Tax Alert: House Republicans Release First Draft of Tax Bill

On the afternoon of May 12, Republicans on the House Ways and Means Committee unveiled the first draft of their draft tax legislation. The 389-page text includes a variety of much anticipated proposals and will serve as the foundational piece for tax policy debate and negotiations as the reconciliation process accelerates.

The key provisions in this sweeping rollout include:

• Increasing the 199A qualified business income (“QBI”) deduction to 23%;
• Increasing the estate tax exemption to $15 million;
• Increasing the SALT cap to $30,000;
• Returning to 100% bonus depreciation;
• Returning to immediate expensing for domestic research and development (“R&D”) costs; and
• Increasing the “small taxpayer” threshold for manufacturers to $80 million in gross receipts.

While this first full draft includes a broad set of proposals, it notably omits several anticipated or rumored items, including:

• The corporate tax rate;
• A domestic manufacturing tax rate;
• The capital gains tax rate;
• Carried interest reform; and
• Any increased tax rates for higher income individuals.

Note, the House Ways and Means Committee held a markup on Tuesday, May 13, and various proposals and revisions to the draft are expected. However, the House Republican tax writers may have significant hurdles to surpass before a more finalized version of their package is released.

As we anticipate any changes brought by the markup, consider the following deeper dive into many of the principal proposals, summarized by tax type.

Aside from the key provisions above, the draft language also includes:

• A termination of the miscellaneous itemized deduction;
• A termination of the overall limitation on itemized deductions;
• A termination of the qualified bicycle commuting reimbursement exclusion;
• An extension of the limitation on the exclusion and deduction for moving expenses;
• An extension of the limitation on wagering losses;
• An extension and enhancement of the increased limitation on Contributions to ABLE accounts;
• An extension of the retirement savings contribution credit allowed for ABLE contributions;
• An extension of rollovers from qualified tuition programs to ABLE accounts;
• An extension of preferable treatment to certain individuals performing services in the Sinai Peninsula made permanent and enhanced to include additional areas; and
• An extension of exclusion for student loans discharged on account of death or disability.

This first draft of the forthcoming tax bill signifies House Republican tax writers’ effort to preserve lower rates and other favorable provisions for individuals and businesses. However, this draft also includes many repeals or changes of hot-button provisions, and we are only at the first stage of what is expected to be a long and challenging process of finalizing a tax package that fits within the larger reconciliation bill.  

Please note that the summarized proposals above do not include a significant portion of the draft bill, and the information provided herein is current as of May 13. The scope and timing of new proposals, or revisions to existing proposals, remains uncertain. We will continue to closely monitor tax bill-related developments and provide updates as new details emerge.  If you have any questions about how forthcoming tax legislation may impact you or your business, please consult with your Elliott Davis tax adviser.

The information provided in this communication is of a general nature and should not be considered professional advice. You should not act upon the information provided without obtaining specific professional advice. The information above is subject to change.