NTF Issue paper: cong151.doc. 9-18.
NEBRASKA TAXPAYERS FOR FREEDOM ISSUE PAPER:
PROTECT NEBRASKA INDIVIDUAL AND SMALL BUSINESS TAX CUTS: 1st in a series of 3 issue papers.
BACKGROUND. Conservative congressmen advanced from the House Ways & Means Committee 3 bills to further tax relief for Americans. The first Trump Tax Cut has seen hundreds of companies offer pay raises, bonuses, or increased pension benefits. Conservative congressmen with President Trump want to make permanent the first tax cuts and offer a 2nd round to help still overtaxed citizens and stimulate our economy.
THE FIRST BILL. HR 6760, the Protecting Family & Small Business Tax Cuts Act, includes several key clauses. Sponsor is Rep. Rodney Davis (Ill.). It would permanently lower individual federal income tax rates and thresholds and permanently increase standard deductions of $12,000 for single filers and $24,000 for married couples filing jointly. Permanent doubling of the child tax credit to $2,000 per child and higher phase-out threshold. Permanent repeal of former personal and dependent exemptions and permanent $500 non-child dependent credit. Permanent $10,000 cap on state and local deductions and $750,000 cap on mortgage interest deduction for new mortgages. Permanent repeal of phase-out of itemized deductions and smaller miscellaneous individual itemized deductions. Increased alternative minimum tax exemption for individuals guaranteed. Elimination of the AMT for 96% of those who paid it in 2017. A permanent increase in doubled estate ($11.2 million per individual) and gift tax exemptions and phase-outs. Continuance of student loans dismissed because of death or disability. A 2-year extension of expanded deduction for medical expenses over 7.5% of adjusted gross income, lower than the pre-tax reform level of 10%. A permanent 20% deduction for pass-through business income. Guaranteed increased percentage limit for charitable cash contributions to public charities. Unlimited bonus depreciation extended. Congress thus would make provisions of the first tax bill permanent, because many provisions otherwise would expire after 2025. The original tax cut bill reduced taxes only for businesses incorporated as C corporations. Most farmers and ranchers file taxes as sole proprietors, partnerships, or S corporations, which this bill includes. Uncertainty caused by temporary tax provisions in the original tax cut bill make the already difficult business of operating a farm or ranch tougher.
RESULTS. This bill would continue to allow the economy to blossom and protect citizens from future tax hikes. Charitable contributions and 529 education accounts protected. Also protected are qualified moving expense reimbursement exclusions now limited to armed forces members. Taxes would decline for all income groups, amounts declining for about $3.6 trillion from 2026-2038. Taxes would drop by an average of $1,600 per household in 2026, lifting average after-tax incomes by 1.6%. Continuing individual tax cuts would increase incentives for work and savings and result in increased economic output. 1.5 million new jobs, continued higher wages, and boosted Gross Domestic Product by 2.2% (Tax Foundation, 2018). Families and small businesses would keep more of their earnings. The Tax Foundation estimates that the reduction in the time needed to file a tax return will translate into a $3.1- $5.4 billion reduction in compliance costs for workers and families. Small business owners are reporting record increases in profits, wages, employment, and plans to expand. Tax Reform 2.0 will lock in this incredibly important provision, so that our small businesses can continue to hire, invest, and grow in their communities.
PROGRESS. The House Ways & Means Committee advanced this bill on 9-13-18. The bill now awaits a full House vote.
SUPPORTERS. Americans for Tax Reform endorsed HR 6760 as spurring investment in new business. Associated Builders & Contractors joined the National Electrical Contractors Association to support the bill. The Heritage Foundation, National Federation of Independent Business, National Taxpayers Union, and Tax Foundation joined other supporters. The American Farm Bureau Federation endorsed this bill.
OPPOSITION. The Democrat Party opposes this bill.
TAKE ACTION NOW. Contact your congressman today to co-sponsor and support HR 6760 to guarantee continued tax relief and economic expansion, particularly for small businesses. Email netaxpayers@gmail.com for congressional office contact information and to join the NTF Congress Watch Project.
