High noon for tax reform…
Last Thursday, the House Ways and Means Committee released its tax reform bill to reduce corporate tax rates and compress individual rates. We are happy to report that all exemptions in the 501 section of the Tax Code, including our 501(c)(8) exemption, are retained. The Alliance is still working our way through the provisions that may have a specific impact on life insurers but in our initial review there do not appear to be provisions directly impacting the taxation of life insurance products. We are especially pleased that the Committee did not propose any significant amendments that would change the ability of consumers to save for retirement on a tax-deferred basis through 401(k) or Individual Retirement Account (IRA) programs. This is all good news for fraternals.
That said, the bill and related documents contain more than 500 pages, so we are still carefully reviewing the particulars of each provision with our colleagues in the financial services community and will update you if our analysis shows any potential negative impact.
The Ways and Means Committee will begin consideration of the bill today (Monday, November 6). We expect the mark-up to last anywhere from a few days to a week or more. There were a number of business interests that expressed significant concerns about the measure immediately after it was introduced. Small business groups voiced opposition over the pass-through provisions, and the Realtors and Home Builders’ groups oppose the bill because of changes to the mortgage interest deduction and other changes on the individual side that they believe no longer incentivize home purchase. In addition, lawmakers from high-tax states continue to be concerned with the elimination of the deductibility of state and local taxes — the bill allows up to $10,000 deduction for property taxes but not income taxes. Additional groups will also likely begin to voice concerns as they wade through the bill and analyze its impact.
Bottom line: enactment of the bill as proposed is not a slam dunk and changes to the measure are inevitable. Politics and policy are on a collision course during this debate and vigilance is an absolute necessity.
While it is expected that the Ways and Means Committee will pass the bill, that is just the first step to final passage into law. After Committee approval, the full House has to pass the bill, the Senate must release and pass its own tax reform bill (which is bound by more rules on deficit spending), and both chambers must agree on a final package. The Administration and Congressional leaders have said they want all of this done by Christmas. It is unclear if they will meet this deadline, but we will provide you updates and information at each step in the process, and alert you to any possible grassroots action that may need to be taken to ensure that the fraternal voice is heard on Capitol Hill.
The Alliance’s efforts to ensure Members of Congress understand the vital role that fraternals play in their districts and across the country is working. We now have 64 co-sponsors on the House resolution and 15 in the Senate! Thanks to all of you who helped secure those co-sponsorships. Our recruitment effort will continue once we have a better handle on how tax reform measures proceed in Congress.
Here are links to additional resources on the measure prepared by the House Ways and Means Committee:
And here are links to some of the most insightful news and editorial coverage that demonstrate the complexities of the issue and outline just how difficult enactment of such a measure will be:
Stay tuned to the Alliance’s Bulletins and blog posts for more detailed information on the tax reform debate. And don’t hesitate to contact me with questions, comments, or concerns about the Alliance’s political advocacy efforts.
May 21, 2018