The Ways and Means Committee of the U.S. House of Representatives today released text and descriptions of a tax reform bill.
Article One, Section 7 of the U.S. Constitution requires all revenue bills to begin in the House of Representatives.
Accordingly, the chairman of the House Ways and Means Committee, Kevin Brady (R-TX), today initiated the tax reform process in the House with the release of a tax reform bill.
CAUTION: These are large documents, with the text being 429 pages and the section-by-section summary being 82 pages. Consider your printer capacity before printing.
KPMG will be providing descriptions and initial impressions of these tax reform proposals in follow-up editions of TaxNewsFlash. This edition is simply intended to provide text of the bill (and related documents), as released today by the Ways and Means Committee.
The documents released today provide a first look at the details of proposals that have been discussed at a high level for several months, and a first look at revenue raisers that are being proposed to pay for some of the policy modifications.
It is important to keep in mind that the road to tax reform is still a long one. The Chairman’s mark generally represents the Ways and Means Chairman’s—and by proxy, the committee staff’s—proposal for tax reform. It does not necessarily include the input and priorities of the full committee. The next step in the process is likely the release by Ways and Means Chairman Brady of an updated document (a “Chairman’s modified mark”) prior to the committee markup. That document could incorporate changes—perhaps significant ones—to the Chairman's mark. The modifications could be the result of technical improvements to the original document or could be the result of changes designed to increase the likelihood of committee approval of the bill or the bill's prospects in the future. Additionally, it is possible that amendments could be approved during the markup by the Ways and Means Committee—changes that would further modify the bill prior to possible final approval by the committee.
If the Ways and Means Committee approves (reports out) the bill, the next stop would be before the House Rules Committee that would set the terms and conditions of House debate on the bill. House Republican leadership has indicated a goal of passing the bill through the full House by the Thanksgiving recess.
On the Senate side of the Capitol, Senate Finance Committee Chairman Orrin Hatch (R-UT), according to reports, is also contemplating relatively swift action on a tax bill. It is possible that Chairman Hatch could release his mark as early as the week of November 6th with Finance Committee action possible prior to the Thanksgiving recess. At this point, it is unclear to what extent a mark released by Chairman Hatch would differ from the mark released by Chairman Brady or from a bill that ultimately might be approved by the House.
Obviously, these aggressive legislative schedules could be delayed by any number of issues—policy, political or otherwise.
When examining the Ways and Means Chairman's mark or any subsequent version of a tax reform bill, it is important to keep in mind that the bill would be at least partially shaped by the need to comply with budget reconciliation requirements. In accordance with the requirements of the FY 2018 budget (approved by the Senate on October 19 and by the House on October 26) that governs consideration of this tax reform bill, any version of the tax reform bill may only increase the deficit by a maximum of $1.5 trillion (over 10 years).
Also to retain the protection from a Senate filibuster as provided under the reconciliation rules, the bill would have to satisfy a number of complex procedural requirements. One of the many requirements is that a reconciliation bill must not increase the long-term deficit of the United States—that is, a reconciliation bill may not be a net tax cut in any year beyond the 10-year budget window (although this bill may have up to $1.5 trillion net tax cut within the 10-year window).
At this point, it is unknown to what extent House and Senate versions of a tax reform bill would differ from each other. Since, ultimately, the House and Senate must pass identical versions of a bill before sending it to the president for his signature or veto, these differences would have to be negotiated between the two houses. The more significant the differences between the two bills, the longer it could take to negotiate a conference report.
© 2017 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
The KPMG logo and name are trademarks of KPMG International. KPMG International is a Swiss cooperative that serves as a coordinating entity for a network of independent member firms. KPMG International provides no audit or other client services. Such services are provided solely by member firms in their respective geographic areas. KPMG International and its member firms are legally distinct and separate entities. They are not and nothing contained herein shall be construed to place these entities in the relationship of parents, subsidiaries, agents, partners, or joint venturers. No member firm has any authority (actual, apparent, implied or otherwise) to obligate or bind KPMG International or any member firm in any manner whatsoever. The information contained in herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's Federal Tax Legislative and Regulatory Services Group at: + 1 202 533 4366, 1801 K Street NW, Washington, DC 20006.