H.R. 6757, the Family Savings Act of 2018, sponsored by Rep. Mike Kelly (R-PA), and cosponsored by Rep. Paul Mitchell (R-MI), House Ways and Means Committee Chairman Kevin Brady (R-TX), and all other Ways and Means Committee Republicans. “With more than 60 percent of Americans not having enough savings to cover a $1,000 emergency expense, the passage of the Family Savings Act is especially critical. After all, real financial security is not about how much one makes but about how much one saves. With my bill’s provisions, families and workers will have new, much fairer ways to prepare for the future and be able to tackle whatever life may throw their way.
“I look forward to the entirety of Tax Reform 2.0 coming to the floor of the People’s House for final passage. When it comes to protecting the benefits of the Tax Cuts and Jobs Act for everyday Americans, now is the right time to double down on a good thing and make it even better!”
H.R. 6756, the American Innovation Act of 2018, sponsored by Tax Policy Subcommittee Chairman Vern Buchanan (R-FL), and cosponsored by House Ways and Means Committee Chairman Kevin Brady (R-TX) and all other Ways and Means Committee Republicans.
The Family Savings Act
House Ways and Means Republican members, led by Chairman Brady and Rep. Mike Kelly (R-PA), sponsor the “Family Savings Act of 2018” (H.R. 6757), which includes many provisions of Rep. Kelly’s “Retirement Enhancement and Savings Act” (RESA). The new bill drops several major provisions of the earlier bill and includes several new provisions.
Key provisions from the earlier Kelly bill that are retained in H.R. 6757 include changes to expand retirement coverage among small businesses through the creation of Open Multiple Employer Plans, or MEPs. The bill would ease portability of lifetime income investments in plans, repeal the maximum age for contributing to a traditional IRA, and block loans from qualified employer-provided plans through credit cards. The bill also retains a provision that provides relief to frozen defined benefit plans. Further, the bill includes a new provision that would exempt from required minimum distribution rules individuals whose aggregated account balances total less than $50,000.
Among provisions of the earlier bill that are not included in the bill slated to be marked up by the Ways and Means Committee is the limit on “inherited IRAs” that was previously included as a revenue offset. H.R. 6757 does not include an alternative offset. Other omissions include two provisions that are strongly supported by the insurance industry. One would require benefit statements to include a lifetime income disclosure that would convert a participant’s current account balance into a monthly annuity at retirement age. Another would provide relief from fiduciary liability for employers in the selection of an annuity provider, creating a safe harbor based on the annuity provider’s status under state insurance laws.
The new bill also does not include two provisions that were aimed at promoting auto-enrollment in employer plans. One would remove the current 10% cap on contributions in auto-escalation arrangements. The second provided for an increase in the “start-up” tax credit for small businesses that create a plan and grant an additional credit if a plan adopts auto-enrollment.
As had been previously signaled, the bill introduced includes new “family-friendly” savings provisions. Universal Savings Accounts would allow annual cash contributions up to the lesser of $2,500, indexed for inflation, or the gross income of the individual. The accounts would generally be exempt from taxation. Distributions could be taken at any time for any purpose. Section 529 plans would be expanded to cover apprenticeships, homeschooling expenses, and student loan repayments. Finally, the bill would allow penalty-free, but not tax-free, withdrawals from qualified retirement plans for expenses related to the birth or adoption of a child in the first year after the birth or adoption. The bill caps the amount that can be withdrawn penalty-free at $7,500.
H.R. 6757, the Family Savings Act of 2018, sponsored by Rep. Mike Kelly (R-Pa.), and cosponsored by Rep. Paul Mitchell (R-Mich.), and Chairman Brady (R-Texas), and all other Ways and Means Committee Republicans. This bill includes four reforms aimed to simplify retirement savings, create a new universal savings account, expand the use of 529 education savings accounts, and allow families to access their own savings to support parental leave.
