Committee on Ways and Means Releases Tax and Oversight Bill

Committee on Ways and Means Releases Tax and Oversight Bill

Nov 28, 2018

Client Alert

Brownstein Client Alert, November 28, 2018

On Nov. 26, 2018, the Committee on Ways and Means released the tax and oversight package. The bill includes:

  • Technical Corrections
    - Related to the Tax Cuts and Jobs Act (P.L.115-97)
    - Other Technical Corrections
  • Technical Corrections
  • Disaster Tax Relief
  • Taxpayer First Act of 2018
  • American Innovation Act of 2018
  • Tax Extenders
  • The Retirement, Savings, and Other Tax Relief Act of 2018


Technical Corrections

The bill includes several technical corrections to the Tax Cuts and Jobs Act (P.L.115-97) (“TCJA”). The bill would clarify that:

  1. the new carryforward rules apply to net operating losses (“NOLs”) in tax years  beginning after Dec. 31, 2017—the statue currently states that it affects tax years  ending after Dec. 31, 2017;
  2. qualified improvement property is 15-year property; 
  3. that only the taxpayer that makes a settlement payment for sexual harassment is  prevented from deducting attorney’s fees; 
  4. that tax overpayments related to the installment payments for the deemed repatriation  tax should be refunded to taxpayers rather than applied to future installment payments;  and 
  5. that regulation investment company (“RIC”) shareholders receiving distributions from  a real estate investment trust (“REIT”) are eligible for the section 199A deduction on  those distributions. 

Other technical corrections also include that: (1) veterans “shall not” fail to be treated as a specified group in reference to the low-income housing credit; and (2) qualified residential rental projects will not fail to meet the public use requirement solely because of occupancy restrictions or preferences.

Tax Relief for Natural Disasters

The bill includes tax relief for victims of Hurricane Florence, Hurricane Michael, Typhoon Mangkhut, Typhoon Yutu, the California wildfires, Hawaii’s volcanic eruption, earthquakes, and other severe storms. The special disaster-related rules allow victims to use withdrawals from retirement plans for storm relief without penalty. Other relief provisions include temporary suspension of limits on charitable contributions, an employee retention credit, and special rules for qualified disaster-related personal casualty losses.

IRS Reform

The bill includes the Taxpayer First Act of 2018, originally introduced by Rep. Lynn Jenkins (R-SD) of the Ways and Means Committee earlier this year. The purpose of the bill is to refocus on taxpayer service by creating an independent dispute appeals process and guaranteeing taxpayers access to information during dispute resolution. The bill also would require the IRS submit to Congress both a proposal on improving customer service and a guide to restructuring the agency.

American Innovation

The American Innovation Act of 2018, originally introduced by Rep. Vern Buchanan (R-FL) of the Ways and Means Committee earlier this year, includes: (1) simplification and expansion of the deduction for startup and organizational expenditures; and (2) the preservation of startup net operating losses and tax credits after an ownership change.

Tax Extenders

Following the enactment of the TCJA, Senate Finance Chairman Orrin Hatch (R-UT) introduced the Tax Extender Act of 2017, which would have extended expired tax provisions (“tax extenders”) not included in the TCJA for two years. The bill was not enacted, but extenders were addressed at the beginning of 2018 in the Bipartisan Budget Act of 2018 (P.L. 115-123), which only retroactively renewed the tax extenders for 2017.

In the bill released on Nov. 26, Chairman Brady extended most of the tax extenders that expired in 2017. The chart below outlines the differences between the Tax Extender Act of 2017 and Chairman Brady’s bill.

Families and Individuals

Provision

Tax Extender Act of 2017 (S.2256)

Extenders Bill

Exclusion from gross income of discharge of qualified

Jan. 1, 2019

Jan. 1, 2019

Mortgage insurance premiums treated as qualified residence interests

Dec. 31, 2018

Dec. 31, 2018

Above-the-line deduction for qualified tuition and related expenses

Dec. 31, 2018

Dec. 31, 2018

 

Incentives for Growth, Jobs, Investment and Innovation

Provision

Tax Extender Act of 2017 (S.2256)

Extenders Bill

Indian employment tax credit

Dec. 31, 2018

Dec. 31, 2018

Railroad track maintenance credit

Jan. 1, 2019

Made permanent

Mine rescue team training credit

Dec. 31, 2018

Dec. 31, 2018

Qualified zone academy bonds

Dec. 31, 2017

Not Included

Classification of certain race horses as three-year property

Jan. 1, 2019

Jan. 1, 2019

Seven-year recovery period for motorsports entertainment complexes

Dec. 31, 2018

Dec. 31, 2018

Accelerated depreciation for business property on an Indian reservation

Dec. 31, 2018

Dec. 31, 2018

Election to expense mine safety equipment

Dec. 31, 2018

Dec. 31, 2018

Special expensing rules for certain productions

Dec. 31, 2017

Dec. 31, 2018

Deduction allowable with respect to income attributable to domestic production activities in Puerto Rico

