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Introduction

On December 15, 2017, the conferees working on reconciling the differences between the House and Senate versions of the Tax Cuts and Jobs Act held a signing ceremony and released legislative text and a Joint Explanatory Statement. This client alert describes the contents of the legislation (the “Conference Agreement” or “bill”) and provides some preliminary observations.
At the time of writing, both the House and Senate had passed the bill with only Republican votes. The bill will be sent to the president’s desk for signature, although a signing ceremony has not been scheduled yet.

In addition to passing the tax bill, Congress must pass a continuing resolution to fund the government beyond December 22. At the time this client alert was drafted, we expected the continuing resolution to fund the government through mid-January or February. It is possible that the continuing resolution may contain tax provisions. In particular, the continuing resolution would serve as a useful vehicle to delay some of the tax provisions in the Affordable Care Act, such as the medical device excise tax and the health insurance providers fee.

Many commenters have observed that the tax bill was quickly drafted and has not been fully vetted by stakeholders, which means that the bill may contain drafting errors that lead to unintended consequences. Some taxpayers have expressed concern that some of the provisions may be unworkable as currently drafted. In response, Republican leadership has announced plans to introduce a technical corrections bill in early 2018 to address any errors. However, taxpayers should be aware that passing a technical corrections bill will be legislatively difficult. Reconciliation is not a viable option for a technical corrections bill, which means that 60 votes will be required to pass the bill in the Senate. If Republicans cannot persuade their Democratic counterparts to support a technical corrections bill, that will increase the pressure on Treasury to issue regulations that address any errors and uncertainties in an administrable fashion. The situation here is similar to the situation faced by Democrats after the Affordable Care Act was passed—because Democrats did not control 60 seats in the Senate and Republicans were unwilling to vote for a technical corrections bill, drafting errors remain uncorrected. While it is too early to tell whether Democrats will withhold their votes, Republicans have done nothing to incentivize them to participate in the technical corrections process.

The Joint Committee on Taxation (JCT) is preparing a bluebook describing the legislation, although it will not be released until after the legislation is signed. Although JCT documents are not technically legislative history, they have historically been viewed as an accurate reflection of Congress' views at the time legislation was passed. As a result, JCT documents are often consulted during the guidance process and may influence Treasury and the IRS' views about legislative intent.

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