Retirement savings: Tax reform 2.0 will allow small employers to pool together to offer retirement benefits, repeal the maximum age for new contributions, add new exemptions from minimum distribution rules, as well as other modifications.
Universal savings accounts: Tax Reform 2.0 includes new small universal savings accounts that would allow taxpayers to contribute up to $2,500 a year. Withdrawals would be tax-free and not reserved strictly for retirement.
Education savings: Last year’s reforms modified college savings or “529” plans to allow parents to use money in these accounts for K-12 expenses. Tax Reform 2.0 would build on these reforms by allowing the money saved in 529 accounts to go toward homeschooling, apprenticeship, and student loan expenses.
New child and adoption savings: Tax Reform 2.0 would give families access to their own retirement accounts to support parental leave for the birth or adoption of a new child.
Family Savings Act he second component of Tax Reform 2.0 is the Family Savings Act of 2018. This bill includes four important reforms to simplify retirement savings, create a new universal savings account, expand the use of 529 education savings accounts, and allow families to access their own savings to support parental leave.
Retirement savings.
Personal retirement savings accounts, such as 401(k)s and IRAs, are crucial for personal retirement savings because they shield investments from being taxed twice and thus encourage people to save for their own retirement. Yet many Americans, especially those employed by small businesses, don’t take advantage of these plans due to their complexity and high compliance costs.
Tax reform 2.0 will work to allow small employers to pool together to offer retirement benefits, repeal the maximum age for new contributions, add new exemptions from minimum distribution rules, as well as other modifications. The reforms stop well short of the much needed complete overhaul of retirement taxation, but they are a small step in the right direction.
Universal savings accounts.
Tax Reform 2.0 includes new small universal savings accounts that would allow taxpayers to contribute up to $2,500 a year. Withdrawals would be tax-free and not reserved strictly for retirement.
These simplified accounts have proven successful in Canada and the United Kingdom and would help Americans protect more of their savings from taxation without all the retirement strings attached.
Regrettably, a contribution limit of $2,500 a year is much too low. People’s lives are full of ups and down, and they should be able to save if they have a good year—putting money away when times are good in order to provide in times of need. Under the currently proposed limit, a family could save every year for the first 18 years of their child’s life and still have saved less than one year’s tuition at many private colleges.
Education savings.
Last year’s reforms modified college savings or “529” plans to allow parents to use money in these accounts for K-12 expenses. It was a good step forward.
Tax Reform 2.0 would build on these reforms by allowing the money saved in 529 accounts to go toward homeschooling, apprenticeship, and student loan expenses. These reforms help parents and students pay for education options outside the traditional school system, giving Americans more choice in their education.
New child and adoption savings.
Tax Reform 2.0 would give families access to their own retirement accounts to support parental leave for the birth or adoption of a new child. Allowing workers to make penalty-free withdrawals from their IRAs or 401(k)s for family leave would help increase access to affordable and sustainable family leave.
The second bill, the Family Savings Act of 2018, provides for changes to retirement and education accounts and creates a new tax-deferred savings account. Specifically, this proposed law would:
• Establish “Universal Savings Accounts,” described as a “flexible savings tool that families can use any time that’s right for them,”
• Expand Section 529 plans,
• Allow penalty-free withdrawals from retirement plans for individuals in the case of a birth of a child or adoption,
• Provide rules for multiple employer plans and pooled employer plans that would “allow small businesses to join together to create a 401(k) plan more affordably,”
• Provide rules relating to the election of safe harbor 401(k) plan status,
• Treat certain taxable nontuition fellowship and stipend payments as compensation for IRA purposes,
• Repeal the maximum age for traditional IRA contributions,
• Prohibit qualified employer plans from making loans through credit cards and other similar arrangements,
• Provide for portability of lifetime income investments,
• Explain the treatment of custodial accounts on termination of Section 403(b) plans,
• Clarify retirement income account rules relating to church-controlled organizations,
• Exempt individuals with certain account balances from required minimum distribution rules, and
• Clarify the treatment of certain retirement plan contributions picked up by governmental employers for new or existing employees.
