Conference Committee Statement.pdf - American CPE Continuing Professional Education Individual and Business Tax ReformJoint Conference Statement

Conference Committee Statement.pdf - American CPE...

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Unformatted text preview: American CPE ® Continuing Professional Education Individual and Business Tax ReformJoint Conference Statement American CPE, Inc. 826 Riviera Mansfield, Texas 76063 (817) 477-0222 Fax: (817) 473-4998 CONTENTS Page JOINT EXPLANATORY STATEMENT OF THE COMMITTEE OF CONFERENCE ............. 1 TITLE I − INDIVIDUAL TAX REFORM .................................................................................... 2 A. Reduction and Simplification of Individual Income Tax Rates (sec. 1001 of the House bill, sec. 11001 of the Senate amendment, and sec. 1 of the Code) .......................................... 2 1. Increase in standard deduction (sec. 1002 of the House bill, sec. 11021 of the Senate amendment, and sec. 63 of the Code) ............................................................................... 14 2. Repeal of the deduction for personal exemptions (sec. 1003 of the House bill, sec. 11041 of the Senate amendment, and sec. 151 of the Code) ............................................ 15 3. Alternative inflation adjustment (secs. 1001 and 1005 of the House bill, sec. 11002 of the Senate amendment, and sec. 1 of the Code) ............................................................... 17 B. Treatment of Business Income of Individuals, Trusts, and Estates .................................. 20 1. Deduction for qualified business income (sec. 1004 of the House bill, sec. 11011 of the Senate amendment, and sec. 199A of the Code)......................................................... 20 C. Simplification and Reform of Family and Individual Tax Credits ................................... 41 1. Enhancement of child tax credit and new family credit (sec. 1101 of the House bill, sec. 11022 of the Senate amendment, and sec. 24 of the Code) ....................................... 41 2. Credit for the elderly and permanently disabled (sec. 1102(a) of the House bill and sec. 22 of the Code) .......................................................................................................... 44 3. Repeal of credit for plug-in electric drive motor vehicles (sec. 1102(c) of the House bill and sec. 30D of the Code) .......................................................................................... 45 4. Termination of credit for interest on certain home mortgages (sec. 1102(b) of the House bill and sec. 25 of the Code) .................................................................................. 46 5. Modification of taxpayer identification number requirements for the child tax credit, earned income credit, and American Opportunity credit (sec. 1103 of the House bill, sec. 11022 of the Senate amendment and secs. 24, 25A and 32 of the Code) ......................... 46 6. Procedures to reduce improper claims of earned income credit (sec. 1104 of the House bill and new secs. 32(c)(2)(B)(vii) and 6011(i) of the Code) ................................ 50 i 7. Certain income disallowed for purposes of the earned income tax credit (sec. 1105 of the House bill, new secs. 32(n) and 32(c)(2)(C) of the Code, and secs. 6051, 6052, 6041(a), and 6050(w) of the Code) ................................................................................... 53 8. Limitation on losses for taxpayers other than corporations (sec. 11012 of the Senate amendment and sec. 461(l) of the Code) .......................................................................... 56 9. Reform of American opportunity tax credit and repeal of lifetime learning credit (sec. 1201 of the House bill and sec. 25A of the Code) ............................................................ 58 10. Consolidation and modification of education savings rules (sec. 1202 of the House bill, sec. 11033 of the Senate amendment, and secs. 529 and 530 of the Code) .............. 60 11. Reforms to discharge of certain student loan indebtedness (sec. 1203 of the House bill, sec. 11031 of the Senate amendment, and sec. 108 of the Code) .............................. 64 12. Repeal of deduction for student loan interest (sec. 1204 of the House bill and sec. 221 of the Code)....................................................................................................................... 66 13. Repeal of deduction for qualified tuition and related expenses (sec. 1204 of the House bill and sec. 222 of the Code) ........................................................................................... 67 14. Repeal of exclusion for qualified tuition reductions (sec. 1204 of the House bill and sec. 117(d) of the Code) .................................................................................................... 68 15. Repeal of exclusion for interest on United States savings bonds used for higher education expenses (sec. 1204 of the House bill and sec. 135 of the Code) .................... 