The Republican tax bill (H.R. 1) is likely to be signed after January 1 to help address concerns about budgetary and technical issues.
A top White House aide said December 20 that signing the bill, which was cleared by the House earlier in the day for President Trump’s signature, would trigger mandatory spending cuts as soon as 2018. By waiting to sign the bill until after the start of the new year, those cuts under statutory “pay as you go” rules won’t go into effect until 2019, giving Congress more time to reach an agreement to waive the budget rules.
National Economic Council Director Gary Cohn, during a public interview in Washington hosted by Axios, said Republicans were hoping to waive the pay-go rules as part of the short-term government funding agreement needed before December 22. That bill will need Democratic votes, however, and Democratic leaders have said they have no intention of helping Republicans pass the bill if the waiver is included.
Another reason to delay the bill signing would be to avoid year-end securities and tax accounting problems for corporations, according to some tax practitioners.
Michael D. Moore of KPMG LLP said that if the bill is signed after the end of 2017, the date of enactment for financial accounting purposes will be in 2018. That means that companies, particularly those on a calendar year, will be spared considerable effort in the computations of their earnings releases and fourth-quarter financial statements, he said.
Because the impact of tax reform would still need to be included on their Forms 10-K and financial statements for the next quarter, “it is a limited reprieve,” Moore said, “but it does make life a little bit easier.”
The announcement of a likely delay came after the Senate voted 51 to 48 just after midnight on December 20 to pass the legislation. Before that vote, the Senate parliamentarian ruled that three provisions — including the bill’s short title, the Tax Cuts and Jobs Act — violated Senate rules that every provision in a bill being considered under budget reconciliation procedures have a fiscal impact.
The House later voted 224 to 201 to pass the revised version of the bill and send it to the White House.
Modifications to 529 Language
One of the other two provisions removed from the bill would have modified allowable expenses for section 529 savings accounts to include those for home-schooling and elementary-age children. The bill still provides for up to $10,000 a year to be distributed from the accounts for pre-college expenses.
The Senate also removed a portion of another provision that defined colleges subject to a 1.4 percent excise tax on net investment income. The definition still includes institutions with at least 500 students and assets worth at least $500,000 per student, but it removed language that required those students to be paying tuition. The tuition-paying student language had been inserted to protect Berea College, a tuition-free Christian college in Kentucky, from being affected by the tax.
Other stakeholders outside of Congress expect more action to come after H.R. 1 is signed into law.
“With a bill of this size and complexity, there will be unintended consequences that will need to be worked out on both the regulatory and policy levels,” Jonathan Traub of Deloitte Tax LLP said in a statement. “The Treasury Department will be very busy in 2018 and beyond, helping provide certainty to taxpayers, soliciting comments, and drafting guidance. Companies will have to carefully consider the impact of the law in their own context.”
The New Democrat Coalition dismissed the Republican tax bill. “This bill very disproportionately benefits the wealthiest Americans and large corporations as opposed to the middle class, and the modest benefits that some, not all, Americans may see will mostly phase out in coming years leading to taxes going up for many Americans,” the coalition said in a statement. House Ways and Means Committee members Suzan K. DelBene of Washington, Ron Kind of Wisconsin, and Terri A. Sewell of Alabama are members of the coalition.
But Ways and Means Chair Kevin Brady, R-Texas, celebrated passage, saying in a statement, “For the first time in three decades, Americans will finally have a tax code that delivers more jobs, fairer taxes, and bigger paychecks to people and families across our nation.”
David van den Berg, Jonathan Curry, Stephen K. Cooper, and Nathan J. Richman contributed to this article.
Follow Dylan Moroses (@DMoroses3244) on Twitter for real-time updates.