Personal retirement savings accounts, such as 401(k)s and IRAs, are crucial for personal retirement savings because they shield investments from being taxed twice and thus encourage people to save for their own retirement. Yet many Americans, especially those employed by small businesses, don’t take advantage of these plans due to their complexity and high compliance costs.
Tax reform 2.0 will work to allow small employers to pool together to offer retirement benefits, repeal the maximum age for new contributions, add new exemptions from minimum distribution rules, as well as other modifications. The reforms stop well short of the much needed complete overhaul of retirement taxation, but they are a small step in the right direction.
A second bill aims to help Americans save more. The bill also proposes a clarification to the expanded child tax credit. The bill would make clear that, to claim the credit, a taxpayer identification number (TIN) would be necessary for any non-child dependent; the TIN could be a Social Security number or an individual taxpayer identification number (ITIN).
The Joint Committee on Taxation anticipates that these changes would result in a net loss of $631 billion in revenue over the next ten years (report downloads as a pdf).
H.R. 6757, Family Savings Act of 2018, is sponsored by Representative Mike Kelly (R-PA). The proposal is touted as helping families “save more and earlier throughout their lives by expanding access to new and existing savings vehicles.” As part of the bill, taxpayers may create a universal savings account and contribute up to $2,500 each year; distributions would generally not be includible in gross income.
The bill would also modify section 529 plans. Under the proposal, tax-free distributions could be used to pay for books, supplies, equipment, and fees for an apprenticeship program and for certain homeschool expenses. It would also expand the definition of qualifying expenses to include those for fees, academic tutoring, special needs services, books, supplies, and other equipment, incurred in connection with enrollment or attendance at an elementary or secondary school. Finally, the bill would allow up to $10,000 in lifetime distributions to be used to pay principal or interest on qualified education loans. Tax Reform 2.0 includes new small universal savings accounts that would allow taxpayers to contribute up to $2,500 a year. Withdrawals would be tax-free and not reserved strictly for retirement.
These simplified accounts have proven successful in Canada and the United Kingdom and would help Americans protect more of their savings from taxation without all the retirement strings attached.
Regrettably, a contribution limit of $2,500 a year is much too low. People’s lives are full of ups and down, and they should be able to save if they have a good year—putting money away when times are good in order to provide in times of need. Under the currently proposed limit, a family could save every year for the first 18 years of their child’s life and still have saved less than one year’s tuition at many private colleges.
Education savings.
Last year’s reforms modified college savings or “529” plans to allow parents to use money in these accounts for K-12 expenses. It was a good step forward.
Tax Reform 2.0 would build on these reforms by allowing the money saved in 529 accounts to go toward homeschooling, apprenticeship, and student loan expenses. These reforms help parents and students pay for education options outside the traditional school system, giving Americans more choice in their education.
New child and adoption savings.
Tax Reform 2.0 would give families access to their own retirement accounts to support parental leave for the birth or adoption of a new child. Allowing workers to make penalty-free withdrawals from their IRAs or 401(k)s for family leave would help increase access to affordable and sustainable family leave.
Encouraging new business innovation.
The third and last major component of Tax Reform 2.0 is the American Innovation Act of 2018. This bill would allow new businesses and entrepreneurs to write off more of their initial start-up costs.
Currently, new businesses are only able to deduct up to $5,000 of their initial start-up expenses, forcing them to write off the remainder over the next 15 years. This makes it more expensive to start new businesses.
Under Tax Reform 2.0, new entrepreneurs could deduct up to $20,000 of their start-up costs and increase their ability to transfer other tax benefits, like operating losses and tax credits, to new owners.
The changes included in Tax Reform 2.0 would certainly benefit fledgling small businesses, but there is one glaring component missing from the House Republican agenda. Much like writing off start-up expenses, expensing for established businesses should also be expanded (beyond what was provided for in the 2017 reform) and made permanent.