69 16. Repeal of exclusion for educational assistance programs (sec. 1204 of the House bill and sec. 127 of the Code).................................................................................................. 70 17. Rollovers between qualified tuition programs and qualified ABLE programs (sec. 1205 of the House bill, sec. 11025 of the Senate amendment and secs. 529 and 529A of the Code) ........................................................................................................................... 71 18. Repeal of overall limitation on itemized deductions (sec. 1301 of the House bill, sec. 11046 of the Senate amendment, and sec. 68 of the Code) .............................................. 74 D. Simplification and Reform of Deductions and Exclusions ............................................... 76 1. Modification of deduction for home mortgage interest (sec. 1302 of the House bill, sec. 11043 of the Senate amendment, and sec. 163(h) of the Code) ................................ 76 2. Modification of deduction for taxes not paid or accrued in a trade or business (sec. 1303 of the House bill, sec. 11042 of the Senate amendment, and sec. 164 of the Code) 78 3. Repeal of deduction for personal casualty and theft losses (sec. 1304 of the House bill, sec. 11044 of the Senate amendment, and sec. 165 of the Code) .............................. 81 ii 4. Limitation on wagering losses (sec. 1305 of the House bill, sec. 11051 of the Senate amendment, and sec. 165 of the Code) ............................................................................. 82 5. Modifications to the deduction for charitable contributions (sec. 1306 of the House bill, secs. 11023, 13703, and 13704 of the Senate amendment, and sec. 170 of the Code) 83 6. Repeal of Certain Miscellaneous Itemized Deductions Subject to the Two-Percent Floor (secs. 1307 and 1312 of the House bill, sec. 11045 of the Senate amendment, and secs. 62, 67 and 212 of the Code) ..................................................................................... 95 7. Repeal of deduction for medical expenses (sec. 1308 of the House bill, sec. 11028 of the Senate amendment and sec. 213 of the Code) ............................................................ 99 8. Repeal of deduction for alimony payments and corresponding inclusion in gross income (sec. 1309 of the House bill and secs. 61, 71, and 215 of the Code) ................. 100 9. Repeal of deduction for moving expenses (sec. 1310 of the House bill, sec. 11050 of the Senate amendment, and sec. 217 of the Code) ......................................................... 101 10. Termination of deduction and exclusions for contributions to medical savings accounts (sec. 1311 of the House bill, secs. 106(b) and 220 of the Code) ..................... 102 11. Denial of deduction for performing artists and certain officials; Modification of deduction for educator expenses (sec. 1312 of the House bill, sec. 11032 of the Senate amendment and sec. 62 of the Code) .............................................................................. 105 12. Suspension of exclusion for qualified bicycle commuting reimbursement (sec. 11048 of the Senate amendment and secs. 132(f) of the Code)................................................. 106 13. Limitation on exclusion for employer-provided housing (sec. 1401 of the House bill and sec. 119 of the Code)................................................................................................ 107 14. Modification of exclusion of gain on sale of a principal residence (sec. 1402 of the House bill, sec. 11047 of the Senate amendment, and sec. 121 of the Code) ................ 108 15. Sunset of exclusion for dependent care assistance programs (sec. 1404 of the House bill and sec. 129 of the Code) ......................................................................................... 109 16. Repeal of exclusion for qualified moving expense reimbursement (sec. 1405 of the House bill, sec. 11049 of the Senate amendment, and sec. 132(g) of the Code) ............ 110 17. Repeal of exclusion for adoption assistance programs (sec. 1406 of the House bill and sec. 137 of the Code) ...................................................................................................... 111 iii E. Simplification and Reform of Savings, Pensions, Retirement ........................................ 113 1. Repeal of special rule permitting recharacterization of IRA contributions (sec. 1501 of the House bill, sec. 13611 of the Senate amendment, and sec. 408A of the Code) ... 113 2. Reduction in minimum age for allowable in-service distributions (sec. 1502 of the House bill and secs. 401 and 457 of the Code) ............................................................... 117 3. Modification of rules governing hardship distributions (sec. 1503 of the House bill and secs. 401 and 403 of the Code) ................................................................................ 