A lot has happened in the past month on tax reform. On November 16, the House passed its version of a tax bill, the Tax Cuts and Jobs Act (H.R.1), just under a week after the Senate released its own version of the bill. After a tenuous 20 hours of debate and deal-making, the Senate then passed a version in the early morning of December 2. Now Congress has two versions of the bill, each with some marked differences.
Now, the bill moves to the reconciliation process, where a conference committee composed of appointed senators and representatives will work to iron out the differences between the chambers. While the two versions have moved more closely in terms of city priorities, incongruences between the Senate and House bill in other areas will make the committee’s job of reconciling differences more difficult.
Still, congressional leadership remains optimistic that they will send a bill to the president by the end of the year.
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Below are some important differences for city leaders between the versions of the bills passed by both chambers:
- Exemption for Interest Earned on Publicly Issued Municipal Bonds
- House Version: Preserved
- Senate Version: Preserved
- Exemption for Interest Earned on Qualified Private Activity Bonds
- House Version: Eliminated
- Senate Version: Preserved
- Exemption for Interest Earned on Advance Refunding Bonds
- House Version: Eliminated
- Senate Version: Eliminated
- Deduction for Local Property Taxes
- House Version: Capped at $10k
- Senate Version: Capped at $10k
- Deductions for Local Sales and Income Taxes
- House Version: Eliminated
- Senate Version: Eliminated
- Historic Tax Credit (HTC)
- House Version: Eliminated
- Senate Version: Eligibility on construction costs reduced from 20 to 10%
- New Markets Tax Credit (NMTC)
- House Version: Eliminated
- Senate Version: Preserved (until reauthorization)
There are a number of interests at play, but NLC will work throughout the reconciliation process to preserve the progress we’ve made, and to push for greater progress. NLC will pay special attention to preserving the tax exemption for all bonds, including Private Activity Bonds, which are only saved under the senate version. Preserving the progress made on the state and local tax (SALT) deduction and pushing for its full preservation are also key concerns.
Given that the Tax Cuts and Jobs Act continues to fall short on critical issues for cities, including various forms of bonds, credits and deductions for state and local taxes, we stand ready to oppose the final bill, if it remains a bad deal for cities when it goes back to both chambers.
To track the status of city priorities throughout tax reform, see if your member of Congress is on the Conference Committee and learn more at www.nlc.org/taxreform.
About the author: Brian Egan is NLC’s Principal Associate for Finance, Administration and Intergovernmental Relations. Follow him on Twitter @BeegleME