bryan Brendle at bbrendle@horsecouncil.org.

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