Timing of tax reform
The next major tax reform bill is expected to be presented in September 2017. It is likely to mirror the tax plans tabled by this administration and members of Congress.
Members of Congress continue to have differing views on the timing of tax reform. However, many in Congress remain committed to tax reform in 2017 such as House Speaker, Paul Ryan, who committed in a recent speech to making tax reform happen in 2017.
The discussions around the FY18 budget continue and many expect that when budget resolution occurs, it will include reconciliation procedures as it relates to tax reform. With reconciliation procedures, tax reform can be passed with the Republican’s simple majority in the House and Senate.
While the Republican party has a simple majority, their dominant position could be lost after the mid-term elections in November 2018.
The proposed changes
A number of US tax reform plans have been proposed in the last few years. The most recent proposal was released by the Trump Administration in April 2017. Prior to this, in June 2016, the House Republicans released their Tax Reform Blueprint.
Many of the principles in these plans are similar to those that appear in the 979-page HR 1, the Tax Reform bill drafted in 2014 by Dave Camp when he was the Chairman of the House Ways & Means Committee. While it is uncertain which particular elements of these plans will be included in the next tax reform bill, there are some common proposals including:
- A reduction in corporate tax rate (rates varying from between 15% - 25%)
- Transition to a territorial tax system
- Mandatory deemed repatriation of untaxed foreign earnings (with varying rates)
- Limitation on deductibility of interest
Also as announced on 27 July 2017, the border adjustment tax which was only included in the Tax Reform Blueprint and was a topic of debate in Congress is no longer being considered by Congress in future tax reform discussions and proposals.
Considerations for Irish business
- The proposed changes need to be carefully monitored by Irish FDI and domestic companies.
- Corporate tax rate reduction may not have significant impact on Irish business but it should be factored into decision making and strategic analysis.
- Mandatory deemed repatriation could lead to short-term activity and repatriation to the US.
