On November 26th, the chairman of the House Ways and Means committee, Representative Kevin Brady, released a new tax proposal. The bill can be treated as having five parts: Extenders, Disaster Relief, Retirement and Savings, Business Provisions and Technical Corrections to the Tax Code.1
The extender provisions in the bill contain a wide variety of tax topics from treatment of renewable fuels, extension of certain excise taxes and deductions related to education and mortgage insurance premiums among others.
The disaster relief provisions in the bill offer employer incentives to retain workers affected by the recent hurricanes, typhoons, wildfires and other severe storms. The bill also modifies the use and repayment of retirement funds for individuals affected by the disasters.
The retirement and savings provisions in the bill modify the treatment of certain retirement vehicles for individuals. In particular, the bill repeals the maximum age for allowable contributions to a traditional IRA. The bill also repeals required minimum distributions for individuals with balances below $50,000. The bill also allows for penalty free withdrawals for individuals in event of birth or adoption of a child.2
The business provisions of the bill include an adjustment of the allowable deduction amount for start-up costs and allows for the transfer of net operating losses and tax credits after an ownership change. PWBM expects these provisions to cost $4 billion over the 10-year budget window and $12 billion out to 2040.
The last portion of the bill includes technical corrections to the TCJA. These are important adjustments to the tax code but PWBM follows the convention of the Joint Committee on Taxation in that a revenue estimate reflects the intent of proposed legislation. As such, we don’t estimate a new cost of these technical corrections.
PWBM will explore the tax provisions included in the Retirement, Savings and other Tax Relief Act of 2018 in more detail in a future post.
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The bill also includes a title that attempts to ‘modernize’ the IRS. PWBM is not in a position to evaluate the revenue gained or loss due to administrative changes. ↩
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The Joint Committee on Taxation estimated this policy to cost $1.8 billion as part of the “Family Savings Act of 2018.” ↩