Jan. 1, 2018

Not Included

Special rule relating to qualified timber gain

Dec. 31, 2017

Not Included

Empowerment zone tax incentives

Dec. 31, 2018

Dec. 31, 2018

Temporary increase in limit to cover over of rum excise taxes to Puerto Rico and the Virgin Islands

Jan. 1, 2019

Not Included

American Samoa economic development credit

Jan. 1, 2019

Jan. 1, 2019


Incentives for Energy Production and Conservation

Provision

Tax Extender Act of 2017 (S.2256)

Extenders Bill

Credit for nonbusiness energy property

Dec. 31, 2018

Dec. 31, 2018

Credit for new qualified fuel cell motor vehicles

Dec. 31, 2018

Dec. 31, 2018

Credit for alternative fuel vehicle refueling property

Dec. 31, 2018

Dec. 31, 2018

Credit for two-wheeled plug-in electric vehicles

Jan. 1, 2019

Jan. 1, 2019

Second generation biofuel producer credit

Jan. 1, 2019

Jan. 1, 2019

Biodiesel and renewable diesel

Dec. 31, 2018

Extension and phaseout by Dec. 31, 2024

Production credit for Indian coal facilities

Jan. 1, 2018

Not Included

Credits with respect to facilities producing energy from certain renewable resources

Jan. 1, 2019

Jan. 1, 2018

Credit for energy-efficient new homes

Dec. 31, 2018

Dec. 31, 2018

Special allowance for second generation biofuel plant property

Jan. 1, 2019

Jan. 1, 2019

Energy-efficient commercial buildings deduction

Dec. 31, 2018

Dec. 31, 2018

Special rule for sales or dispositions to implement FERC or state electric restructuring policy for qualified electric utilities

Jan. 1, 2019

Jan. 1, 2019

Excise tax credits relating to alternative fuels

Dec. 31, 2018

Dec. 31, 2018

Oil spill liability trust fund financing rate

Dec. 31, 2018

Dec. 31, 2019

Extension and modification of credit for residential energy property

Dec. 31, 2021

Not Included

Extension and phaseout of energy credit

Jan. 1, 2022

Not Included

Black lung liability trust fund excise tax

Not Included

Dec. 31, 2019

 

Retirement and Savings Enhancements

The bill also included numerous provisions related to retirement and savings. Several recent bills have focused on these areas. This chart compares the provisions of the following:

  • The House Retirement Enhancement and Savings Act of 2018 (H.R. 5282)
  • The Senate Retirement Enhancement and Savings Act of 2018 (S. 2526)
  • The House Family Savings Act of 2018 (H.R. 6757 as reported)
  • The House Family Savings Act of 2018 (H.R. 6757 as passed the House)
  • The Retirement and Savings Provisions of the Brady House Amendment (Released Nov. 26, 2018)
     

 

Key

Identical or near-identical section in all three House bills, Senate bill and Brady House Amendment

Section is only in H.R. 5282 and S. 2526

Section is only in H.R. 5282 and S. 2526 and Brady House Amendment

Section is only in H.R. 6757 as reported and H.R. 6757 as passed in the House

Section is only in H.R. 6757 as reported, H.R. 6757 as passed in the House and Brady House Amendment

Section in H.R. 5282, S. 2526, H.R. 6757 as passed in the House and Brady House Amendment

Section is only in H.R. 6757 as reported in the House

Section is only in H.R. 6757 as passed in the House

Section is only in Brady House Amendment

 

 

Provision

H.R. 5282

S. 2526

 H.R. 6757 as reported

 H.R. 6757 as passed House

Brady House Amendment 11/2018

EXPANDING AND PRESERVING RETIREMENT SAVINGS

 

 

Multiple employer plans

Sec. 101

Sec. 101

Sec. 101

Sec. 101

Sec. 301

Pooled employer and multiple employer plan reporting

Sec. 102

Sec. 102

Sec. 101

Sec. 101

Sec. 301

Removal of 10 percent cap from automatic enrollment safe harbor after first plan year

Sec. 103

Sec. 103

 

 

 

Increase in 10 percent cap for automatic enrollment safe harbor after first plan year

 

 

 

 

Sec. 309

Rules relating to election of safe harbor 401(k) status

Sec. 104

Sec.104

Sec. 102

Sec. 102

Sec. 302

Increase in credit limitation for small employer pension plan startup costs

Sec. 105

Sec. 105

 

 

Sec. 310

Small employer automatic enrollment credit

Sec. 106

Sec. 106

 

 

Sec. 311
(similar)

Certain taxable non-tuition fellowship and stipend payments treated as compensation for IRA purposes

