PreliminaryComparisonofH.R.1,the“TaxCutandJobsAct”asapprovedbytheHouseofRepresentativesandasapprovedbytheSenate

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HOUSE SENATEBUSINESS

Corporaterate Permanentlylowersratefrom35percentto20percent,beginningin2018.Thepartialdividendsreceiveddeductionsareeachproportionallyreducedtoreflectthereductioninthecorporatetaxrate.

SimilartoHousebill,butpermanentlylowersratefrom35percentto20percent,beginningin2019.Thepartialdividendsreceiveddeductionsareeachproportionallyreducedtoreflectthereductioninthecorporatetaxrate,beginningin2019.

CorporateAMT RepealscorporateAlternativeMinimumTax(AMT),effectivefortaxyearsbeginningafter2017.AMTcreditcarryforwardstoberefundable(i.e.,totheextentthecreditsexceedregulartaxfortheyear),upto50percentoftheremainingcreditsintaxyearsbeginningin2019,2020,and2021.TheremainingAMTcreditcarryforwardstoberefundableinthetaxyearbeginningin2022.

TheSenatebillretainsthecorporatealternativeminimumtax(AMT)atitscurrentrateof20percent.ThebillfavorablyreportedbytheSenateFinanceCommitteewouldhaverepealedthecorporateAMT.BecausetheregularcorporatetaxrateandtheAMTrateareboth20percentin2019,retainingthecorporateAMTeffectivelyrepealscertaingeneralbusinesscreditsclaimedforregulartaxpurposes(e.g.,theR&Dcredit),aswellastax-exemptinterest.ItisalsonotclearhowtheAMTinteractswithvariousinternationalprovisions,includingthebaseerosionproposalsandthedeductionforforeignsourcedividends.

Businessdeductions/credits

Repealssection199deductionfordomesticproduction.RepealsWorkOpportunityTaxCredit.RepealsHistoricRehabilitationCredit.RepealsNewMarketsTaxCredit.Repealstaxcreditforemployer-providedchild

Repealssection199deductionfordomesticproduction,effectiveforcorporationsintaxableyearsbeginningafter2018.Fornon-corporatetaxpayers,therepealofsection199appliestotaxableyearsbeginningafter2017

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care.Repealsorphandrugcredit.Repealsthecreditforexpensestoprovideaccessfordisabledpeople.Repealsdeductionforexpensesforlobbyingbeforelocalgovernments.

Reducesorphandrugcreditratefrom50percentto27.5percent,andstrikesanybaseamountcalculationandstrikesthelimitationregardingqualifiedclinicaltestingexpensestotheextentsuchtestingrelatestoadrugwhichhasbeenpreviouslyapprovedundersection505oftheFederalFood,DrugandCosmeticAct.Reformstherehabilitationcreditbyrepealingthe10percentcreditforpre-1936buildingsandprovidingthatthecurrent20percentcreditforqualifiedhistoricrehabexpendituresforcertifiedhistoricstructuresbetakenratablyovera5-yearperiod.Repealsthesection196deductionfor“certainunusedbusinesscredits.”Deniesthedeductionforlocallobbyingexpenses,settlementpaymentsofcertainsexualharassmentclaims,andpayments(similartofinesandpenalties)inrelationtoaviolationoflaw(orinsettlementthereof),otherthancertainrestitutionpayments.Adoptsqualifiedopportunityzones.Allowsdeductionforreplantingcertaincitruscrops.Exemptscertainpaymentsforthemanagementofprivateaircraftfromtheexcisetaxforairtransportation.

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Adoptsseveralprovisionsmodifyingthelow-incomehousingtaxcreditfromS.548,theAffordableHousingCreditImprovementActof2017Adoptsseveralprovisionsmodernizingthetreatmentofcertainbeer,wineandspirits.Adoptsnewcreditequalto12.5percentofcertainwagespaidduringperiodsoffamilyandmedicalleave.

Interest Includesthincapitalizationruleprovidingforadisallowanceofadeductionfornetinterestexpenseinexcessof(i)30percentofadjustedtaxableincome(generallyEarningsBeforeInterest,DepreciationandAmortizationorEBIDA),plus(ii)businessinterestincome.Providesfora5-yearcarryforwardofdisallowedinterest.Thereisnocarryforwardofexcesslimitation.Includescarve-outsforutilities,realestate,smallbusinesses,andtaxpayersthatpaidoraccruedintereston“floorplanfinancingindebtedness.”Appliestopartnerships.Nograndfatheringprovided.

SimilartoHousebill.Includesthincapitalizationruleprovidingforadisallowanceofadeductionfornetinterestexpenseinexcessof(i)30percentofadjustedtaxableincome(generallyEarningsBeforeInterestandTaxesbutnotBeforeDepreciationandAmortization),plus(ii)businessinterestincome.Providesforanindefinitecarryforwardofdisallowedinterest.Thereisnocarryforwardofexcesslimitation.Includescarve-outsforutilities,certainelectriccooperatives,floorplanfinancing,realestate(ifelected)andsmallbusinesses($15millioningrossreceipts,ratherthan$25millionasinHousebill).Allowsfarmingbusinesses(includingfarmercooperatives)toelectoutandapplyAlternativeDepreciationSystem(ADS)topropertywitharecoveryperiodof10yearsormore.Appliestopartnerships.Nograndfatheringprovided.

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Costrecovery Increasesthebonusdepreciationpercentageto

100percentforpropertyacquiredandplacedinserviceafterSeptember27,2017andbeforeJanuary1,2023.Appliestothetypesofpropertyforwhichbonusdepreciationcurrentlyapplies.Alsoappliestousedpropertyifthetaxpayerneverpreviouslyusedsuchproperty.Doesnotapplytopropertyusedbytaxpayerstowhichthecutbackininterestexpensedoesnotapply,generallyregulatedpublicutilities,realestatebusinesses,and“floorplanfinancingindebtedness.”Repealslike-kindexchangerulesexceptforrealestate.

