The potential for sweeping tax changes is greater now than in decades, but many open questions remain. Businesses and individuals are scrambling to understand when tax reform could be enacted, when it would be made effective and what is actually being proposed. Our FAQs address these issues and more.

1. Answers to key tax reform questions
Is tax reform really happening?

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Is tax reform really
happening?
The odds for tax reform are better
than in decades, but there are still
major obstacles such as the cost,
the lack of 60 votes in the Senate,
competing priorities and the
potential political backlash.
60

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When will tax reform
be enacted?
Tax reform is difficult and complex
and will likely take nearly all of
2017 and could even spill well
into 2018.

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When would tax law
changes become
effective?
Most changes are likely to be
prospective beginning in 2018
or later, but individual provisions
and “loophole closers” could be
made retroactive to as early as
the beginning of 2017.

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What are Republicans
actually proposing?
House Republicans want to repeal targeted tax
benefits to pay for a rate cut that would lower the top
rate to 20% for corporations, 25% for pass-through
businesses and 33% for individuals.
In addition, Republicans want to move toward a more
cash-flow consumption-based tax by allowing full
expensing and making business taxes border
adjustable.
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How would full
expensing work?
The House plan would allow
businesses to fully deduct property
purchased domestically in the year
the property is placed in service
(including buildings), but would not
allow a deduction for interest
expense in excess of interest income
(Special rules would exempt banks
and other financial institutions).

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What does border
adjustability mean?
The House plan, details of which are still
forthcoming, would generally not allow a
deduction for any imports and would
exclude export receipts from taxable
income. This is a controversial provision
expected to at least raise $1 trillion and
pay for other aspects of tax reform.

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What’s the plan for
international taxes?
The House plan would move the U.S. to a territorial tax
system essentially exempting offshore earnings from tax.
To transition and raise revenue, a one-time tax on
previously unrepatriated foreign earnings would be
imposed at a rate of 8.75% for cash and cash equivalents
and 3.5% for everything else. The tax would apply
regardless of whether any of those earnings are
repatriated, but could be paid over eight years.
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What are the next steps
for tax reform?
“House Republicans are currently drafting a full bill
based on their tax reform blueprint, and are working
closely with the administration. This bill will likely be
introduced sometime in the Spring, and Speaker Paul
Ryan is aiming to achieve House passage by the end of
July. The Senate is months behind, however, and is
planning either to produce its own bill or modify the
House bill.”
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Disclaimer
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subject matters covered and may include proposed guidance that is subject to
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