House Tax Bill Seeks Major Overhaul of Tax Code

by Buchanan Ingersoll & Rooney PC

Buchanan Ingersoll & Rooney PC

On November 2, the Ways and Means Committee released its long-awaited version of tax reform, entitled the “Tax Cuts and Jobs Act.” The bill proposes significant changes to many key areas of federal tax law. This alert highlights some of the changes that could significantly impact your business and/or your family’s wealth and succession planning strategies.

The tax reform process has begun in earnest. Developments can now be expected to move quickly, especially relative to the months of anticipation leading up to the bill’s release since the presidential election.

As far as immediate next steps, the Ways and Means Committee has begun its review of the bill. If this committee review process, known as “markup,” is completed this week, the bill can be expected to move to the House floor for a vote next week. The Senate is also expected to release its own tax reform bill later this week.

President Trump has indicated that he wants to sign a tax bill by Christmas. This sets a very aggressive timetable. The last major tax overhaul in 1986 began with a bill released by the Ways and Means Committee in November 1985 and ended with an act signed by President Reagan in October 1986, nearly a year later.

It is important to keep in mind that the procedure going forward is still largely uncertain, including whether or not legislation will ultimately be enacted. If legislation is passed, it appears likely that the final version will differ (possibly significantly) from the bill initially released by the Ways and Means Committee.

The tax professionals at Buchanan, Ingersoll & Rooney are closely monitoring the legislative process so that we will be poised to counsel our clients when greater clarity returns to the tax landscape. In addition, our government relations (GR) team is working on Capitol Hill for those clients who want to advocate for a particular position with respect to tax reform. Please give your Buchanan contact a call if we can be of help to you.

Highlights of Proposed Changes (Note: This list reflects the Chairman’s amendment released on November 3, 2017)

The following is certainly not an exhaustive list of proposed changes to the Tax Code (e.g., the bill includes many revisions applicable to the computation of individual income tax liability, including the reduction of the number of tax brackets, an increased standard deduction, the elimination of many deductions and exclusions, the elimination of alternative minimum tax, and changes to tax credits), but the highlighted changes may end up being the most impactful for many of our clients.

Effective Date of Proposed Changes: Tax years beginning after 2017, unless otherwise indicated.