SimilartoHousebill.Increasesthebonusdepreciationpercentageto100percentforpropertyplacedinserviceafterSeptember27,2017andbeforeJanuary1,2023(2024forcertainlongerproductionperiodpropertyandaircraft).Appliestothetypesofpropertyforwhichbonusdepreciationcurrentlyapplies,butexpandedtoincludequalifiedfilm,televisionandlivetheatricalproductions.Doesnotapplytousedproperty.Doesnotapplytopropertyusedbytaxpayerstowhichthecutbackininterestexpensedoesnotapply,generallyregulatedpublicutilitiesandrealestateandfarmbusinessesthatelectADS.Shortensthedepreciablelifeoffarmproperty(from7to5years),realproperty(from27.5and39yearsto25years),andleaseholdimprovements(from15to10years).ChangesADSlifeofresidentialrentalpropertyto30years.TheexpensingallowancewasextendedontheSenatefloorandphaseddownafter2022.Theexpensingpercentagewillbe80percentfor2023,60percentfor2024,40percentfor2025,and20percentfor2026.Repealslike-kindexchangerulesexceptforrealestate.Modifiesdepreciationlimitationonluxuryautosandpersonaluseproperty.

Netoperatinglosses Generallylimitsdeductionsfornetoperatinglossesto90percentoftaxableincome.

SimilartoHousebill.Generallylimitsdeductionsfornetoperatinglossesincurredintaxableyears

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Carrybackswouldbeeliminated,exceptforcertaindisasterorcasualtylossesforfarmorsmallbusinesses).Carryforwardswouldbeindexedforinflation.

beginningafter2017to90percent(80percentafter2022)oftaxableincome.Carrybackswouldbeeliminated,exceptfora2-yearcarrybackinthecaseofcertainfarminglossesandP&Cinsurancecompanies.Carryforwardswouldnotbeindexedforinflation.

ResearchandDevelopment

PreservestheResearchandDevelopmenttaxcredit.Requirescapitalizationand5-yearamortization(15yearsforexpendituresattributabletooffshoreresearch)ofcertainresearchorexperimentalexpenses.Appliestoexpenditurespaidorincurredduringtaxableyearsbeginningafter2022.

SimilartoHousebill.PreservestheResearchandDevelopmenttaxcredit.Requirescapitalizationand5-yearamortization(15yearsforexpendituresattributabletooffshoreresearch)ofcertainresearchorexperimentalexpenses.Appliestoexpenditurespaidorincurredduringtaxableyearsbeginningafter2025.

Healthcare/ACA DoesnotaddressAffordableCareActtaxes. RepealstheACAindividualmandatepenaltytaxafter2018.

FICAtiptaxcredit LimitsFICAtiptaxcredittotipsreportedabovetheminimumwage(ratherthanthepreviouslowerthreshold).Allrestaurantsclaimingthecreditwouldbesubjecttoreportingrequirementspreviouslyapplicableonlytolargerestaurants,andwouldberequiredtoallocatetipincomeequalto10percentofgrossreceiptstoalloftheirtippedemployees.

Noprovision.

Workerclassification

Proposaltoprovideworkerclassificationsafeharborforindependentcontractorsandtochangeinformationreportingthresholdsundersec.6050WwasdeletedbyChairman’smodification.

Partnerships Repealsthetechnicalterminationrules.

RequiresthatgainorlossonsaleorexchangeofforeignpartnershipinterestbetreatedasEffectivelyConnectedIncome(ECI)totheextentthetransferorwouldhavehadECIifthe

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partnershipsolditsassetsatfairmarketvalue(FMV).Alsorequires10percentwithholdingunlessappropriatecertificationreceived.Adjuststhe“substantialbuilt-inloss”definition—asitrelatestoamandatorybasisadjustment—uponthetransferofapartnershipinterest.Undertheproposala“substantialbuiltinloss”existsiftransfereewouldbeallocatedanetlossof$250,000underahypotheticaldispositionofallpartnershipassets.Thebasislimitationonpartnerlossesappliestoapartner’sdistributiveshareofcharitablecontributionsandforeigntaxes.

Carriedinterest Imposesa3-yearholdingrequirementfortreatmentaslong-termcapitalgain.

SimilartoHousebill.

Securitysales Generally,requiresFirst-InFirst-Out(FIFO)accounting,ratherthanbyidentification.Doesnotapplytomutualfunds.

Contributionsofcapital

Treatscontributionsofcapitalasincomeiftheirvalueexceedsthevalueofthestockissuedinexchangeforsuchcontributions.

Noprovision.

FDICpremiums LimitsdeductionforFederalDepositInsuranceCorporationpremiumsiftheinstitution’sconsolidatedassetsexceed$10billion.Theamountdisallowedisbasedontheratiothatsuchassetsinexcessof$10billionbearsto$40billion.

SimilartoHousebill.

ACCOUNTING Generally,requiresthatataxpayerrecognize

incomenolaterthantheyearinwhichtheincomeistakenintoaccountonthetaxpayer’s

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financialstatement.Thereisanexceptionforcertainmortgageservicecontracts.CodifiesIRSRevenueProcedure2004-34,allowingtaxpayerstodeferaninclusionofincomebeyondthetaxableyearforsome“advancedpayments.”Requiresthatoriginalissuediscount(OID)beincludedinincomeintheyearinwhichitisreceived.TheSenatebilldelayedtheeffectivedateuntiltaxyearsbeginningafter2018,andprovidedforasix-yearspreadonthechangeinmethodofaccounting.