Sec. 107

Sec. 107

Sec. 103

Sec. 103

Sec. 303

Repeal of maximum age for traditional for IRA contributions

Sec. 108

Sec. 108

Sec. 104

Sec. 104

Sec. 304

Expansion of IRA ownership of S corporation bank stock

Sec. 109

Sec. 109

 

 

 

Qualified employer plans prohibited from making loans through credit cards and other similar arrangements

Sec. 110

Sec. 110

Sec. 105

Sec. 105

Sec. 305

Portability of lifetime income options

Sec. 111

Sec. 111

Sec. 106

Sec. 106

Sec. 306

Treatment of custodial accounts on termination of section 403(b) plans

Sec. 112

Sec. 112

Sec. 107

Sec. 107

Sec. 307

(Accomplished through Treasury guidance)

Clarification of retirement income account rules relating to church-controlled organizations

Sec. 113

Sec. 113

Sec. 108

Sec. 108

Sec. 308

Exemption from required minimum distribution rules for individuals with certain account balances

 

 

Sec. 109

Sec. 109

Sec. 312

Clarification of treatment of certain retirement plan contributions picked up by governmental employers for new or existing employees

 

 

Sec. 110

Sec. 110

 

Elective deferrals by members of the Ready Reserve of a reserve component of the Armed Forces

 

 

Sec. 111

Sec. 111

Sec. 313

 

Provision

H.R. 5282

S. 2526

H.R. 6757 as reported

H.R. 6757 as passed house

Brady House Amendment 11/2018

ADMINISTRATIVE IMPROVEMENTS

 

 

Plan adopted by filing due date for year may be treated as in effect at close of year

Sec. 201

Sec. 201

Sec. 201

Sec. 201

Sec. 321

Combined annual report for group of plans

Sec. 202

Sec. 202

 

 

 

Disclosure regarding lifetime income

Sec. 203

Sec. 203

 

 

Sec. 324

Fiduciary safe harbor for selection of lifetime income provider

Sec. 204

Sec. 204

 

Sec. 203

Sec. 323

Modification of nondiscrimination rules to protect older, longer service participants

Sec. 205

Sec. 205

Sec. 202

Sec. 202

Sec. 322

Modification of PBGC premiums for CSEC

Sec. 206

Sec. 206

 

 

Sec. 325

Study of appropriate PBGC premiums

 

 

Sec. 203

 

 

 

Provision

 

 

H.R. 6757 as reported

H.R. 6757 as passed House

Brady House Amendment 11/2018

OTHER SAVINGS PROVISIONS

 

 

Universal Saving Accounts

 

 

Sec. 301

Sec. 301

 

Expansion of Section 529 plans

 

 

Sec. 302

Sec. 302

 

Section 529 Unborn Child provision

 

 

 

Sec. 302

 

Penalty-free withdrawals from retirement plans for individuals in case of birth of child or adoption

 

 

Sec. 303

Sec. 303

Sec. 331

 

Provision

 

 

 

H.R. 6757 as passed House

 

BUDGETARY EFFECTS

 

 

Budgetary Effects

 

 

 

Sec. 401

 

 

Provision

H.R. 5282

S. 2526

 

 

 

BENEFITS RELATING TO UNITED STATES TAX COURT

 

 

Thrifting Savings Plan contributions for judges in the Federal Employees Retirement System

Sec. 301

Sec. 301

 

 

 

Change in vesting period for survivor annuities and waiver of vesting period in the event of assassination

Sec. 302

Sec. 302

 

 

 

Coordination of retirement and survivor annuity with the Federal Employees Retirement System

Sec. 303

Sec. 303

 

 

 

Limit on teaching compensation of retired judges

Sec. 304

Sec. 304

 

 

 

General provisions relating to magistrate judges of the Tax Court

Sec. 305

Sec. 305

 

 

 

Life insurance for magistrate judges of the tax court age 65 or older

Sec. 306

Sec. 306

 

 

 

Retirement and annuity program

Sec. 307

Sec. 307

 

 

 

Provisions for recall

Sec. 308

Sec. 308

 

 

 

 

Provision

H.R. 5282

S.2526

 

 

 

OTHER BENEFITS

 

 

 

Benefits provided to volunteer firefighters and emergency medical responders

Sec. 401

Sec. 401

 

 

 

 

Provision

H.R. 5282

S.2526

 

 

 

REVENUE PROVISIONS

 

 

Modification of required distribution rules for pension plans

Sec. 501

Sec. 501

 

 

 

Increase in penalty for failure to file

Sec. 502

Sec. 502

 

 

 

Increased penalties for failure to file retirement plan returns

Sec. 503

Sec. 503

 

 

 

Increased information sharing to administer excise taxes

Sec. 504

Sec. 504

 

 

 

Pension variable rate premium payment acceleration

Sec. 505

Sec. 505

 

 

 

 

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