  • New Rate on Business Income. 25% maximum tax rate on portion of pass-through net income treated as qualified business income. All net income derived from a passive business activity would be treated as qualified business income, which essentially means that passive investment will generate income taxed at 25%. Pass-through owners or shareholders who receive income allocations from active business activities may elect to: (1) treat 30% as qualified business income and 70% as wage income, or (2) determine the ratio of qualified business income to wage income based on capital investment.
    • Income subject to preferential rates (e.g., net capital gains and qualified dividend income) would not be eligible to be recharacterized as qualified business income. Interest income properly allocable to a trade or business would be eligible to be recharacterized as qualified business income.
    • The new 25% rate on qualified business income would generally not apply to services businesses including legal, accounting, consulting, engineering, financial services, or performing arts.
    • The 25% rate on qualified business income would apply to sole proprietorships, partnerships, LLCs taxed as partnerships and S corporations.
  • Corporate Tax Rate. The current 35% top corporate rate would be reduced to 20% and a 25% rate would apply to personal service corporations.
  • Cost Recovery – Increased Expensing. Taxpayer would be able to fully/immediately deduct the entire cost of qualified property acquired and placed in service after September 27, 2017 and before January 1, 2023 (plus an additional year for certain qualified property with a longer production period).
    • Requirement that the original use of the property begin with the taxpayer would be repealed, but it must be the taxpayer’s first use of the property to qualify for immediate expensing.
    • Qualified property would not include any property used by a regulated public utility company or any property used in a real property trade or business.
  • Cost Recovery – Expansion of Section 179 Expensing. The small business expensing limitation would be increased to $5,000,000 and phase out amount increased to $20,000,000 (adjusted for inflation).
    • Definition of Section 179 property would be expanded to include qualified energy efficient heating and air-conditioning property.
  • Cash Method of Accounting. $5,000,000 average gross receipts threshold for corporations and partnerships with corporate partners that are not allowed to use the cash method of accounting increased to $25,000,000 (indexed for inflation). $10,000,000 average gross receipts exception to requirement for use of percentage-of-completion accounting method for long-term contracts increased to $25,000,000.
  • Interest Expense. The deduction for net interest expenses in excess of 30% of adjusted taxable income would be eliminated.
    • This limitation would not be applicable to real property trades or businesses but those businesses are not eligible for full expensing.
    • Businesses with average gross receipts of $25,000,000 or less would be exempt from this interest limitation.
  • Like-Kind Exchanges. The rule allowing deferral of gain on like-kind exchanges would be modified to allow for like-kind exchanges only with respect to real property. There would be a transition rule that allows like-kind exchanges of personal property to be completed if the taxpayer has either disposed of the relinquished property or acquired the replacement property on or before December 31, 2017.
  • Carried Interest. The bill would impose a three-year holding period requirement for qualification as long-term capital gain with respect to certain partnership interests received in connection with the performance of services.
  • Private Activity Bonds.  Under the bills, interest on newly issued private activity bonds would be included in income and, therefore, subject to tax. This change would be effective for bonds issued after 2017.
  • Business Credits. The following credits would be repealed: (i) 50% credit for clinical testing expenses for certain drugs and rare diseases; (ii) employer-provided child care credit; (iii) rehabilitation tax credit; (iv) work opportunity credit; (v) deduction for unused business credits; (vi) new markets tax credit; and (vii) credit for expenditures to provide access to disabled individuals
  • Energy Credits. The current 30% investment tax credit – for solar, fiber optic solar, fuel cell, and small wind energy producers – would be eliminated for any such facility constructed after 2021. A permanent 10% investment tax credit specifically for solar energy and geothermal energy producers will be completely eliminated for facilities constructed after 2027. In addition, the inflation adjustment for the production tax credit would be repealed for electricity produced at qualifying facilities, reverting back to the base rate of 1.5 cents/kW. This reduction would be effective for all electricity and coal produced at facilities, the construction of which begins after November 2, 2017.
  • Alternative Minimum Tax. Alternative minimum tax would be repealed.

 International Tax

  • Dividend Exemption System. The bill establishes a 100% dividend exemption for foreign-source dividends paid by foreign corporations to U.S. corporate shareholders owning at least 10% of the foreign entity. The provision disallows a foreign tax credit and a deduction would not be allowed for any foreign taxes (including withholding taxes) paid or accrued with respect to any exempt dividend. In addition, no deductions for expenses allocable to an exempt dividend would be allowed.
  • Offshore Repatriation. Repatriated accumulated foreign earnings held as cash or cash equivalent will face a one-time 12% tax; noncash assets would be taxed at 5%, payable over eight years at the election of the taxpayer.
  • Base Erosion Prevention. There would be a new category of inclusion for 10% U.S. shareholders (both corporate and individual) equal to 50% of their CFCs’ “foreign high return amount” – which is net income from most types of active businesses to the extent such net income exceeded a return (equal to the short term AFR for the year + 7 percentage points) on the CFC’s assets used in producing such income (measured by the adjusted bases of those assets). Foreign high returns would be allowed 80% foreign tax credits, which could not be carried forward or backward to that tax year. Certain exceptions for active financing and extraction activities would apply.
    • The deductible net interest expense of a U.S. corporation that is a member of an “international financial reporting group” (IFRP) would be limited to the extent of the U.S. corporation’s percentage of the reporting group’s EBITDA.
    •  An excise tax of 20% would be imposed on certain payments (other than interest) made by a U.S. corporation to a related foreign corporation that are deductible, includible in cost of goods sold, or includible in the basis of a depreciable or amortizable asset, unless the U.S. corporation elects to treat the payments as income effectively connected with the conduct of a U.S. trade or business. The provision provides for certain specific deductions, exceptions and allowances for limited foreign tax credits. The provision is effective for tax years beginning after 2018.
  •  Subpart F. CFC “look-through” rule for related corporations would be made permanent beginning after 2019. Stock attribution rules for determining “CFC” status would be revised such that a U.S. corporation would be treated as constructively owning stock held by its foreign shareholder and a requirement that a corporation must be controlled for an uninterrupted period of 30-days before it can be subject to U.S. tax on the CFC’s Subpart F income would be eliminated.