INSURANCE Insurance ConformstheNetOperatingLossrulesforlife

insurancecompaniestomatchothercompanies,changingfromback3yearsandforward15,toback2yearsandforward20.Repealsthesmalllifeinsurancecompanydeduction.Imposesan8percentsurtaxonlifeinsurancetaxableincome(asaplaceholderforotherlifeinsuranceoffsets).Conformstherulesforadjustmentsforchangesincomputingreservestothegeneralrule,sothatlifeinsurancecompanieswillnolongerhavea10-yearperiodforcertainadjustmentsbutwill

ConformstheNetOperatingLossrulesforlifeinsurancecompaniestomatchothercompanies(asmodifiedelsewhereinthebill).However,P&Ccompaniesretaincurrentlawat2yearsbackand20forwardtooffset100percentoftaxableincome.SimilartoHousebill,repealsthesmalllifeinsurancecompanydeduction.Modifiesthelifeinsuranceprorationrulesforpurposesofdeterminingthedividendsreceiveddeductionbyestablishingthecompanyshareat70percentandthepolicyholder’sshareat30percent.

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followthegeneralruleoffouryearsforanadjustmentthatincreasestaxableincome,whilereductionstotaxableincomearetakenintoaccountinthecurrentyear.Reservescalculationsforexistingcontractswouldbetakenintoaccountratablyoverthenexteightyears.Repealsspecialrulefordistributionstoshareholdersfromcertainpre-1984policyholders’surplusaccounts.ModifiesP&CProrationRule:Increasesthecurrent15percentreductioninreservedeductionsto26.25percent,inlinewiththedecreaseinthecorporatetaxrate.ModifiesP&CDiscountingRules:Changesthediscountratetothecorporatebondyieldcurve(asspecifiedbyTreasury),ratherthanthemid-termapplicableFederalrate,basedonlosspaymentpatterns.Also,thespecialruleforlong-taillinesofbusinessextendingthelosspaymentpatternperiodisappliedsimilarlytoalllinesofbusiness,andtheprovisionallowingcompany-specificlosspaymentpatternsisrepealed.Repealsspecialestimatedtaxpayments,whichhadbeenavailabletocompanieselectingtotakeadeductionforthedifferencebetweenthecomputationofreservescomputedonadiscountedandundiscountedbasis.

Providesforthecomputationoflifeinsurancetaxreservesatthegreaterofnetsurrendervalueor92.87percentofstatutoryreserves.SimilartoHousebill,conformstherulesforadjustmentsforchangesincomputingreservestothegeneralrule,sothatlifeinsurancecompanieswillnolongerhavea10-yearperiodforcertainadjustmentsbutwillfollowthegeneralruleoffouryearsforanadjustmentthatincreasestaxableincome,whilereductionstotaxableincomearetakenintoaccountinthecurrentyear.Reservescalculationsforexistingcontractswouldbetakenintoaccountratablyoverthenexteightyears.SimilartoHousebill.Repealsspecialrulefordistributionstoshareholdersfromcertainpre-1984policyholders’surplusaccounts.ModifiesDeferredAcquisitionCostrules:Expensesassociatedwithearningastreamofpremiumincomewouldbespreadover180months,ratherthan120(butkeepsspecialruleforthefirst$5million,withphaseout).Thespecifiedpercentageusedtocalculatetheexpenseratiowouldincreaseto2.1percentforannuitycontracts;2.46percentforgrouplifecontracts;andto9.24percentforallothercontracts.SimilartoHousebill,modifiesP&CProrationRule:Increasesthecurrent15percentreduction

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inreservedeductionsto26.25percent,inlinewiththedecreaseinthecorporatetaxrate.SimilartoHousebill,repealsspecialestimatedtaxpayments,whichhadbeenavailabletocompanieselectingtotakeadeductionforthedifferencebetweenthecomputationofreservescomputedonadiscountedandundiscountedbasis.Establishesataxreportingrequirementforacquisitions(includingindirect)oflifeinsurancecontracts(orintereststherein)oncertainsaleswheretheacquirerhasnosubstantialfamily,businessorfinancialrelationshiptoinsured.ReportingtoincludebasisanddeathbenefitpaymentinformationtoIRSandpayee(effective2018).Basisshallnotincludeanyreductionforthecostofinsurance,overturningIRSRevenueRuling2009-13(effectivefortransactionsafterAugust25,2009).Inareportablepolicysale,exceptionsfortransferforvaluerulesdonotapply,andthus,someportionofthedeathbenefitmaybeincludedinincome.

BONDS Tax-exemptbonds Repealstaxexemptionforinterestonnewly-

issuedprivateactivitybondsandnewly-advancedrefundingbonds.EffectiveforbondsissuedafterDecember31,2017.Repealstaxcreditbondsafter2017.Existingtaxcreditbondsaregrandfathered.

Repealstaxexemptionforinterestonnewly-issuedadvancedrefundingbonds,effectiveforbondsissuedafterDecember31,2017.

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Interestonbondsissuedtofinancetheconstructionof,orcapitalexpendituresfor,aprofessionalsportsstadiumwouldbesubjecttotax.EffectiveforbondsissuedafterNovember2,2017.

COMPENSATION&

BENEFITS

Executivecompensation

Non-qualifieddeferredcompensationproposaltoimposetaximmediatelyuponvestingwasdeletedbyChairman’samendment.Subjects“performance-based"compensationforCEO,CFO,andnextthreehighest-paidemployeestothe$1milliondeductionlimitundersection162(m).Alsoincludesformertopofficerswhoarestillreceivingremunerationpaymentsfromthecompany.Permitstaxdeferralforrevenuefromqualifiedequitygrants.

SimilarprovisionwasdeletedbyChairman’smodification.SimilartoHousebill,exceptdoesnotapplytoanyremunerationundercertainexistingbindingcontractsineffectonNovember2,2017.SimilartoHousebill.

Benefits Limits,oreliminates,deductionsbyemployersforcertainfringebenefits:

• Nodeductionisallowedforanyactivityconsideredtobeentertainment,amusement,orrecreation;

• The50percentoffoodlimitationisexpandedtoincludeemployersprovidingfoodorbeveragesdirectlytoemployees;

• Nodeductionformembershipduesforanyclub;and

• Theproposaldisallowsadeductionfor

SimilartoHousebill.Also,disallowsdeductionformealsprovidedtoemployeesforconvenienceoftheemployerintaxableyearsafter2025.