Expensing would allow businesses to deduct their costs immediately. The old tax law made businesses wait years before deducting their investment costs from their taxable income. This had the effect of needlessly increasing the cost of investing in everything, from new equipment and machinery to expanding existing workspace or even building new facilities.
Expensing makes it more affordable for new businesses to open and for mature businesses to upgrade and expand their operations—something that results in more jobs and enables employers to raise wages.
The second bill, the Family Savings Act of 2018 (H.R. 6757), includes changes to retirement and education accounts and creates a new tax-deferred savings account.
For starters, the measure would remove the age limit on individual retirement account contributions. Currently, IRA owners cannot make additional contributions beginning in the year they turn 70½. Roth IRAs, by contrast, do not have a contribution age limit.
It also would exempt people with less than $50,000 in their retirement accounts from taking required minimum distributions, which start when you turn 70½. It also would allow families to withdraw up to $7,500, penalty-free, from retirement accounts for costs related to a new child, whether by birth or adoption.
Additionally, 529 education account could be used to cover the cost of home schooling, for fees related to a trade apprenticeship and to help pay off a student debt.
The bill also endorses Universal Savings Accounts, which would allow savers to set aside tax-advantaged money for basically anything.
The accounts, which would come without restrictions on when (or why) the owners can make use of them, would work similarly to Roth IRAs. Up to $2,500 of after-tax income yearly could be contributed to an account, while the withdrawals — including any investment gain or interest — would be tax-free.
Another provision would allow smaller firms to more easily band together to offer their employees a 401(k) plan. As it stands, so-called multiple employer plans restrict exactly which businesses can team up.
For start-up businesses
The third bill is called the American Innovation Act of 2018 (H.R. 6756). Just 15 pages long, it would let new businesses deduct up to $20,000 in start-up expenses in the year they are incurred as long as they meet certain qualifications.
One of the provisions under this branch of the bill would eliminate the contribution age limit for IRA accounts, which is currently 70.5. It would also remove the required minimum distribution withdrawals for those with less than $50,000 in their accounts and would allow for penalty-free withdrawals for certain child-care related costs.
Republicans are also looking to make it easier for small businesses to offer retirement plans by letting them band together to offer joint plans – an effort to reduce costs.
The bill encourages the use of Universal Savings Accounts. Contributions into a Universal Savings Account would be taxed, but earnings would grow tax-free and would be easier to withdraw than a traditional 401(k) or other retirement account.
A May report from Northwestern Mutual found that 21 percent of Americans have no retirement savings at all, while two-thirds of people with a savings account or plan are certain their funds will run dry too soon.
“We are looking at ways where it’s easier for families to save earlier in life and more over time, whether it’s for health care or for retirement,” Brady has said. “We think America is not a nation of savers; we want it to be.” The second bill, the Family Savings Act of 2018 (H.R. 6757), includes changes to retirement and education accounts and creates a new tax-deferred savings account.
For starters, the measure would remove the age limit on individual retirement account contributions. Currently, IRA owners cannot make additional contributions beginning in the year they turn 70½. Roth IRAs, by contrast, do not have a contribution age limit.
It also would exempt people with less than $50,000 in their retirement accounts from taking required minimum distributions, which start when you turn 70½. It also would allow families to withdraw up to $7,500, penalty-free, from retirement accounts for costs related to a new child, whether by birth or adoption.
Additionally, 529 education account could be used to cover the cost of home schooling, for fees related to a trade apprenticeship and to help pay off a student debt.
The bill also endorses Universal Savings Accounts, which would allow savers to set aside tax-advantaged money for basically anything.
The accounts, which would come without restrictions on when (or why) the owners can make use of them, would work similarly to Roth IRAs. Up to $2,500 of after-tax income yearly could be contributed to an account, while the withdrawals — including any investment gain or interest — would be tax-free.
Another provision would allow smaller firms to more easily band together to offer their employees a 401(k) plan. As it stands, so-called multiple employer plans restrict exactly which businesses can team up.