Estate, Gift and Generation-Skipping Transfer (GST) Taxes

  • Increased Exclusion Amount. The applicable exclusion amount for the Federal estate and gift tax as well as Federal GST tax would be increased to $10,000,000 adjusted for inflation (i.e., $11,200,000 in 2018). Currently, only 0.02% of taxpayers pay estate tax and, with an increase in the exemption, that percentage will decrease further; thereby, setting the stage for eventual repeal.
  • Eventual Repeal of Estate and GST. Federal estate tax and GST tax would be repealed in 2024; however, the step up in basis would be retained.
  • Eventual Reduction of Rate for Gift Tax. In contrast to the estate and GST taxes, the gift tax would remain in 2024 but with a reduced tax rate (from 40% to 35%).

Exempt Organizations

  • Changes in Investment Tax. The private foundation investment tax has been simplified into a single 1.4% rate, rather than the alternate 1% or 2% rates. This 1.4% tax would also be collected from many private colleges and universities on their investment income. 
  • Increased Reporting for Donor Advised Funds. Donor advised funds would be subject to additional reporting requirements regarding inactive donor advised funds and the average amount of grants made from their donor advised funds.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Buchanan Ingersoll & Rooney PC | Attorney Advertising

Written by:

Buchanan Ingersoll & Rooney PC

Buchanan Ingersoll & Rooney PC on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
- hide

JD Supra Privacy Policy

Updated: May 25, 2018:

JD Supra is a legal publishing service that connects experts and their content with broader audiences of professionals, journalists and associations.

This Privacy Policy describes how JD Supra, LLC ("JD Supra" or "we," "us," or "our") collects, uses and shares personal data collected from visitors to our website (located at (our "Website") who view only publicly-available content as well as subscribers to our services (such as our email digests or author tools)(our "Services"). By using our Website and registering for one of our Services, you are agreeing to the terms of this Privacy Policy.

Please note that if you subscribe to one of our Services, you can make choices about how we collect, use and share your information through our Privacy Center under the "My Account" dashboard (available if you are logged into your JD Supra account).

Collection of Information

Registration Information. When you register with JD Supra for our Website and Services, either as an author or as a subscriber, you will be asked to provide identifying information to create your JD Supra account ("Registration Data"), such as your:

  • Email
  • First Name
  • Last Name
  • Company Name
  • Company Industry
  • Title
  • Country

Other Information: We also collect other information you may voluntarily provide. This may include content you provide for publication. We may also receive your communications with others through our Website and Services (such as contacting an author through our Website) or communications directly with us (such as through email, feedback or other forms or social media). If you are a subscribed user, we will also collect your user preferences, such as the types of articles you would like to read.

Information from third parties (such as, from your employer or LinkedIn): We may also receive information about you from third party sources. For example, your employer may provide your information to us, such as in connection with an article submitted by your employer for publication. If you choose to use LinkedIn to subscribe to our Website and Services, we also collect information related to your LinkedIn account and profile.

Your interactions with our Website and Services: As is true of most websites, we gather certain information automatically. This information includes IP addresses, browser type, Internet service provider (ISP), referring/exit pages, operating system, date/time stamp and clickstream data. We use this information to analyze trends, to administer the Website and our Services, to improve the content and performance of our Website and Services, and to track users' movements around the site. We may also link this automatically-collected data to personal information, for example, to inform authors about who has read their articles. Some of this data is collected through information sent by your web browser. We also use cookies and other tracking technologies to collect this information. To learn more about cookies and other tracking technologies that JD Supra may use on our Website and Services please see our "Cookies Guide" page.

