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We Have a House Tax Reform Bill, but We Still Have Questions

Nov 06, 2017
From the Tax Governance Institute

We Have a Bill, but We Still Have Questions

By John Gimigliano, Principal in Charge, Federal Legislative & Regulatory Services, Washington National Tax, KPMG LLP

Read more Tracking Tax Reform blog posts

What's on our minds this week:

With last week’s release of the House tax reform bill (H.R. 1), the big push now begins. GOP lawmakers are aware they must move quickly if they want to achieve passage, especially given that opponents of the proposal are already mobilizing.

It’s important to remember that, in reviewing the bill, we are chasing a moving target. The bill we saw last Thursday is going to look different, maybe significantly different, by the time it gets through Ways and Means Committee markup this Thursday.

But even with this caveat, there are still some key questions that need to be answered as we gauge the viability of the House bill:

  1. The Year-Eleven Problem:  As we know, this bill will need to meet several revenue requirements to satisfy the budgetary rules of reconciliation, one being the requirement that the bill not add to the deficit after the first decade. Right now, it’s not clear that the bill can satisfy the long-term revenue requirement as currently constructed. That leaves the bill exposed to Democratic opposition based on procedure and, perhaps more important, significant rewrite by the Senate when the bill comes to that chamber.
  2. The Upper Chamber’s View: Ultimately, we’re not yet quite sure how strongly the Senate is prepared to endorse the House approach. If the Senate chooses to go off in a different direction, certainly its prerogative, odds of finishing legislation this year could go to near zero.
  3. The Private Sector’s View: Business trade associations serve as a proxy for the private sector in negotiating and evaluating legislation, and their endorsement or disapproval can significantly influence a bill’s success.  While some associations have already expressed their opposition or support, most have withheld judgment so far—perhaps waiting to see how this week’s markup plays out. Eventually they will take a side, for or against, and their positions will likely be a factor in the final bill.
  4. The Shape of the Final Bill: The House reform bill’s 425 pages of legislative text is still only the first effort at tax reform legislation. We are still likely to see a “modified mark” at the beginning of this week’s Ways and Means markup. From there, amendments are expected to be accepted throughout the full House markup itself. So “known unknown” changes are coming, and we can still only guess as to what those will be and how they will affect the prospects for the bill.

All that said, we are now off the tax reform entrance ramp and on the road. These issues are all important ones for the long-term viability of the House tax reform bill and for any Senate bill that follows. There are also many other challenges lurking—challenges that will only become apparent as Congress moves through the process of proposing, debating and enacting tax reform.  For now, the best route is for us all to do our best to understand what has been proposed, to keep apace of changes as they occur, and most importantly, to enjoy the ride. 

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This article represents the views of the author only, and does not necessarily represent the views or professional advice of KPMG LLP.

The information contained herein is of a general nature and based on authorities that are subject to change. Applicability of the information to specific situations should be determined through consultation with your tax adviser.

____________________

This article represents the views of the author only, and does not necessarily represent the views or professional advice of KPMG LLP.

The information contained herein is of a general nature and based on authorities that are subject to change. Applicability of the information to specific situations should be determined through consultation with your tax adviser.