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anyqualifiedtransportationfringe.Travelpasses,as“no-additional-cost”benefits,donotappeartobeimpacted.

Retirementsavings Retainssavingsprogramswithsmallmodifications.

Appliesasingleaggregatelimitwithrespectto401(k),403(b),and457(b)plans.Generally,appliesearlywithdrawaltaxtoadistributionfroma457(b)planbeforeage59½.

INTERNATIONAL Territorialsystem Generally,providesfora100percentdividends

receiveddeduction(DRD)fordividendsreceivedbydomesticcorporationsfrom10-percentownedforeigncorporationsotherthanapassiveforeigninvestmentcompany(PFIC)thatisnotacontrolledforeigncorporation(CFC).

SimilartoHousebill,butdeniesDRDforhybriddividends.One-yearholdingrequirementdiffersfromsix-monthrequirementinHousebill.

Deemedrepatriationtransitiontax

USshareholdertaxedonpro-ratashareofallpost-1986pre-effectivedateundistributedearningsofspecifiedforeigncorporationstaxedatoneoftworates(reducedbypro-ratedFTCs)–(i)14percent(earningsrepresentedby“cashpositionassets”,i.e.,cash,cashequivalentsorothershort-termassets);or(ii)7percent(allotherearnings).

USshareholdertaxedonpro-ratashareofallpost-1986pre-effectivedateundistributedearningsofspecifiedforeigncorporationstaxedatoneoftworates(reducedbypro-ratedFTCs)–(i)14.49percent(earningsrepresentedby“cashpositionassets”);or(ii)7.49percent(allotherearnings).Appliestopost-1986earningsonlyforperiodswhenaUSpersonowned10percentormoreofthevotingstockofthecorporation.

Anti-baseerosion—minimumtax

SubjectsaUSshareholderofaCFCsubjecttotaxon50percentofitsaggregateshareofeachCFC’sforeignhighreturnamount(FHRA),whichisnetincomeinexcessofaroutinereturn(7percentplustheFederalshort-termrate)ontheaggregateadjustedbasisindepreciabletangiblepropertylessinterestexpense.Limitsforeigntaxcreditsto80percentofforeigntaxespaidonCFCexcessreturnincome,subjecttoseparateforeigntaxcreditlimitation,andnot

SimilartoHousebill,butincomeinclusionslabeled“globalintangiblelowtaxincome”(GILTI),routinereturnis10percentofthequarterlyaverageofaggregateadjustedbasisindepreciabletangibleproperty,anditisimplementedthroughafullinclusionanda50percentdeduction,foranet50percentinclusionandaneffectivetaxrateof10percent.Foreigntaxcreditsarelimitedto80percentoftheaggregateforeigntaxespaidontheexcessreturn

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allowedtobecarriedbackorcarriedforward.Ineffect,assumingacorporaterateof20percent,theminimumtaxwillnotapplytotaxpayersthatarenotforeigntaxcreditlimitedif,onanaggregatebasis,theCFCeffectiveforeigntaxrateis12.5percentorhigher(10percent/80percent).No“roundtriprule”(butseenewexcisetaxwithECIelectionbelow).

income,subjecttoseparateforeigntaxcreditlimitation,andnotallowedtobecarriedbackorcarriedforward. No“roundtriprule”(butseenewbaseerosionanti-abusetaxbelow).NetGILTIinclusionincreasedto62.5percent(after37.5percentdeduction)fortaxableyearsbeginningafterDecember31,2025.

Foreignintangibleincomededuction

Noprovision. 50percentdeductionforGILTIand37.5percentdeductionforadomesticcorporation’s“foreignderivedintangibleincome”(FDII),determinedbyapplyingsameformulausedtodetermineGILTItodirectlyearnedforeignderivedincome.CombinedGILTIandFDIIdeductionslimitedtotaxableincome(cannotcreateanNOL).

GILTIdeductionreducedtoafter37.5percentanddomesticFDIdeductionreducedto21.875percentfortaxableyearsbeginningafterDecember31,2025.

Allowsfortax-neutraldistributionsofIPheldbyCFCsondateofenactment.QualifiedIPincludesintangiblepropertydefinedinsection936(h)(3)(B)andcomputersoftwaredefinedinsection197(e)(3)(B).AppliestodistributionstoUSshareholdersbeforetheendofCFC’sthirdtaxyearbeginningafterDecember31,2017.

Anti-baseerosion—inbound

Imposesa20percentexcisetaxoncertainamountspaidoraccruedbyaUScorporationtoaforeignaffiliatethataredeductible,includibleincostofgoodssold(COGS),orincludibleinthe

Imposesabaseerosionanti-abusetax(BEAT)onapplicabletaxpayers(generallyUScorporations),otherthanREITs,RICs,andScorporations,equaltotheexcessof(i)10percentoftaxableincome

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basisofadepreciableoramortizableasset,unlesstheforeignaffiliateelectstotreattheamountaseffectivelyconnectedwiththeconductofatradeorbusinessintheUSand,forpurposesofanytreatybetweentheUSandanyforeigncountry,asincomeattributabletoapermanentestablishmentintheUS(ECIelection).Provisiondoesnotapplyiftheamountofthe3-yearaverageannualpaymentsofthegroupare$100millionorless.

• EffectofECIelection:hastheeffectofsubjectingtheforeignaffiliatetoUStaxinthesamemannerasaUScorporation(i.e.,onanetbasis),withrespecttoincomederivedfromdeductibleamountsreceivedfromUSaffiliates.

o Expensesgenerallyallocatedbasedonthegroup’sconsolidatedfinancialstatements,takingintoaccountonlyforeigngroupmembers.

o AllowsaforeigncorporationthatmakeanECIelectionaforeigntaxcreditof80percentofforeigntaxes.

o Branchprofitstaxalsoappearstoapply.

