The Senate voted early today in favor of the Tax Cuts and Jobs Act, H.R. 1, which the House of Representatives had approved Tuesday. However, the version of the bill passed by the Senate differs slightly from the House bill, so the House will have to re-vote to pass the bill as amended.
The Senate vote on the bill was 51–48, split along party lines, with Sen. John McCain, R-Ariz., not voting.
The changes in the Senate’s version of the bill were made to conform the bill to the Senate’s Byrd rule, allowing it to be passed with only 51 votes. The Senate’s changes involve the removal of an expansion of the Sec. 529 accounts that would have allowed distributions to be used for home-schooling expenses (Section 11032 of the bill) and the removal of an exception to the endowment excise tax for colleges with fewer than 500 tuition-paying students (Section 13701 of the bill). A vote to suspend the Byrd rule and keep those provisions in the bill failed on a vote of 51–48; it needed 60 votes to pass.
The final vote on the bill in the Senate, which came soon after midnight, was disrupted several times by shouting protestors in the Senate gallery.
The House is expected to re-vote on the bill this morning, when it is expected to pass, after which it will go to President Donald Trump for his signature.
The House initially voted on Tuesday afternoon to pass H.R. 1 by a vote of 227–203, with 227 Republicans voting yea and 191 Democrats and 12 Republicans voting no. The version of the bill passed by the House was the result of negotiations in a Senate and House conference committee, which reconciled the many differences between the legislation passed by the House on Nov. 16 and the bill passed by the Senate on the morning of Dec. 2.
Among the many changes to current tax law is permanently lowering the corporate income tax rate from 35% to 21%, effective for 2018. The Senate version lowered the rate to 20%, but delayed its effective date for one year until 2019 whereas the House bill originally had a 20% rate that would have been effective in 2018.
The bill also lowers the individual income tax rates through 2025. The new top rate will be 37%, lowered from 39.6%. The law keeps the same number of brackets as under current law. It also keeps the individual alternative minimum tax (AMT), with a higher exemption than under current law, but eliminates the corporate AMT.
The Joint Committee on Taxation’s report on the estimated budget effects of the bill predicts that it will result in a net federal revenue loss of $1.456 trillion from 2018 through 2027. Under the Senate’s budget reconciliation rules, the Senate could pass the bill with only 51 votes as long as it does not increase the deficit by more than $1.5 trillion over that period.
Cordasco & Company PC is a boutique CPA firm specializing in federal and state taxation. If you have any questions regarding this bill and its ultimate passage please do not hesitate to contact us.