How do we use this information?

We use the information and data we collect principally in order to provide our Website and Services. More specifically, we may use your personal information to:

  • Operate our Website and Services and publish content;
  • Distribute content to you in accordance with your preferences as well as to provide other notifications to you (for example, updates about our policies and terms);
  • Measure readership and usage of the Website and Services;
  • Communicate with you regarding your questions and requests;
  • Authenticate users and to provide for the safety and security of our Website and Services;
  • Conduct research and similar activities to improve our Website and Services; and
  • Comply with our legal and regulatory responsibilities and to enforce our rights.

How is your information shared?

  • Content and other public information (such as an author profile) is shared on our Website and Services, including via email digests and social media feeds, and is accessible to the general public.
  • If you choose to use our Website and Services to communicate directly with a company or individual, such communication may be shared accordingly.
  • Readership information is provided to publishing law firms and authors of content to give them insight into their readership and to help them to improve their content.
  • Our Website may offer you the opportunity to share information through our Website, such as through Facebook's "Like" or Twitter's "Tweet" button. We offer this functionality to help generate interest in our Website and content and to permit you to recommend content to your contacts. You should be aware that sharing through such functionality may result in information being collected by the applicable social media network and possibly being made publicly available (for example, through a search engine). Any such information collection would be subject to such third party social media network's privacy policy.
  • Your information may also be shared to parties who support our business, such as professional advisors as well as web-hosting providers, analytics providers and other information technology providers.
  • Any court, governmental authority, law enforcement agency or other third party where we believe disclosure is necessary to comply with a legal or regulatory obligation, or otherwise to protect our rights, the rights of any third party or individuals' personal safety, or to detect, prevent, or otherwise address fraud, security or safety issues.
  • To our affiliated entities and in connection with the sale, assignment or other transfer of our company or our business.

How We Protect Your Information

JD Supra takes reasonable and appropriate precautions to insure that user information is protected from loss, misuse and unauthorized access, disclosure, alteration and destruction. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. You should keep in mind that no Internet transmission is ever 100% secure or error-free. Where you use log-in credentials (usernames, passwords) on our Website, please remember that it is your responsibility to safeguard them. If you believe that your log-in credentials have been compromised, please contact us at

Children's Information

Our Website and Services are not directed at children under the age of 16 and we do not knowingly collect personal information from children under the age of 16 through our Website and/or Services. If you have reason to believe that a child under the age of 16 has provided personal information to us, please contact us, and we will endeavor to delete that information from our databases.

Links to Other Websites

Our Website and Services may contain links to other websites. The operators of such other websites may collect information about you, including through cookies or other technologies. If you are using our Website or Services and click a link to another site, you will leave our Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We are not responsible for the data collection and use practices of such other sites. This Policy applies solely to the information collected in connection with your use of our Website and Services and does not apply to any practices conducted offline or in connection with any other websites.

Information for EU and Swiss Residents

JD Supra's principal place of business is in the United States. By subscribing to our website, you expressly consent to your information being processed in the United States.

  • Our Legal Basis for Processing: Generally, we rely on our legitimate interests in order to process your personal information. For example, we rely on this legal ground if we use your personal information to manage your Registration Data and administer our relationship with you; to deliver our Website and Services; understand and improve our Website and Services; report reader analytics to our authors; to personalize your experience on our Website and Services; and where necessary to protect or defend our or another's rights or property, or to detect, prevent, or otherwise address fraud, security, safety or privacy issues. Please see Article 6(1)(f) of the E.U. General Data Protection Regulation ("GDPR") In addition, there may be other situations where other grounds for processing may exist, such as where processing is a result of legal requirements (GDPR Article 6(1)(c)) or for reasons of public interest (GDPR Article 6(1)(e)). Please see the "Your Rights" section of this Privacy Policy immediately below for more information about how you may request that we limit or refrain from processing your personal information.
  • Your Rights
    • Right of Access/Portability: You can ask to review details about the information we hold about you and how that information has been used and disclosed. Note that we may request to verify your identification before fulfilling your request. You can also request that your personal information is provided to you in a commonly used electronic format so that you can share it with other organizations.
    • Right to Correct Information: You may ask that we make corrections to any information we hold, if you believe such correction to be necessary.
    • Right to Restrict Our Processing or Erasure of Information: You also have the right in certain circumstances to ask us to restrict processing of your personal information or to erase your personal information. Where you have consented to our use of your personal information, you can withdraw your consent at any time.

