The House agreed to the Senate budget resolution on Oct. 26 in a major step toward tax reform. The House Ways and Means Committee is now scheduled to introduce a full tax reform bill on Nov. 1.
The budget agreement, which does not need to be signed by the president, includes reconciliation instructions that allow tax writers to lose up to $1.5 trillion in revenue in a tax reform bill. Reconciliation is key to tax reform because it allows Republicans to bypass 60-vote procedural hurdles in the Senate and approve a bill with a simple majority vote.
With a budget resolution in place, tax reform efforts should immediately gain momentum. Tax reform is clearly now the top Republican priority, and one of their last opportunities to secure a signature legislative achievement before mid-term elections in 2018. Republican leaders are setting an aggressive timeline to complete a bill.
The House Ways and Means is planning to introduce their bill on Nov. 1, mark it up the following week, and send it to the House with the goal of final passage before Thanksgiving. The Senate is at least a week behind and probably more, but Republican leaders are hoping they can reconcile House and Senate bills and enact final legislation before the end of the year.
That goal may be overly optimistic. Tax reform will certainly run into hurdles that could significantly delay that timeline well into 2018, or even derail the effort altogether. Tax writers are already dealing with political pushback on many of their proposals and are facing scoring and revenue challenges. The reconciliation process makes tax reform easier, but comes with its own restrictions. Reconciliation bills cannot lose money outside of the 10-year budget window, leaving Republicans with many difficult decisions.
Despite the challenges, major tax reform appears more possible now than it has in decades. Many of the proposals would have a profound impact on how both individuals and businesses are taxed. For more information on the framework tax writers are using as the template for their bills, see our previous Tax Legislative Update
Director, Washington National Tax Office
+1 202 861 4144
Senior Manager, Washington National Tax Office
+1 202 521 1511
Tax professional standards statement
This content supports Grant Thornton LLP’s marketing of professional services and is not written tax advice directed at the particular facts and circumstances of any person. If you are interested in the topics presented herein, we encourage you to contact us or an independent tax professional to discuss their potential application to your particular situation. Nothing herein shall be construed as imposing a limitation on any person from disclosing the tax treatment or tax structure of any matter addressed herein. To the extent this content may be considered to contain written tax advice, any written advice contained in, forwarded with or attached to this content is not intended by Grant Thornton LLP to be used, and cannot be used, by any person for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code.
The information contained herein is general in nature and is based on authorities that are subject to change. It is not, and should not be construed as, accounting, legal or tax advice provided by Grant Thornton LLP to the reader. This material may not be applicable to, or suitable for, the reader’s specific circumstances or needs and may require consideration of tax and nontax factors not described herein. Contact Grant Thornton LLP or other tax professionals prior to taking any action based upon this information. Changes in tax laws or other factors could affect, on a prospective or retroactive basis, the information contained herein; Grant Thornton LLP assumes no obligation to inform the reader of any such changes. All references to “Section,” “Sec.,” or “§” refer to the Internal Revenue Code of 1986, as amended.