Pending Legislation Promises a Number of Tax Changes

• Published date: 01 September 2017
• Date: 01 September 2017
• DOI: http://doi.org/10.1002/jcaf.22290

59

© 2017 Wiley Periodicals, Inc.

Published online in Wiley Online Library (wileyonlinelibrary.com).

DOI 10.1002/jcaf.22290

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Pending Legislation Promises a Number

of Tax Changes

Caroline D. Strobel

Two major pieces of tax leg-

islation are currently pending

in Congress. Both of them

promise a significant number

of changes in our current tax

law. I will briefly discuss what

apears to be the major changes

in both the proposed tax bill

and the changes in the Afford-

able Care Act.

THE AFFORDABLE CARE ACT

PROPOSED CHANGES

The Affordable Care

Act changes include changes

in the premium tax credit.

This has caused considerable

controversy over the need to

make sure that people will be

covered by health insurance

after the changes are enacted.

Currently, the amount of the

credit and the length of time

it would be operative are both

unsettled issues. The amount of

the credit could be paid into a

health savings account. Other

important changes include the

3.8% net investment income

tax, which would be repealed

after December 31, 2017. The

Section 45$ small business tax

credit would be repealed after

2019. Any health care plan that

allows for abortions would not

qualify for the credit. The pen-

alty, which requires individuals

to have health insurance, would

be repealed retroactively to

the end of 2015. Likewise, the

penalty for large employers not

providing essential coverage

would be repealed to the end

of 2015. The 40% excise tax on

“Cadillac” health plans would

not be repealed, but enforce-

ment would be delayed until

after 2024.

The following provisions

would be repealed after 2017:

• The $500,000 deduction

limitation on compensation

by covered health providers;

• The 10% excise tax on

indoor tanning services;

• The annual fee on pharma-

ceutical manufacturers and

importers;

• The annual fee imposed on

health insurance providers;

• The Section 125(i) limitation

on contributions to flexible

spending arrangements;

• The medical device tax; and

• The 0.90% Medicaid surtax.

The income threshold for

itemizing medical expense

deductions would revert to

7.5% from the current 10%

after 2017.

MAJOR PROPOSED TAX

CHANGES

The newly proposed tax bill

changes were unveiled by the

administration toward the end

of the president’s first 100 days.

For corporations, there were

a number of major proposals

designed to increase investment

and jobs in the United States.

The corporate tax rate would

be reduced from a top rate of

35% to 15%. In addition, we

would adopt a territorial taxing

system rather than the current

worldwide taxing system. In the

case of small and closely held

businesses that are taxed in

individual owners’ tax returns,

the tax rate would also be 15%.

There would be an incentive

for businesses holding cash

overseas in order to avoid the

current high U.S. tax to bring

those dollars home and invest

in the United States. These

changes alone would make the

United States very competitive

from a tax regime standpoint