You can make a request to exercise any of these rights by emailing us at or by writing to us at:

Privacy Officer
JD Supra, LLC
10 Liberty Ship Way, Suite 300
Sausalito, California 94965

You can also manage your profile and subscriptions through our Privacy Center under the "My Account" dashboard.

We will make all practical efforts to respect your wishes. There may be times, however, where we are not able to fulfill your request, for example, if applicable law prohibits our compliance. Please note that JD Supra does not use "automatic decision making" or "profiling" as those terms are defined in the GDPR.

  • Timeframe for retaining your personal information: We will retain your personal information in a form that identifies you only for as long as it serves the purpose(s) for which it was initially collected as stated in this Privacy Policy, or subsequently authorized. We may continue processing your personal information for longer periods, but only for the time and to the extent such processing reasonably serves the purposes of archiving in the public interest, journalism, literature and art, scientific or historical research and statistical analysis, and subject to the protection of this Privacy Policy. For example, if you are an author, your personal information may continue to be published in connection with your article indefinitely. When we have no ongoing legitimate business need to process your personal information, we will either delete or anonymize it, or, if this is not possible (for example, because your personal information has been stored in backup archives), then we will securely store your personal information and isolate it from any further processing until deletion is possible.
  • Onward Transfer to Third Parties: As noted in the "How We Share Your Data" Section above, JD Supra may share your information with third parties. When JD Supra discloses your personal information to third parties, we have ensured that such third parties have either certified under the EU-U.S. or Swiss Privacy Shield Framework and will process all personal data received from EU member states/Switzerland in reliance on the applicable Privacy Shield Framework or that they have been subjected to strict contractual provisions in their contract with us to guarantee an adequate level of data protection for your data.

California Privacy Rights

Pursuant to Section 1798.83 of the California Civil Code, our customers who are California residents have the right to request certain information regarding our disclosure of personal information to third parties for their direct marketing purposes.

You can make a request for this information by emailing us at or by writing to us at:

Privacy Officer
JD Supra, LLC
10 Liberty Ship Way, Suite 300
Sausalito, California 94965

Some browsers have incorporated a Do Not Track (DNT) feature. These features, when turned on, send a signal that you prefer that the website you are visiting not collect and use data regarding your online searching and browsing activities. As there is not yet a common understanding on how to interpret the DNT signal, we currently do not respond to DNT signals on our site.

Access/Correct/Update/Delete Personal Information

For non-EU/Swiss residents, if you would like to know what personal information we have about you, you can send an e-mail to We will be in contact with you (by mail or otherwise) to verify your identity and provide you the information you request. We will respond within 30 days to your request for access to your personal information. In some cases, we may not be able to remove your personal information, in which case we will let you know if we are unable to do so and why. If you would like to correct or update your personal information, you can manage your profile and subscriptions through our Privacy Center under the "My Account" dashboard. If you would like to delete your account or remove your information from our Website and Services, send an e-mail to

Changes in Our Privacy Policy

We reserve the right to change this Privacy Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our Privacy Policy will become effective upon posting of the revised policy on the Website. By continuing to use our Website and Services following such changes, you will be deemed to have agreed to such changes.

