Updated Proposal for Year-End Tax Bill

After two weeks of negotiations, House Ways and Means Chairman Kevin Brady (R-TX) has updated his proposal for a year-end tax bill. The updated bill removes the section that extended many taxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. provisions, as well as a section that would make changes to start-up business costs, and instead replaces it with delays of many health care-related taxes, borne out of the Affordable Care Act.

• Health Care Taxes: First, the bill would delay the medical device tax from 2020 to 2025. Second, it would further delay the Cadillac TaxThe Cadillac Tax is a 40 percent tax on employer-sponsored health care coverage that exceeds a certain value. The aim: to curb health-care cost growth, reduce favorable tax treatment of employer-provided insurance, and help fund the Affordable Care Act (ACA). It was repealed in late 2019 before taking effect. , a tax on high-value insurance plans, from 2022 to 2023. It would repeal the excise taxAn excise tax is a tax imposed on a specific good or activity. Excise taxes are commonly levied on cigarettes, alcoholic beverages, soda, gasoline, insurance premiums, amusement activities, and betting, and typically make up a relatively small and volatile portion of state and local and, to a lesser extent, federal tax collections. on tanning beds and would further delay the health insurance premium tax from 2020 to 2022.
• Retirement Savings: The bill includes several changes to the administration of retirement accounts, particularly as they relate to small employers. Additionally, individuals would now be able to withdraw up to $7,500, without penalty, from retirement accounts for the birth or adoption of a child. It would also allow individuals to contribute to traditional Individual Retirement Accounts (IRAs) past the age of 70½.
• Technical Corrections: The bill includes several “technical corrections” to the Tax Cuts and Jobs Act of 2017. It would clarify that qualified improvement property can be immediately deducted and clarifies an issue with the treatment of net operating losses.
• Miscellaneous Other Provisions: The bill would also repeal a change made by the Tax Cuts and Jobs Act that would require nonprofits to begin paying taxes on the parking benefits provided to employees. The bill also defines eight disaster relief zones and areas, including those from Hurricanes Florence and Michael, western wildfires, and weather events in Hawaii, which will qualify for tax-related disaster relief assistance. This includes penalty-free withdrawals from retirement accounts, an employee retention credit, and other provisions.

The bill still needs to be considered by the full House of Representatives before moving to the Senate. We’ll continue to monitor any developments and update our analysis.

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