The Tax Cuts and Jobs Act of 2017 (TCJA) was the most significant change to the tax code in a generation. Most of the changes enacted by the TCJA were effective beginning with the 2018 tax year. The U.S. Department of the Treasury and the IRS have provided guidance for the new law, but much remains to be done, including finalizing the proposed regulations that have been issued to date.
As the TCJA is being implemented, Congress is continuing to review it for necessary changes and corrections. Last year’s midterm elections and the partial government shutdown hampered the work needed for implementation. Following is insight into how Congress and Treasury are approaching the next phases of the new tax law and extenders.
Legislative update
The work of the House Ways and Means Committee and Senate Finance Committee was delayed at the beginning of the year due to the 35-day government shutdown. Since the government’s reopening, both committees have shown signs of life. Chairman Richard Neal of the House Ways and Means Committee has signaled that the committee will have several months of informational hearings before it drafts changes or corrections to the TCJA.
Chairman Chuck Grassley and ranking member Ron Wyden of the Senate Finance Committee have introduced a package of expired tax credits, known as extenders. The extenders seem to have bipartisan support in the Senate, but comments from House Ways and Means Committee staff are less optimistic. The Ways and Means Committee is taking a broader look at tax provisions set to expire in the next several years, including individual tax rates in the TCJA.
Corrections and changes to the TCJA likely will be debated and linked to extenders. Conversations among the two tax-writing committees and their respective leadership teams are ongoing, but swift action that results in changes to the law is not expected. The divergent agendas of the new Democratic majority in the House and the Republican majority in the Senate, including the stated intention of the chairman of the Ways and Means Committee to hold hearings on a variety of tax issues, means that it is unlikely that tax legislation will be enacted any time soon. Furthermore, analysts have suggested that there will not be a vehicle for enacting tax legislation until this summer, when discussions around the debt ceiling and next year’s appropriations are in full swing.
Regulatory update
IRS and Treasury officials have indicated on several occasions that their goal is to have most of the TCJA guidance finalized by June 30, 2019. One reason this date is relevant is because IRC Section 7805(b)(2) provides an exception to the statutory prohibition on retroactive regulations if the regulations are issued within 18 months of the date of enactment of the statutory provision to which the regulations relate. So far the IRS and Treasury have made a significant down payment on their goal of publishing proposed regulations on major provisions of the TCJA. However, they may not be able to maintain this pace when it comes to publishing final regulations, because:
As the TCJA is being implemented, Congress is continuing to review it for necessary changes and corrections. Last year’s midterm elections and the partial government shutdown hampered the work needed for implementation. Following is insight into how Congress and Treasury are approaching the next phases of the new tax law and extenders.
Legislative update
The work of the House Ways and Means Committee and Senate Finance Committee was delayed at the beginning of the year due to the 35-day government shutdown. Since the government’s reopening, both committees have shown signs of life. Chairman Richard Neal of the House Ways and Means Committee has signaled that the committee will have several months of informational hearings before it drafts changes or corrections to the TCJA.
Chairman Chuck Grassley and ranking member Ron Wyden of the Senate Finance Committee have introduced a package of expired tax credits, known as extenders. The extenders seem to have bipartisan support in the Senate, but comments from House Ways and Means Committee staff are less optimistic. The Ways and Means Committee is taking a broader look at tax provisions set to expire in the next several years, including individual tax rates in the TCJA.
Corrections and changes to the TCJA likely will be debated and linked to extenders. Conversations among the two tax-writing committees and their respective leadership teams are ongoing, but swift action that results in changes to the law is not expected. The divergent agendas of the new Democratic majority in the House and the Republican majority in the Senate, including the stated intention of the chairman of the Ways and Means Committee to hold hearings on a variety of tax issues, means that it is unlikely that tax legislation will be enacted any time soon. Furthermore, analysts have suggested that there will not be a vehicle for enacting tax legislation until this summer, when discussions around the debt ceiling and next year’s appropriations are in full swing.
Regulatory update
IRS and Treasury officials have indicated on several occasions that their goal is to have most of the TCJA guidance finalized by June 30, 2019. One reason this date is relevant is because IRC Section 7805(b)(2) provides an exception to the statutory prohibition on retroactive regulations if the regulations are issued within 18 months of the date of enactment of the statutory provision to which the regulations relate. So far the IRS and Treasury have made a significant down payment on their goal of publishing proposed regulations on major provisions of the TCJA. However, they may not be able to maintain this pace when it comes to publishing final regulations, because:
- Final regulations are harder to draft, and therefore take longer, because the preamble must account for and respond to public comments. In the case of the TCJA, some of the regulations have numerous and significant comments.
- Final regulations are final. Proposed regulations are an opportunity to take positions knowing those positions can be adjusted in the final rules. Also, errors in proposed regulations can be easily fixed in final regulations, but the same is not true for the final rule (with the exception of ministerial, nonsubstantive errors).
- The Office of Management and Budget has intensified its review of tax regulations, including stricter compliance with burden and cost estimate requirements.
