Tax Reform Watch: Movement in House and Senate; Still Too Early to Call– November 17, 2017 by Tony Bakale

Yesterday was eventful for tax reform, with the House passing its bill along party lines 227-205 and the Senate Finance Committee voting its version of the bill out of committee. Again, the 14-12 vote was strictly along party lines.
While these events are certainly signs of movement for tax reform, there is still a long way to go. Twelve of the GOP congressmen voted no yesterday. All were from the high-tax states of California, New York and New Jersey. Obviously there is still room in the House to lose some more GOP votes. The Senate’s version of the bill will now be put to a vote before the full Senate, most likely next week. Currently, two senators in the GOP have indicated they will vote no. This would create a tie of 50/50 with Vice President Pence casting the deciding vote. Assuming the GOP doesn’t lose any more votes, the bill should pass in the Senate.
Now the sticky part. The House and Senate bills are different in many key respects. Once they are voted out of both houses, they will be sent to the conference committee. This committee is charged with reconciling (combining) the two bills into one. This is where some real horse trading may occur.
The conference committee would most likely consist of members of the House Ways and Means and Senate Finance committees. A simple majority is needed to vote the combined bill out of conference. At that point, the bill goes back to both houses for a vote. Neither house can offer amendments to the resulting bill. Again, only a simple majority is needed to pass.
Keep in mind that the Senate bill going up for vote soon most likely will pass along party lines with two defections. So, changes in to the Senate version in the conference committee could be difficult. Also, the House has experienced its own defections.
Back in 1986, the last time significant tax reform legislation passed, it took very strong leadership in the House, Senate and the administration to get the bill into law. Serious questions exist on whether the current leadership in Washington can pull together to get reform done.
So, the fact that a bill passed in the House of Representatives doesn’t really mean all that much in the grand scheme of things. We are closely following the progress of the legislation as the bills move through the committees and onto the floors for votes. Once we have legislation coming out of the conference committee, we will have a much better idea what the new tax law could look like.
As of now, it’s simply too early to conduct any serious planning for what reform may look like down the road. And since most of the provisions in both bills have effective dates of January 1, 2018, or later, there is plenty of opportunity to plan both now as we wrap up 2017 and in the future as we look to take advantage of opportunities in the new law.
Sign up to receive our Tax Reform Watch series and follow as we chronicle the story of tax reform.
Cohen & Company is not rendering legal, accounting or other professional advice. Any action taken based on information in this blog should be taken only after a detailed review of the specific facts and circumstances.