• Excisetaxnon-deductible:IfECIelectionisnotmade,theexcisetaxisnotdeductibleforpurposesofdeterminingtheUScorporation’staxliability.

InteractionwithnewminimumtaxonCFCincome:NewminimumtaxdoesnotincludeECI.IfECI

generallydeterminedwithoutregardtodeductionsforamountspaidoraccruedtoaforeignrelatedparty,includingamountsincludibleinthebasisofadepreciableoramortizableasset,andCOGSpaidtoarelatedsurrogateforeigncorporation;over(ii)regulartaxliabilityreducedbyallcreditsotherthantheR&Dcredit.Provisiongenerallydoesnotapplytotaxpayerswithaverageannualgrossreceiptsoflessthan$500million,andanexceptionisprovidedforcertainderivativepayments.Taxrateappliedtomodifiedtaxableincomeincreasedto12.5percentandregulartaxliabilityundersection26(b)(i.e,reducedbyallcredits)fortaxableyearsbeginningafterDecember31,2025.DetailedreportingrequirementforCOGSandrelatedpartypaymentsbrokendownbytypeandseparatelystated.ThetaxrateonBEATis1percentagepointhigherforcertainfinancialinstitutions.

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electionisnotmade,however,theCFC’sincomeappearstobeincludedinthenewminimumtaxbase(seeabove).

Internationallimitationondeductiblenetinterestexpense

DisallowadeductionfortheamountofaUScorporation’snetinterestexpensethatexceeds110percentofitsallocableshareofthegroup’snetinterestexpense.It’sallocableshareofthegroup’snetinterestexpensebasedonitsshareofthegroup’sEBITDA.GroupnetinterestexpenseandEBITDAarebasedonGAAPorIFRSconsolidatedfinancialstatements.Forexample,iftheUScorporation’sshareofglobalEBITDAis50percent,itsnetinterestexpensedeductionwouldbelimitedto55percent(110percentof50percent)oftheworldwidegroup’sconsolidatednetinterestexpense(i.e.,netinterestonthirdpartydebt).Consolidatedgroupstreatedasasingletaxpayer.

• Interactionwithgenerallimitonnetinterestexpense:Thislimitationappliesinadditiontothegenerallimitationonnetinterestexpense(seeabove).Theamountdisallowedisthegreateroftheamountsdeterminedunderthisprovisionandthegeneralprovision.

• Carryforward:Disallowedinterestexpensecanbecarriedforwardforuptofivetaxableyears(onafirst-in,first-outbasis).

• Internationalfinancialgroup:Definedasagroupofentitiesthatincludes(i)atleastoneforeigncorporationengagedinaUStradeorbusinessor(ii)atleastone

DisallowsadeductionfortheamountofnetinterestexpenseofaUScorporationthatisamemberofaworldwideaffiliatedgroupattributabletoexcessivedomesticdebt.Thedisallowedamountistheproductof(i)netinterestexpense;multipliedby(ii)thedebt-equitydifferentialpercentageoftheworldwideaffiliatedgroup.

• Interactionwithgenerallimitonnetinterestexpense:Thislimitationappliesinadditiontothegenerallimitationonnetinterestexpense(seeabove).Theamountdisallowedisthegreateroftheamountsdeterminedunderthisprovisionandthegeneralprovision.

• Worldwideaffiliatedgroup:Affiliatedgroupundersection1504,using50percentownershiptestandincludingforeigncorporations.

• Debt-equitydifferentialpercentage:Excessdomesticindebtednessofthegroup,dividedbytotalindebtednessofthedomesticcorporatemembersofthegroup.

• Excessdomesticindebtedness:TheamountbywhichUSgroupdebtexceeds110percentofwhatsuchdebtwouldbeiftheUSgroup’sdebt-equityratiowasproportionatetotheworldwidegroup’sdebt-equityratio.USmembersofthe

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domesticcorporationandoneforeigncorporation,andsuchgrouppreparesconsolidatedfinancialstatements,andhasannualgrossreceiptsofmorethan$100million.

worldwideaffiliatedgrouptreatedasonemember.

• Carryforward:Disallowedinterestcanbecarriedforwardindefinitely.

• Phase-in of excess indebtedness percentage: For tax years beginning in 2018 – 2021, percentage is 130 percent, 125 percent, 120 percent, and 115 percent.

Otheranti-baseerosion

ModifyPFICexceptionforinsurancecompaniestoapplyonlyifcertainrequirementsaresatisfied.

Limitationsonincomeshiftingthroughintangiblepropertytransfers:Would(i)amendthedefinitionofintangiblepropertyforpurposesofsections367(d)and482includesworkforceinplace,goodwill,andgoingconcernvalue,andanyotheritemownedorcontrolledbyataxpayerthatisnotatangibleorfinancialassetandthathassubstantialvalueindependentoftheservicesofanyindividual;(ii)clarifythattheIRSmayvalueintangiblepropertiesonanaggregatebasiswherethatachievesamorereliableresult;and(iii)clarifythattheIRSmayvalueintangiblepropertytakingintoconsiderationthepricesorprofitsthatthecontrolledtaxpayercouldhaverealizedbychoosingarealisticalternativetothecontrolledtransactionundertaken.Relatedpartypaymentsinhybridtransactionsorwithhybridentities:Denydeductionfordisqualifiedrelatedpartyinterestorroyaltypaidoraccruedinahybridtransactionoftoahybridentity.Surrogateforeigncorporationsnoteligibleforreducedrateondividends:Reducedrateon

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dividendsreceivedbyindividualsnottoapplytodividendsfrominvertedcorporations.EffectivefordividendspaidintaxableyearsbeginningafterDecember31,2017.InsuranceexceptiontoPFICrules:ModifyPFICexceptionforinsurancecompaniestoapplyonlyifcertainrequirementsaresatisfied.

