The Tax Cuts and Jobs Act Conference Report
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Key takeaways
- The Republican Congressional leadership released a Conference report with agreed legislative language for tax reform, following negotiations to reconcile the Senate and House versions of the tax bill.
- The Conference version of the bill significantly lowers the corporate income tax rate to 21% and alters fundamental principles of the U.S. income tax system. The bill eliminates most itemized deductions, limits the deduction for interest expense, imposes broad anti-base erosion rules, and alters the taxation of insurance companies and of non-U.S. earnings.
- The Conference bill replaces the current worldwide U.S. taxation system with a territorial system that taxes U.S. multinational corporations only on income related to the United States and imposes a one-time tax on all existing foreign earnings and a new minimum tax on “excess” foreign profits.
- The likelihood for passage of the Conference bill prior to year end appears to be virtually certain. The changes to the U.S. tax system under the bill are so sweeping that almost every business structure and transaction will need to be reconsidered, and there will clearly be winners and losers under the new regime.