Never mind that taxpayers and tax practitioners alike are struggling to learn and understand the many nuances of the Tax Cuts and Jobs Act (TCJA) signed into law by the President on December 22, 2017. Never mind that the law, as passed, includes many ambiguities and unanswered questions that may require Congressional action, through a technical corrections bill or guidance issued by Treasury, through the Internal Revenue Service. And, finally, never mind that most Americans are currently battling their way through the 2018 income tax filing season and struggling to meet their filing responsibilities under the old law.
Kevin Brady (R-TX), Chairman of the House Ways and Means Committee, has confirmed the President’s comments earlier this week that House Republicans and the Trump administration are working on a second phase of tax reform this year. Brady noted that the President and the House GOP “think more can be done” [to facilitate tax reform].
An area of expected focus is on the temporary individual tax cuts enacted under the TCJA. Because of budgetary concerns, the cuts to individual tax rates and benefits were not made permanent under the new law. While the tax cuts for families were enacted for a longer term of eight years, they do expire on December 31, 2025. Without further action at some point, all of the individual provisions in the TCJA will sunset, and the tax law affected by the TCJA provisions will revert back to pre-2018 tax law. The temporary nature of these provisions, as they are currently enacted, works to make tax planning more difficult.
Meanwhile, Democratic lawmakers continue to criticize the reform efforts, arguing that the TCJA, as enacted, guides the majority of the income tax benefits to the wealthiest 1% of American taxpayers. As such, it is expected that many, if not all, Democrats will be reluctant to work with Republicans in making new tax changes unless the GOP is willing to address their concerns with the law. The problem is further compounded due to 2018 being a Congressional election year.
Almost always, it has been this author’s experience that tax legislation as substantial as the TCJA is generally followed up with a Technical Corrections bill. There is no question that such a bill would be helpful, if not absolutely necessary. It remains to be seen, however, if the two parties can muster enough nonpartisan support and provide the political give and take necessary to get a Technical Corrections bill written and passed.
While Chairman Brady has noted that Technical Corrections will not be tied to further tax reform, Democrats have said that they will not address the needed corrections without modification of a number of provisions in the bill to which they object.
We will continue to monitor tax developments in Washington, D.C. and keep our clients and friends updated regularly through our website. In the meantime, should you have questions or comments, please contact Bob Grossman or Don Johnston at 412-338-9300.