Senate Passes Tax Reform Bill With Last Minute Changes
Early Saturday, December 2, 2017, the Senate passed their version of the Republican tax bill in a 51-49 vote along party lines. Though the version passed makes progress towards the goal of lower corporate tax rates, several last minute provisions may impact financial institutions and their shareholders.
Key provisions of the bill include the following:
- A C Corporation tax rate of 20%
- A 23% deduction for pass-through entities resulting in a maximum effective rate on S Corporation earnings of 29.60%
- A top tax rate for individuals of 38.5%
- The addition of both the corporate alternative minimum tax and personal alternative minimum tax, which had been eliminated in earlier versions
The tax rate cuts for individuals as well as the deduction for pass-through entities would be set to expire in 2026 though presumably these could be extended at a later date.
The next step is for the House and Senate to reconcile their two versions of the tax bill, which will likely result in more changes. Republicans hope to provide a final version to the President for signature before the new year.
Though many of these provisions may still be refined as the bill is reconciled through Congress, institutions should begin analyzing how these proposals will impact their effective tax rate, deferred tax assets, and long term strategic plans.
Amanda Garnett is a principal in the financial institutions practice of CliftonLarsonAllen (CLA) from Peoria, Illinois. She currently leads the firm’s Midwest financial institution tax team and serves institutions ranging in size from $15 million to $3.5 billion in total assets. In addition to tax compliance, Amanda assists clients in the areas of tax consulting, mergers and acquisitions, and regulatory reporting. She also routinely teaches courses for banking associations across the country.
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