Now that the $1.5 trillion tax cut is ready to be signed into law, accountants, lawyers, taxpayers – and even some of the people who voted for it – are trying to figure out exactly how it will work in practice.
The need for a re-vote in the House Wednesday points to the likelihood that Congress will have to enact ‘technical corrections’ to the legislation in the not-too-distant future.
Merely interpreting what has been passed has sent the bureaucracy into a flurry of action, while private accountants and corporate lawyers are still parsing the legislation to see how it will affect taxpayers – and how to best game the new rules.
The law is set to take effect in just 12 days, while the White House hasn’t said precisely when the president will sign it.
President Donald Trump, flanked by Republican lawmakers, celebrates Congress passing tax cut legislation
Bill text for the final conference report neared 1,100 pages.
‘There will always be bumps in implementation with the IRS, and probably technical corrections to follow,” said Republican Sen. John Thune of South Dakota, Politico reported.
The same thing happened with Obamacare, only in that case, Democrats lost control of Congress and were unable to make technical fixes to the complex new system.
The publication reported it could take years for Treasury and IRS officials to develop regulations to codify language dealing with ‘pass-through’ corporations.
Even as professionals dig into the bill to see what is in it – the final conference report got released just Friday evening, with provisions struck down in the Senate Tuesday night – the Treasury Department and other agencies must put out rules to interpret provisions.
One immediate crunch for tax advisors is how to help people grappling with a new $10,000 cap on deductibility for state and local income taxes.
President Trump was joined by Republican members of Congress who helped and supported the bill
Speaker of the House Paul Ryan (R-WI) speaks about newly passed tax reform legislation during an event at the White House December 20, 2017 in Washington, DC
The New York Times reported that bill authors did not prohibit Americans from pre-paying their property taxes for 2018 in order to avoid a the cap and get the deduction. But not all communities allow for prepayment.
The bill does, however, prohibit people from prepaying their 2018 local income taxes.
President Donald Trump’s daughter Ivanka Trump greets guests during an event to celebrate Congress passing the tax cut with Republican members of the House and Senate on the South Lawn of the White House
President Trump touted the tax bill as a form of simplification, promising in November: ‘The only people that aren’t going to like this is H&R Block. They’re not going to be very happy. That’s probably one of the only companies in the country that’s not going to be thrilled.’
Although the standard deduction is doubling, it is unclear how many filers will forego professional assistance, leaving the ‘postcard’ tax return a dream deferred for many.
Despite condensing income tax brackets, the rewrite did not notably simplify the tax code, and tax professionals will spend hours interpreting the changes for their clients.
HOLIDAY READING: The conference report came in at 1,100 pages
Even the name of the law changed at the last minute. It used to carry a short title, the ‘Tax Cuts and Job Act.’
But the Senate parliamentarian ruled the title had no budget impact as required under the rules, so Democrats were able to knock it out. Now it is called by its longer name: ‘An Act to provide for reconciliation pursuant to titles II and V of the concurrent resolution on the budget for fiscal year 2018.’
‘The bill has taken shape at breakneck pace over the past two months, making it difficult for even seasoned tax practitioners to know exactly where things stand. The bill itself is massive and contains many tax law changes, some of which are extremely complex, and many of which go into effect in a matter of weeks,’ according to a Thompson/Reuters summary of the bill.