The Ways and Means Committee passed the savings measure 21 to 14 on Thursday.
The American Innovation Act
H.R. 6756, the American Innovation Act of 2018, sponsored by Tax Policy Subcommittee Chairman Vern Buchanan (R-Fl.), and cosponsored by Chairman Brady (R-Texas) and all other Ways and Means Committee Republicans.
The third bill, would allow new businesses to deduct more of their initial start-up costs. Currently, new businesses are only able to deduct up to $5,000 of their initial start-up expenses, forcing them to write off the remainder over the next 15 years. This makes it more expensive to start new businesses. Under Tax Reform 2.0, firms could deduct the lesser of their start-up expenses or $20,000. The $20,000 amount would be reduced for firms with more than $120,000 in expenses. Expenses that could not be deducted immediately would be amortized over 180 months.
For their part, House Speaker Paul Ryan (R-Wis.) and Majority Leader Kevin McCarthy (R-Calif.), noted that they intend to bring the Tax Cuts 2.0 plan to the House floor for a vote this month. A floor vote could potentially occur during the week of Sept. 24—as the House is currently scheduled to be out of session during the week of Sept. 17.
However, even if the lower chamber can clear the Tax Reform 2.0 plan, its prospects remain dubious in the Senate, where 60 votes (and thus the acquiescence of at least nine Democrats) would be required to overcome procedural hurdles and secure its passage.
Nonetheless, some have theorized that the new components of the Tax Cuts 2.0 effort – that is, those related to retirement savings and business innovation – could potentially be in play, along with other tax items such as tax extenders and some technical corrections to the 2017 tax bill, during the post-election “lame duck” session of Congress.
The third and last major component of Tax Reform 2.0 is the American Innovation Act of 2018. This bill would allow new businesses and entrepreneurs to write off more of their initial start-up costs.
Currently, new businesses are only able to deduct up to $5,000 of their initial start-up expenses, forcing them to write off the remainder over the next 15 years. This makes it more expensive to start new businesses.
Under Tax Reform 2.0, new entrepreneurs could deduct up to $20,000 of their start-up costs and increase their ability to transfer other tax benefits, like operating losses and tax credits, to new owners.
The changes included in Tax Reform 2.0 would certainly benefit fledgling small businesses, but there is one glaring component missing from the House Republican agenda. Much like writing off start-up expenses, expensing for established businesses should also be expanded (beyond what was provided for in the 2017 reform) and made permanent.
Expensing would allow businesses to deduct their costs immediately. The old tax law made businesses wait years before deducting their investment costs from their taxable income. This had the effect of needlessly increasing the cost of investing in everything, from new equipment and machinery to expanding existing workspace or even building new facilities.
Expensing makes it more affordable for new businesses to open and for mature businesses to upgrade and expand their operations—something that results in more jobs and enables employers to raise wages.
The third bill, called the American Innovation Act of 2018, is the briefest of the three, at only 15 pages. It would allow new businesses to deduct up to $20,000 in start-up expenses in the year they’re incurred so long as they meet certain qualifications. Specifically, this bill would:
• Simplify and expand deductions for start-up and organizational expenditures, and
• Preserve start-up net oper
The final part of the package looks to expand tax breaks for startup businesses. Businesses that qualify could deduct up to $20,000 in expenses. H.R. 6756, American Innovation Act of 2018, is sponsored by Ways and Means Tax Policy Subcommittee Chairman Vern Buchanan (R-FL). The bill would help brand-new businesses with start-up and organizational expenditures by consolidating the rules to allow taxpayers to deduct up to $20,000 of start-up and organizational costs. Under current law, taxpayers were limited to a deduction of $5,000 for each.
The bill would also allow new companies which experience a change in ownership to claim certain tax breaks that were previously limited. Specifically, a start-up business’ pre-change net operating loss carryforwards, net operating losses, general business credit carryforwards, and general business credits would be available for use in a post-change year. Under current law, an ownership change would subject the company to significant limitations.
