The Senate Finance Committee recently approved its version of the Tax Cuts and Jobs Act. The bill is now on it’s way to the full Senate for debate and a vote. The Finance committee spent over a week amending the bill, and the final version includes some changes beyond those included in the chairmanâ€™s mark released early in November
The Senate is expected to take up the bill after it has fully returned from its Thanksgiving recess.
Here are notable changes in the final version approved by the Committee:
Changes For Individuals
- Free File Program: The Senate bill would codify and make permanent the IRSâ€™s Free File program.
- Carried Interests: The Senate bill would impose a three-year holding period requirement before certain partnership interests transferred in connection with the performance of services would qualify for long-term capital gain treatment.
- Whistleblower Wwards: The Senate bill would provide an above-the-line deduction for attorneysâ€™ fees and court costs paid in connection with any action involving claims under a state false claims act, the SEC whistleblower program, and the Commodity Futures Trading Commission whistleblower program.
The bill would also modify Sec. 7623 to expand the definition of collected proceeds eligible for whistleblower awards.
Changes For Businesses
- Excessive Compensation: Sec. 162(m) limits the deductibility of compensation paid to certain covered employees of publicly traded corporations.The bill includes a transition rule, so that the proposed changes would not apply to any remuneration under a written binding contract that was in effect on Nov. 2, 2017, and that was not later modified in any material respect.
- Employer-Provided Meals: The Senate bill would disallow an employerâ€™s deduction for expenses associated with meals provided for the convenience of the employer on the employerâ€™s business premises, or provided on or near the employerâ€™s business premises through an employer-operated facility that meets certain requirements. However, the final version of the bill delays this change until tax years starting after 2025.
- Dividends Received: The Senate bill would also reduce the current 70% dividends-received deduction to 50% and the 80% dividends-received deduction to 65%.
- Dividends Paid: Under the Senate bill, corporations that pay dividends would be required to report the total amount of dividends paid during the tax year and the first 2Â½ months of the succeeding year, effective for tax years beginning after 2018. Corporations would not be allowed to deduct dividends paid when computing taxable income.
- Net Operating Losses: The Senate bill would limit the net operating loss deduction to 80% of taxable income (as determined without regard to the deduction). Net operating losses would be allowed to be carried forward indefinitely, but not carried back (except for certain farming losses). This change would apply to tax years beginning after 2022.
- Amortization of Research and Experimental Expenditures: The Senate bill would require specified research or experimental expenditures to be capitalized and amortized over a five-year period, effective for amounts paid or incurred in tax years beginning after 2025. Specified research and experimental expenditures attributable to research conducted outside the United States would be amortized over a 15-year period. The bill would also institute a new reporting requirement, for tax years beginning after 2024.
- Orphan Drug Credit: The Senate bill would reduce the current Sec. 45C 50% orphan drug credit to 27.5% and would institute reporting requirements similar to the required for the Sec. 48C qualifying advanced energy project credit and the Sec. 48D qualifying therapeutic discovery project credit.