Contacting JD Supra

If you have any questions about this Privacy Policy, the practices of this site, your dealings with our Website or Services, or if you would like to change any of the information you have provided to us, please contact us at:

JD Supra Cookie Guide

As with many websites, JD Supra's website (located at (our "Website") and our services (such as our email article digests)(our "Services") use a standard technology called a "cookie" and other similar technologies (such as, pixels and web beacons), which are small data files that are transferred to your computer when you use our Website and Services. These technologies automatically identify your browser whenever you interact with our Website and Services.

How We Use Cookies and Other Tracking Technologies

We use cookies and other tracking technologies to:

  1. Improve the user experience on our Website and Services;
  2. Store the authorization token that users receive when they login to the private areas of our Website. This token is specific to a user's login session and requires a valid username and password to obtain. It is required to access the user's profile information, subscriptions, and analytics;
  3. Track anonymous site usage; and
  4. Permit connectivity with social media networks to permit content sharing.

There are different types of cookies and other technologies used our Website, notably:

  • "Session cookies" - These cookies only last as long as your online session, and disappear from your computer or device when you close your browser (like Internet Explorer, Google Chrome or Safari).
  • "Persistent cookies" - These cookies stay on your computer or device after your browser has been closed and last for a time specified in the cookie. We use persistent cookies when we need to know who you are for more than one browsing session. For example, we use them to remember your preferences for the next time you visit.
  • "Web Beacons/Pixels" - Some of our web pages and emails may also contain small electronic images known as web beacons, clear GIFs or single-pixel GIFs. These images are placed on a web page or email and typically work in conjunction with cookies to collect data. We use these images to identify our users and user behavior, such as counting the number of users who have visited a web page or acted upon one of our email digests.

JD Supra Cookies. We place our own cookies on your computer to track certain information about you while you are using our Website and Services. For example, we place a session cookie on your computer each time you visit our Website. We use these cookies to allow you to log-in to your subscriber account. In addition, through these cookies we are able to collect information about how you use the Website, including what browser you may be using, your IP address, and the URL address you came from upon visiting our Website and the URL you next visit (even if those URLs are not on our Website). We also utilize email web beacons to monitor whether our emails are being delivered and read. We also use these tools to help deliver reader analytics to our authors to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

Analytics/Performance Cookies. JD Supra also uses the following analytic tools to help us analyze the performance of our Website and Services as well as how visitors use our Website and Services:

  • HubSpot - For more information about HubSpot cookies, please visit
  • New Relic - For more information on New Relic cookies, please visit
  • Google Analytics - For more information on Google Analytics cookies, visit To opt-out of being tracked by Google Analytics across all websites visit This will allow you to download and install a Google Analytics cookie-free web browser.

Facebook, Twitter and other Social Network Cookies. Our content pages allow you to share content appearing on our Website and Services to your social media accounts through the "Like," "Tweet," or similar buttons displayed on such pages. To accomplish this Service, we embed code that such third party social networks provide and that we do not control. These buttons know that you are logged in to your social network account and therefore such social networks could also know that you are viewing the JD Supra Website.

Controlling and Deleting Cookies

If you would like to change how a browser uses cookies, including blocking or deleting cookies from the JD Supra Website and Services you can do so by changing the settings in your web browser. To control cookies, most browsers allow you to either accept or reject all cookies, only accept certain types of cookies, or prompt you every time a site wishes to save a cookie. It's also easy to delete cookies that are already saved on your device by a browser.

The processes for controlling and deleting cookies vary depending on which browser you use. To find out how to do so with a particular browser, you can use your browser's "Help" function or alternatively, you can visit which explains, step-by-step, how to control and delete cookies in most browsers.

Updates to This Policy

We may update this cookie policy and our Privacy Policy from time-to-time, particularly as technology changes. You can always check this page for the latest version. We may also notify you of changes to our privacy policy by email.

Contacting JD Supra

If you have any questions about how we use cookies and other tracking technologies, please contact us at:

- hide

This website uses cookies to improve user experience, track anonymous site usage, store authorization tokens and permit sharing on social media networks. By continuing to browse this website you accept the use of cookies. Click here to read more about how we use cookies.