Summary of Key Amendments to Final Senate Tax Reform Bill

Late in the evening on December 1, the Senate passed their tax bill on a final vote of 51 to 49. Each Republican other than Senator Bob Corker (Tennessee) voted in favor of the bill, and each Democrat voted against the bill. The next step in the legislative process will be to reconcile this bill with the version passed by the House on November 16, which differs from the Senate bill in a number of significant ways. Both chambers are expected to vote this week to go to a conference committee to work out a final bill. December 6, 2017
Now that the Senate bill is finalized, we wanted to note several key amendments made to the Senate bill in the final days and hours before passage, including:
  • Like the House bill, the final Senate bill would allow an itemized deduction for up to $10,000 of state and local real property taxes. The earlier Senate draft bill would have repealed the deduction for state and local taxes completely.
  • The final Senate bill would retain the individual AMT, although with increased exemption amounts, and the corporate AMT. The increased threshold for the individual AMT would phase out gradually, returning to the present-law exemption levels after the 2025 taxable year. The Senate draft bill would have repealed both the individual and corporate AMT, as would the House bill.
  • The final Senate bill would allow for temporary 100% expensing of capital expenditures through 2022, with the expensing percentage decreasing by 20% every year thereafter. The draft Senate bill would only have allowed 100% expensing through 2022, without the subsequent phasedown.
  • The final Senate bill would increase the deduction for passthrough “qualified business income” from 17.4% in the Senate draft bill to 23% (reducing the effective tax rate for passthrough income to 29.6%, subject to the wage limitation).
  • The final Senate bill would increase the tax rates for the deemed repatriation of untaxed foreign earnings to 14.5% (on cash and cash equivalents) and 7.5% (on all other earnings). The “Chairman’s Mark” originally proposed rates of 10% and 5%, respectively. These new rates are the same as those in the House bill.
  • The final Senate bill would phase in the proposed rule to limit interest deductibility for disproportionate allocations of debt to U.S. members of a multi-national group, applying an initial “debt-to-equity differential percentage” of 130% for taxable years beginning in 2018, which would then decrease by 5% points annually, ending at 110% for taxable years beginning in 2022 or later. The draft Senate bill would have instituted the 110% figure beginning in 2018.
  • The final Senate bill would increase the base erosion minimum tax (a minimum tax calculated on a base equal to the taxpayer’s income determined without tax deductions or other tax benefits arising from certain “base erosion” payments) from 10% to 11% for certain financial institutions.
  • In the final Senate bill, the 1.4% excise tax on the net investment income of certain large private college and university endowments would only apply to colleges and universities with an asset-per-student threshold of $500,000 (rather than $250,000 in the draft Senate bill and House bill), and schools that do not participate in federal financial aid programs would be exempt from paying the tax.