118 4. Modification of rules relating to hardship withdrawals from cash or deferred arrangements (sec. 1504 of the bill, sec. 11033(c) of the Senate amendment, and sec. 401 of the Code)..................................................................................................................... 119 5. Extended rollover period for the rollover of plan loan offset amounts in certain cases (sec. 1505 of the bill, sec. 13613 of the Senate amendment, and sec. 402 of the Code) 120 6. Modification of nondiscrimination rules for certain plans providing benefits or contributions to older, longer service participants (sec. 1506 of the House bill and sec. 401 of the Code) ...................................................................................................... 122 7. Modification of rules applicable to length of service award programs for bona fide public safety volunteers (sec. 13612 of the Senate amendment and sec. 457(e) of the Code) ............................................................................................................................... 132 F. Modifications to Estate, Gift, and Generation-Skipping Transfers Taxes (secs 1601 and 1602 of the House bill, sec. 11061 of the Senate amendment, and secs. 2001 and 2010 of the Code) ..................................................................................................................................... 134 G. Alternative Minimum Tax (sec. 2001 of the House bill, sec. 12001 of the Senate amendment, and secs. 53 and 55-59 of the Code) ................................................................ 145 H. Elimination of Shared Responsibility Payment for Individuals Failing to Maintain Minimal Essential Coverage (sec. 11081 of the Senate amendment and sec. 5000A of the Code) ..................................................................................................................................... 153 I. Other Provisions.............................................................................................................. 155 1. Temporarily allow increased contributions to ABLE accounts, and allow contributions to be eligible for saver’s credit (sec. 11024 of the Senate amendment and sec. 529A of the Code).................................................................................................... 155 2. Extension of time limit for contesting IRS levy (sec. 11071 of the Senate amendment and secs. 6343 and 6532 of the Code) ............................................................................ 159 3. Treatment of certain individuals performing services in the Sinai Peninsula of Egypt (sec. 11026 of the Senate amendment and secs. 2, 112, 692, 2201, 3401, 4253, 6013, and 7508 of the Code)............................................................................................................ 160 iv 4. Modifications of user fees requirements for installment agreements (sec. 11073 of the Senate amendment and new sec. 6159(f) of the Code) ................................................... 162 5. Relief for 2016 disaster areas (sec. 11029 of the Senate amendment and secs. 72(t), 165, 401-403, 408, 457, and 3405 of the Code) ............................................................. 163 6. Attorneys’ fees relating to awards to whistleblowers (sec. 11078 of the Senate amendment and sec. 62(a)(21) of the Code) ................................................................... 166 7. Clarification of whistleblower awards (sec. 11079 of the Senate amendment and new sec. 7623(c) of the Code) ................................................................................................ 167 8. Exclusion from gross income of certain amounts received by wrongly incarcerated individuals (sec. 11027 of the Senate amendment and sec. 139F of the Code) .............. 172 BUSINESS TAX REFORM ....................................................................................................... 174 A. Tax Rates ........................................................................................................................ 174 1. Reduction in corporate tax rate (sec. 3001 of the House bill, secs. 13001 and 13002 of the Senate amendment, and secs. 11 and 243 of the Code) ............................................ 174 B. Cost Recovery ................................................................................................................. 179 1. Increased expensing (sec. 3101 of the House bill, secs. 13201 and 13311 of the Senate amendment, and sec. 168(k) of the Code) ........................................................... 179 2. Modifications to depreciation limitations on luxury automobiles and personal use property (sec. 13202 of the Senate amendment and sec. 280F of the Code) .................. 193 3. Modifications of treatment of certain farm property (sec. 13203 of the Senate amendment and sec. 168 of the Code) ............................................................................ 195 4. Applicable recovery period for real property (sec. 13204 of the Senate amendment and sec. 168 of the Code) ................................................................................................ 