Friday evening, the Tax Cuts and Jobs Act was finalized, paving the way for a once in a generation overhaul of the U.S. Tax code. The legislation, which fully maintains the tax-exempt status for private-activity bonds, is expected to pass both chambers and be signed into law by the President by weeks-end.
PABs Preserved
One uncertainty entering the release Friday evening was the fate of PABs. Chairman Brady stated his long standing position of concern with the scope and scale in the usage of private-activity bonds. The Chairman pushed to retain their status for “infrastructure only,” but terminate the ability to issue 501c3 bonds for housing and health care.
Municipal advance refundings were fully repealed in the conference report. The legislation does not provide a delay in effective date or relief through transition rules, with the law going into effect December 31, 2017. The BDA is talking with State and local groups about working with Capitol Hill and Treasury on a possible technical fix to the repeal of advance refundings. We’ll provide more information very soon.
Highlights of the the legislation, which includes sweeping individual and corporate tax cuts, include (Effective date December 31, 2017):
- Maintains the tax-exempt status of governmental municipal bonds and private-activity bonds;
- Repeals municipal advance refundings.
- Seven individual tax brackets: 10%, 12%, 22%, 28%, 32%, 35% and 37%;
- Lowers the corporate rate to 21%;
- State and Local Tax Deduction: Individuals are allowed to deduct up to $10,000 in income, property and sales tax;
- Mortgage Interest Deduction: Cap lowered to $750,000 for new home purchases;
- Includes the repeal of the individual mandate of the Affordable Care Act
Next Steps
The House of Representatives is expected to vote on the measure tomorrow afternoon, with the Senate following suit as early as tomorrow evening. There are still some questions on the Senate side, with Senator John McCain(R-AZ) returning home to Arizona and Senator Thad Cochran (R-MS) health status unknown.
With a Continuing Resolution needed to be finalized by Friday December, 21st to avoid a government shutdown, Republican leadership continues to maintain the position that the bill will be signed into law by mid-week.