The Joint Committee on Taxation anticipates that these changes would result in a net loss of $5.4 billion in revenue over the next ten years (report downloads as a pdf).
If you add up all of the estimates, the total loss of revenue for three bills is projected to reach approximately $657 billion. With those kinds of losses and an escalating federal deficit, the bills are not expected to clear the Senate intact.
“We are helping entrepreneurs grow,” Brady said in a statement. “The American Innovation Act will increase innovation by helping new entrepreneurs move from the kitchen table to Main Street and beyond. The country that wins the innovation race wins the future, and it’s time for our tax code to help us get there.” Why it matters: House Republicans may pass the package this month, but the legislation has little chance of getting through the Senate, where it would need Democratic votes. Even some Republicans, especially those in high-tax states where residents may be hurt by an extension of the limits on deducting state and local taxes, are reportedly worried about voting for the package. So this is all about setting up political messaging at this point — and even there, it’s not clear how much Republicans stand to gain, given that the first round of tax cuts hasn’t been very popular and the new proposals open GOP lawmakers up to renewed criticism that they’re willing to explode the deficit further to provide tax cuts that largely benefit the wealthiest Americans.
“After handing massive unpaid-for tax breaks to Big Pharma, Wall Street and the wealthiest 1 percent with the first GOP tax scam for the rich, House Republicans are here with more of the same,” House Democratic leader Nancy Pelosi said in a statement Monday. “With version 2.0 of the GOP tax scam for the rich, Republicans want to add even more to the deficit, and even more to the bank accounts of the wealthiest 1 percent. Then, Republicans will use the massive deficit from their tax scam to justify ransacking the Medicare, Medicaid and Social Security that seniors and working families rely on.”
Michael Linden of the left-leaning Roosevelt Institute noted that President Trump recently cited the need “to put our nation on a fiscally sustainable course” in canceling 2.1 percent pay raises for civilian federal workers. “A simple question every GOP candidate should have to answer: How come we can’t afford cost of living raises for middle-class public employees, but we can afford trillions in new tax cuts for millionaires?” he tweeted.
Still, Republicans are pushing ahead and portraying the legislation as a way to give American families certainty around the tax code and cement benefits for the middle class, betting that it can provide a cudgel to use against Democrats who vote against it. House Ways and Means Committee Chairman Kevin Brady (R-TX) said the Tax Cuts 2.0 package will create more than 1.5 million new jobs, raise wages and boost GDP. “Republicans gave Congress almost a full decade to extend these individual tax cuts before they expire,” notes The Washington Post’s Jeff Stein, “but the law’s mediocre polling numbers and the difficult election outlook for House Republicans have increased their sense of urgency.”
Innovation
Main provisions of the “American Innovation Act of 2018” (H.R. 6756) are:
— Expanded deduction for start-up and organizational costs — The bill would increase the Section 195 deduction for certain start-up costs from $5,000 to $20,000. The deduction is phased out for costs that exceed $120,000 (up from $50,000). Excess costs would continue to be amortized ratably over 180 months. The bill would also clarify the definition of start-up and organizational expenses and the application of the provision to pass through entities.
— Preservation of Operating Losses and Tax Credits of Start-up Companies — The bill would provide an exception to current rules that limit the use of net operating losses (Section 382) and certain tax credits (Section 383) when there is an ownership change to avoid the loss of tax benefits when a start-up business engages in additional rounds of financing. For start-up businesses, any losses or tax credits that occurred in the three-year period prior to the ownership change would not be subject to the Section 382 and 383 limitations, allowing the business to utilize the net operating losses and tax credits available in the year prior to the financing and change in ownership. In order to qualify, the trade or business must continue in business for at least two years following the change. The provision would apply to an active trade or business that begins after September 10, 2018.
Small business owners are reporting record increases in profits, wages, employment, and plans to expand. Tax Reform 2.0 will lock in this incredibly important provision so that our small businesses can continue to hire, invest, and grow in their communities.