1. Senate and House negotiators are expected to sign an official agreement on H.R.1, the Tax Cuts and Jobs Act, the first significant tax reform measure passed in 31 years. The conferees and their staff are under strict instructions not to release details, but based on credible sources, NECA understands these are some of the major items that comprise the deal:
Top individual tax rate reduced from 39.6 percent to 37 percent
- The deduction for pass-through companies will be set at 20 percent, somewhat lower than the 23 percent included in the Senate-passed bill, but the effective rate is offset by lower top rate
- Corporate tax rate at 21 percent, slightly higher than the 20 percent initially offered
- Corporate AMT eliminated
- Individual AMT remains, but thresholds adjusted
- State and Local Tax deduction (SALT) remains at $10,000, with a likely mix of property and income or sales taxes
- Estate tax exemption doubled to over $11 million per spouse, but not totally repealed
- Cap the mortgage interest deduction at $750,000, a mid-point compromise between the Senate and House bills
- A provision to allow apprentices to utilize 529 plans to pay for related costs to their apprenticeship that was included in the House bill and supported by key Senators remains under consideration
NECA’s Look Ahead: It is our estimate that if what we have heard holds true, there are many significant and transformational wins for NECA contractors nationwide. NECA focused much of our efforts in recent weeks on lowering the pass-through rate and ensuring it is attainable. Factoring in the 20 percent deduction, along with other changes in the code, we estimate that the pass-through rate will top out at effectively 29.6 percent. While it is still not the 25 percent promised in the Framework, it is significantly better than the current 43.3 percent for many NECA contractors. Other major wins include the significant reduction in the corporate rate from 35 percent to 21 percent, a doubling of the exemption in relations to the estate tax, elimination of the Corporate AMT, and changes in the individual AMT thresholds. NECA will continue to report on details of the final agreement and the impact it will have on NECA contractors and their employees.
2. As the conversation over unfinished tax items continues, several House Republicans introduced a group of five bills seeking to provide relief for Affordable Care Act taxes scheduled to go into effect in 2018. The bills address items including the Medical Device Tax, the Health Insurance Tax, but most notably they provide for a one-year delay to the Cadillac Tax, pushing back enforcement to 2021.
NECA’s Look Ahead: While this bill, H.R. 4616, falls well short of a full repeal, the initiative taken by leadership to address this crippling tax is commendable. NECA will continue to advocate for a full repeal and will push for a more substantial delay.
3. Last week the House and Senate passed a continuing resolution that only funds the government until December 22, 2017. The government will shut down the next day unless another CR or spending package is enacted. Republican leadership is working to craft a deal that can pass both chambers. Conservative members of the House have pushed forward a plan that would keep most parts of the government open until January 19, 2018 while providing full-year funding for the Defense Department and extending funding for the Children’s Health Insurance Program.
NECA’s Look Ahead: House Republicans are expected to move forward with this plan that would essentially dare Senate Democrats to shut down the government if they don’t accept the increased defense spending. Complicating matters, Congressional leaders have yet to reach a top-line deal on non-defense discretionary spending. The deal is expected to receive no democratic support in the House, but as negotiations move forward, some moderate democrat Senators could be brought on board to support the measure.