199 5. Use of alternative depreciation system for electing farming businesses (sec. 13205 of the Senate amendment and sec. 168 of the Code) .......................................................... 205 6. Expensing of certain costs of replanting citrus plants lost by reason of casualty (sec. 13207 of the Senate amendment and sec. 263A of the Code) ........................................ 209 C. Small Business Reforms ................................................................................................. 212 1. Expansion of section 179 expensing (sec. 3201 of the House bill, sec. 13101 of the Senate amendment, and sec. 179 of the Code) ............................................................... 212 v 2. Small business accounting method reform and simplification (sec. 3202 of the House bill, secs. 13102 through 13105 of the Senate amendment, and secs. 263A, 448, 460, and 471 of the Code).............................................................................................................. 215 3. Modification of treatment of S corporation conversions to C corporations (sec. 3204 of the House bill, sec. 13543 of the Senate amendment, and secs. 481 and 1371 of the Code) ............................................................................................................................... 222 D. Reform of Business Related Exclusions, Deductions, etc. ............................................. 226 1. Interest (sec. 3301 of the House bill, secs. 13301 and 13311 of the Senate amendment, and sec. 163(j) of the Code) ....................................................................... 226 2. Modification of net operating loss deduction (sec. 3302 of the House bill, sec. 13302 of the Senate amendment, and sec. 172 of the Code) ..................................................... 234 3. Like-kind exchanges of real property (sec. 3303 of the House bill, and sec. 13303 of the Senate amendment, and sec. 1031 of the Code) ....................................................... 236 4. Revision of treatment of contributions to capital (sec. 3304 of the House bill and sec. 118 of the Code) ...................................................................................................... 239 5. Repeal of deduction for local lobbying expenses (sec. 3305 of the House bill, sec. 13308 of the Senate amendment, and sec. 162(e) of the Code) ...................................... 242 6. Repeal of deduction for income attributable to domestic production activities (sec. 3306 of the House bill, sec. 13305 of the Senate amendment, and sec. 199 of the Code) 244 7. Entertainment, etc. expenses (sec. 3307 of the House bill, sec. 13304 of the Senate amendment, and sec. 274 of the Code) ........................................................................... 246 8. Repeal of exclusion, etc., for employee achievement awards (sec. 1403 of the House bill, sec. 13310 of the Senate amendment, and secs. 74(c) and 274(j) of the Code) ...... 251 9. Unrelated business taxable income increased by amount of certain fringe benefit expenses for which deduction is disallowed (sec. 3308 of the House bill and sec. 512 of the Code) ......................................................................................................................... 252 10. Limitation on deduction for FDIC premiums (sec. 3309 of the House bill, sec. 13531 of the Senate amendment, and sec. 162 of the Code) ..................................................... 254 11. Repeal of rollover of publicly traded securities gain into specialized small business investment companies (sec. 3310 of the House bill and sec. 1044 of the Code) ............ 258 12. Certain self-created property not treated as a capital asset (sec. 3311 of the House bill and sec. 1221 of the Code) .............................................................................................. 258 vi 13. Repeal of special rule for sale or exchange of patents (sec. 3312 of the House bill and sec. 1235 of the Code)) ................................................................................................... 260 14. Repeal of technical termination of partnerships (sec. 3313 of the House bill and sec. 708(b) of the Code) .................................................................................................. 261 15. Recharacterization of certain gains in the case of partnership profits interests held in connection with performance of investment services (sec. 3314 of the House bill, sec. 13310 of the Senate amendment, and secs. 1061 and 83 of the Code) .................... 262 16. Amortization of research and experimental expenditures (sec. 3315 of the House bill, sec. 13206 of the Senate amendment, and sec. 174 of the Code) ................................... 269 17. Certain special rules for taxable year of inclusion (sec. 13221 of the Senate amendment and sec. 451 of the Code) ......................................................
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