Thomas M Reynolds is a Senior Policy Advisor for Holland & Knight's Washington, D.C. office.
Paolo Mastrangelo is a Senior Public Affairs Advisor for Holland & Knight's Washington, D.C. office.
David Whitestone is a Government Section Leader for Holland & Knight's Washington, D.C. office.
The Top Line
House GOP leaders on Thursday, Nov. 2, released their anticipated tax-reform proposal. Entitled the "Tax Cuts and Jobs Act," the House Bill includes several proposed changes to the corporate and individual tax system.
From a policy perspective, the bill's proposed changes are in line with the past several months of public debate. From a political perspective, our analysis and discussion with key stakeholders leads us to believe that the bill could be substantially altered as soon as this weekend - in anticipation of its scheduled markup in the House Ways and Means Committee on Monday, Nov. 6. This path in the House will allow the legislation to keep moving while also resolving the big-ticket challenges facing the Republican caucus.
The Senate is expected to release its own proposal next week.
Carried Interest: There is no mention in the released text of any changes to carried interest. Pass-Throughs: As anticipated, the House bill allows a portion of net income distributed by a pass-through entity to an owner or shareholder to be treated as "business income" subject to a maximum rate of 25 percent. We caution that the details of this will change - making its impact on investment firms clearer - and are subject to continuing political and policy debate. Corporate Interest Deductibility: Generally, for most businesses interest deductibility is capped at 30 percent of the business's adjusted taxable income. For partnerships/net-income: This would be determined at the partnership level instead of the partner level. It also allows a pass-through's unused interest limitation for the taxable year to be used by the pass-through's owners and to ensure that net income from pass-through's would not be double counted at the partner level. Small business exception: Businesses with average gross receipts of $25 million or less would be exempt. Domestic companies...