SMALLBUSINESS Pass-throughrate Treatsaportionofnetincomeas“business

income,”subjecttoamaximumrateof25percentinsteadofordinaryincometaxrates.Remainingnetincometobetaxedatordinaryindividualincometaxrates.Businessincomeeligibleforthelowerrate:--100percentofanynetbusinessincomederivedfrompassivebusinessactivity.Theprovisionincludesanypassiveactivitydefinedinsection469(c)(determinedwithoutregardtoparagraphs(3)and(6)(B));or--Ownersorshareholdersfromanactivebusinesswoulddeterminetheirbusinessincomebyreferencetothe“capitalpercentage”ofnetincome.The“capitalpercentage”equalseither30percentofnetbusinessincomederivedfromactivebusinessactivities(theso-called“70/30rule”);or--Thetaxpayercanchoosetouseanalternatefacts-and-circumstancestesttodetermineacapitalpercentagegreaterthan30percent.Incomesubjecttopreferentialrates—suchas

Allowsa23percentdeductionofqualifiedbusinessincomefromapartnership,Scorporation,orsoleproprietorship.Thedeductionisgenerallynotavailabletoservicebusinesses—health,law,engineering,architecture,accounting,actuarialscience,performingarts,consulting,athletics,financialservices,brokerageservices,andanybusinesswherethereputationorskillofoneormoreemployeeistheprincipalasset.Servicebusinesstaxpayersareonlyeligibleiftheirtaxableincomedoesnotexceed$500,000(marriedfilingjointly)and$250,000forotherindividuals.Individualsprovidingservicesasanemployeewouldnotbeeligibleforthededuction.ForpartnershipsandScorporations,the23percentdeductionislimitedto50percentoftheW-2wagesofthetaxpayer.TheW-2wagelimitationdoesnotapplyinthecaseofataxpayerwithtaxableincomebelow$500,000(marriedfilingjointly)and$250,000forothertaxpayers.

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dividendincome—wouldnotbecalculatedaspartoftheowner’scapitalpercentage.Personalservicebusinesses(e.g.law,accounting,financialservices,etc.)aregenerallynoteligibleforthe25percentrate.--Providesa9percenttaxrateinlieuoftheordinary12percentrate.Therateisavailableforthefirst$75,000innettaxableincomeofanactiveownerorshareholderearninglessthan$150,000.The9percentbenefitfullyphasesoutat$225,000intaxableincome.

DividendsfromaREIT(otherthanaqualifieddividendsubjecttocapitalgainsrates)arequalifiedincomeandeligibleforthe23percentdeduction.NetqualifiedincomefromPTPswouldbetreatedsimilartoREITdividends.The23percentdeductionappliestothetaxableincomeofagriculturalandhorticulturalcooperativesfrom2019to2025.DoesnotapplytoreasonablecompensationpaidbyanScorporation,certainpaymentsbypartnershipsorinvestment-relatedincome.

Losslimitation Excessbusinesslossesofanon-Ccorporationaredisallowedandcarriedforwardaspartofthetaxpayer’sNOL.Anexcesslossisataxpayer’snet,aggregatecurrent-yearpass-throughlossabove$500,000(marriedfilingjointly)and$250,000forothertaxpayers.TheprovisionsunsetsonDecember31,2025.

Expensing Increasesthecurrent-lawsmallbusinessexpensinglimitationundersection179from$500,000to$5millionandthephaseoutrangefrom$2,000,000to$20millionfortaxableyears2018-22.Also,treatscertainenergyefficientHVACpropertyasqualifiedproperty.

Increasesthecurrent-lawsmallbusinessexpensinglimitationundersection179from$500,000to$1millionandthephaseoutrangefrom$2millionto$2.5millionfortaxableyears2018andbeyond.Also,treatscertainpersonalpropertyusedinlodging,HVACproperty,fireprotectionandsecuritysystemsasqualifiedproperty.

Smallbusinessaccountingmethodreform

Providesgreateraccesstothecashmethodofaccounting,othersimplifiedaccountingmethodrules,andtheexemptionfromcomplexUNICAPrules.

GenerallysameastheHousebill.Exemptsbusinesseswithaveragegrossreceiptsof$15millionorlessfromtheinterestlimitationrulesproposedinthebill.

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Exemptsbusinesseswithaveragegrossreceiptsof$25millionorlessfromtheinterestlimitationrulesproposedinthebill.

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ENERGY Wind Modifiestheproductiontaxcreditforwind

facilitiesbyeliminatingtheinflationadjustmentwithrespecttoprojectstheconstructionofwhichbeginsafterthedateofenactment.Alsorequiresthestartofconstructiontobedeterminedbasedonaprogramofcontinuousphysicalworkforallprojects.

Noprovision.

Solarandotherenergyproperty

Modifiestheinvestmenttaxcredit(ITC)forotherenergyfacilitiesbyextendingandphasingouttheITCforrenewableenergytechnologiesthatwerenotextendedin2015.Providesthesamecreditphasedownschedulemadeapplicabletosolarpropertypursuanttothe2015taxextenderbill.Terminatesthepermanent10percentITCforsolarandgeothermalpropertyafter2027.Requiresthestartofconstructiontobedeterminedbasedonaprogramofcontinuousphysicalworkforallprojects.

Noprovision.

Residentialenergyproperty

ExtendstheresidentialenergyITCforgeothermalheatpumps,smallwindprojects,andqualifiedfuelcellsthrough2021,subjecttothecurrentphasedownapplicabletoresidentialsolarproperty.

Noprovision.

Oilandgastaxcredits

Repealstheenhancedoilrecoverycreditandmarginalwelltaxcreditafter2017.

Noprovision.

Advancednucleartaxcredit

ExtendsandmodifiestheadvancednucleartaxcreditinamannersimilartolegislationthatpreviouslypassedintheHouse.

Noprovision.

