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Brady Says to Expect Passthrough Changes, Technical Corrections

Posted on December 12, 2017 by Stephen K. Cooper

The tax reform bill’s conference committee could entertain new policy ideas in order to resolve differences between the House and Senate versions of the legislation, House Ways and Means Committee Chair Kevin Brady, R-Texas, told reporters December 11.

One area under discussion for changes to the Tax Cut and Jobs Act is the tax treatment of passthrough business income, Brady said, adding that he hopes the conference committee’s product will surpass what the House and Senate have already produced.   

The House bill provides a maximum 25 percent rate for qualifying passthrough business income, while the Senate bill uses a deduction for 23 percent of qualifying business income to arrive at a lower, variable individual rate. Some tax observers have warned that the Republican tax bill will generate problems for low- and middle-income taxpayers with passthrough income.

“We simply haven’t closed out the whole bill,” Brady said regarding discussions of whether to set the corporate tax rate at 20 percent. He added that individual pieces of the tax bill are changing as negotiators make decisions. “Nothing’s final until everything’s final,” he said.

GOP lawmakers hope to pass tax reform legislation by the end of 2017, but first they must work out differences between the two chambers’ bills while also negotiating with Democrats on spending legislation to keep the government operating past December 22.  

With such a shortened timeline in place, the lawmakers will be looking to fix unintended problems in the tax bill in 2018. Brady said he is certain there will be a technical corrections bill “given the magnitude” of tax reform.

“I think tax reform has a lot of technical issues in it. I would anticipate next year as we get feedback from changes, [you’ll see technical] corrections issues arise in a normal tax year, just out of the regulatory process like from any White House,” Brady said.

Despite Congress’s inability to pass technical corrections for the Affordable Care Act or the 2014 budget law, Brady said he was hopeful Democrats would help clear up any tax issues that arise early next year.

But Brady downplayed the expectation of some Senate lawmakers that another tax extender bill would occur later this year or next. Some Senate Republicans said last month that they are considering extending a group of expired energy tax provisions in a year-end extenders bill rather than addressing them through tax reform.

Five conservative organizations reiterated their stance on the importance of a 20 percent corporate tax rate during a December 11 media call. However, when asked if they would oppose the final legislative package if the corporate rate were higher than that, none committed to doing that. National Taxpayers Union President Pete Sepp said during the call that groups like his don’t want to be faced with that decision, adding that “this whole effort is designed to avoid such a situation.”

Christine Harbin of Americans for Prosperity said her organization will “consider these packages holistically and make a decision at that time.”

David van den Berg contributed to this article.

Follow Stephen K. Cooper (ScoopOnTaxes) on Twitter for real-time updates.