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TAX-EXEMPTORGANIZATIONS

Tax-exemptorganizations

Providesthatallentitiesexemptfromtaxundersec.501(a)aresubjecttotheunrelatedbusinessincomerules.

Noprovision.

Imposes1.4percentexcisetaxonnetinvestmentincomeofcertainprivatecollegesanduniversitiesandotherrelatedinstitutions.

SimilartoHousebill,butwouldnotapplytoschoolsforwhichtheaggregatefairmarketvalueoftheassetsattheendoftheprecedingtaxableyear(otherthanthoseassetswhichareuseddirectlyincarryingouttheinstitution’sexemptpurpose)arelessthan$500,000perstudent(upfrom$250,000perstudentintheSFCbill).

Imposea20percentexcisetaxoncompensationinexcessof$1millionpaidtothefivehighestpaidemployeesofatax-exemptorganization.

SimilartoHousebill.

Simplifiesexcisetaxonprivatefoundationinvestmentincome.

Noprovision.

Modifiestheso-calledJohnsonruleandallowschurchesandcharitiestomakestatementsrelatingtopoliticalcampaignsintheordinarycourseofreligiousservicesandactivities,aslongasexpensesrelatedtosuchspeecharedeminimis.

Noprovision.

Additionalreportingrequirementsfordonoradvisedfundsponsoringorganizations.

Noprovision.

Exemptcertainprivatefoundationsfromtheexcessbusinessholdingstax.

StrickenfromFinanceCommitteebill.

CertainfringebenefitdeductiondisallowancesaretreatedasUBI.

Noprovision.

Unrelatedbusinessincomeseparatelycomputed

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foreachtradeorbusinessactivity. Nocharitabledeductionforamountpaidfor

athleticseatlicenses.

INDIVIDUAL Individualrates Creates4brackets:12percent,25percent,35

percent,and39.6percent.--25percentbracketthreshold($90,000forjointfilers,and$45,000forthosefilingseparately);--35percentbracketthreshold($260,000forjointfilers,and$200,000forthosefilingseparately);--39.6percentbracketthreshold($1,000,000forjointfilers,and$500,000forthosefilingseparately).Forsingleparentsfilingasheadofhousehold,thebracketthresholdswouldbethemidpointbetweenthethresholdsforunmarriedindividualsandmarriedtaxpayersfilingjointly,exceptthatthe39.6percentbracketthresholdforheadsofhouseholdwouldbe$500,000.Phasesout12percentbracketforhighearners(i.e.above$1.2millionforjointfilers).

7brackets:10percent,12percent,22percent,24percent,32percent,35percentand38.5percent.--10percentbracket(upto$19,050forjointfilers,and$9,525forthosefilingseparately);--12percentbracket(upto$77,400forjointfilers,and$38,700forthosefilingseparately);--22percentbracket(upto$140,000forjointfilers,and$60,000forthosefilingseparately);--24percentbracket(upto$320,000forjointfilers,and$170,000forthosefilingseparately);--32percentbracket(upto$400,000forjointfilers,and$200,000forthosefilingseparately);--35percentbracket(upto$1,000,000forjointfilers,and$500,000forthosefilingseparately);--38.5percentbracket(over$1,000,000forjointfilers,andover$500,000forthosefilingseparately);Separateheadofhouseholdbracket,butbenefitphasesoutforhigherearners(andnewduediligencerequirementtoverifystatus).“KiddieTax”simplification.ThebracketthresholdsandotherindexedtaxparametersarealladjustedforinflationusingChainedCPI-U.

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Allindividualchangesexpireafter2025,exceptfortheChainedCPI-Uprovision.

Standarddeduction Increasesfrom$6,350to$12,000forindividuals,from$12,700to$24,000formarriedcouples.Singlefilerswithatleastonequalifyingchildincreasedto$18,000.IndexedforinflationusingChainedConsumerPriceIndex(CPI).Repealsadditionalstandarddeductionforelderlyandblind.

SimilarincreasestoHousebill(amountsindexedwithChainedCPI),butthestandarddeductionforelderlyandblindisnotchanged.Expiresafter2025.

Personalexemption Repealspersonalexemptionandpersonalexemptionphaseout(PEP).

SimilartoHousebill.Expiresafter2025.

Deductionsandexclusions

RepealsStateandlocalincomeandsalestaxdeduction.CapsStateandlocalpropertytaxdeductionat$10,000(unlessincurredbyabusinessentityincarryingonatradeorbusiness).Limitsdeductionformortgageinteresttoloansforupto$500,000fornewhomepurchases.Existingmortgagesgrandfathered.Limitsinterestdeductibilitytoprimaryresidence,eliminatingdeductionforinterestonsecondhomeandhomeequity.Retainsdeductionforcharitablecontributions,withmodifications.RepealsmedicalexpensedeductionandrepealsdeductionforfutureArcherMSAcontributions.Repealsdeductionfortaxpreparationexpenses.Repealsdeductionforalimonypayments.Repealsdeductionformovingexpenses,exceptforactivedutymilitaryonorders.Repealsdeductionforstudentloaninterest.

RepealsStateandlocalincomeandsalestaxdeduction.LimitsdeductionforStateandlocalpropertytaxto$10,000(unlessincurredincarryingonatradeorbusiness).Retainsdeductionforcharitablecontributions,withmodifications.LowersthemedicalexpensedeductionfloorthroughJanuary1,2019toexpensesthatexceed7.5percent(ratherthan10percent)ofAGIandprotectsfromAMT.Preservedthehomemortgageinterestdeductionforacquisitionindebtedness,butrepealsitforinterestonhomeequityindebtedness.Repealsdeductionfortaxpreparationexpenses.Repealsdeductionformovingexpenses(butretainsspecialrulesforexclusionsifmilitary).RepealsPeaselimitation.Repealsexclusionforbicyclecommutingreimbursement.

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RepealsPeaselimitation.Repealscasualtylossdeduction(unlessaddressedinspecialdisasterreliefbill).

Repealofitemizeddeductionsubjecttothetwo-percentfloor.Repealscasualtylossdeduction(unlessaddressedinspecialdisasterreliefbill,orspecialprovisionsforMississippiDeltafloodof2016containedherein).Retainsdeductionforalimony,medicalexpenses,andstudentloaninterest.Clarifiesthetreatmentofwageringlosses.Expiresafter2025.

IndividualAMT RepealsindividualAlternativeMinimumTax. Increasescurrentlawexemptionamountsandphase-outthresholds.Increasesexemptionamounts:Inthecaseofjointreturnsincrease$78,750to$109,400.Inthecaseofindividualreturnsincrease$50,600to$70,300.Increasesphase-outandindexesforinflation:Inthecaseofajointreturnincrease$150,000to$208,400.Inthecaseofanindividualreturnincrease$112,500to$156,300.Expiresafter2025andreturnstocurrentlawAMT.

Childrenanddependents

EstablishesnewFamilyCredit,effectivethrough2022,whichincludesexpandingtheChildTaxCreditfrom$1,000to$1,600,andprovidesacreditof$300foreachparentandnon-childdependent.Refundableportionlimitedto$1,000(requireswork-eligibleSocialSecuritynumberforrefundableandenhancedCTC).Phasesoutat$230,000forjointfilersand$115,000forsinglefilers.

IncreasesChildTaxCreditto$2,000(notindexed).Refundableupto$1,000,andindexedsothatin2018,itis$1,100.Theearnedincomethresholdforrefundabilityisloweredto$2,500(notindexed).Thecreditbeginstophaseoutat$500,000.Appliestoachildwhohas“notattainedage18,”ratherthanage17undercurrentlaw,untiltaxyearsafter2024.

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PreservesChildandDependentCareTaxCredit.PreservesEarnedIncomeTaxCredit(butrequireswork-eligibleSocialSecuritynumberandnewprogramintegrityrules).Exclusionfordependentcareassistanceprogramretaineduntil2023.

RequiresvalidSSNforeachchildforrefundablecredit.Addsa$500non-refundablecreditfordependentsthatarenotchildren.PreservesChildandDependentCareTaxCredit.PreservesEarnedIncomeTaxCredit.Noprovisionsrelatedtodependentcareassistanceprogram.Expiresafter2025(exceptfortheagechangeforCTC).

PersonalNonrefundableCredits

Repealscreditfortheelderlyandpermanentlydisabled.Repealscreditforelectriccars.Repealstaxcreditformortgagecreditcertificates.Retainsadoptiontaxcredit.

Noprovisions.

Education CombinesAmericanOpportunityTaxCredit,LifetimeLearningCredit,andHopeScholarshipintoanAmericanOpportunityTaxCredit—a100-percenttaxcreditforthefirst$2,000ofqualifiedexpensesanda25percentcreditforthenext$2,000ofqualifiedexpenses.Retainscurrentlawrefundabilityof$1,000(requireswork-eligibleSocialSecuritynumber).RepealsnewcontributionstoCoverdellESA,buttax-freerolloversfromCoverdellinto529accountsareallowed.ElementaryandHighSchoolexpensesupto$10,000peryearwouldbequalified529expenses.Apprenticeshipprogramexpenseswouldbequalifying.Childreninuteromaybedesignated529beneficiaries.

SimilartoHousebill,allowrolloversfrom529accountstoABLEaccounts.Retainsanddoublestheclassroomteacher’sdeduction.Expands529planstoincludeK-12elementaryandsecondaryschooltuitionforpublic,private,andreligiousschools,includingK-12educationalexpensesforhomeschoolstudents.Expiresafter2025.Childreninuteromaynotbedesignated529beneficiaries.

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Allowsrolloversfrom529planstoAchievingaBetterLifeExperience(ABLE)programs.Providesthatstudentloandebtforgivenessonaccountofdeathordisabilitywouldbeexcludablefromincome.RepealstheexclusionofinterestfromUSbondsusedtopayforhighereducation,theexclusionforqualifiedtuitionreductionprograms,andtheexclusionforemployer-providededucationassistanceprograms.Repealsdeductionforinterestoneducationloansandthedeductionforqualifiedtuitionandrelatedexpenses.Repealstheexemptionofqualifiedtuitionreductions.

Savingsandinvestmentincome(capitalgains,dividendsandinterest)

Preserveslowerratesforcapitalgainsanddividends.However,thecurrentlawexclusionforgainsonhomesales($500,000married/$250,000single)phasesoutfortaxpayersover$500,000married/$250,000single,andtogettheexclusionthe“principalresidencerule”isincreasedfrom2of5previousyearsto5of8previousyearsandisonlyavailableonceevery5years.

Indexesbreakpointsfor15percentand20percentratesusingchainedCPI.Regardinggainsonhomesales,retainscurrentlawexclusionamountsbutonlyavailableifthe“principalresidencerule”of5of8previousyearsismetandisonlyavailableonceevery5years.ExemptsbindingcontractsbeforeJanuary1,2018.Expiresafter2025.

Estateandgifttaxes Theexemptionamountisincreasedfrom$5.49millionto$10million,indexedforinflation,beginningin2018.Repealsestateand

Theexemptionamountisincreasedfrom$5.49millionto$10million,indexedforinflation,beginningin2018.Theestateandgeneration-

26

generation-skippingtaxesin2024,whilemaintainingabeneficiary’sstepped-upbasisinestateproperty.Lowersgifttaxtoatoprateof35percentandretainsabasicexemptionamountof$10millionandanannualgifttaxexclusionof$14,000(asof2017),alsoindexedforinflation.

skippingtaxesarenotrepealedandnochangesaremadetothegifttaxorannualgifttaxexclusion.Expiresafter2025.

Patents Repealsspecialcapitalgainstreatmentforsalesofpatentspriortoactualcommercialuse.

Noprovision.