The journey to 2025 tax reform begins

ARTICLE | April 29, 2024

Authored by RSM US LLP

Executive summary:

House Ways & Means Committee Chairman Jason Smith (R-MO)  and House Tax Subcommittee Chairman Mike Kelly (R-PA) recently announced the formation of 10 “Committee Tax Teams”.  Each team will address key tax provisions from the 2017 Tax Cuts and Jobs Act (TCJA) that are set to expire in 2025 and identify legislative solutions that seek to help many taxpayers.

Tax policy and potential legislation will be top of mind for many as we move closer to the expiration of many TCJA provisions.

The journey to 2025 tax reform begins

Last week, House Ways & Means Committee Chairman Jason Smith and House Tax Subcommittee Chairman Mike Kelly announced the formation of 10 “Committee Tax Teams”. Each committee is comprised of Republican Ways and Means Committee members tasked with identifying legislative solutions to various policy areas that will be part of discussions as we approach the expiration of several provisions from the 2017 Tax Cuts and Jobs Act (TCJA) at the end of 2025.

While not unexpected, the announcement loosely resembles a similar action taken in 2017 as Congress began deliberations leading to the enactment of the TCJA. It is noteworthy that there are no Democratic members assigned to these teams.

It is important to keep in mind that the advancement of Republican and Democratic priorities will be largely dependent upon the results of the upcoming presidential and congressional elections later this year. While policymakers will face pressure to reach a consensus on extending the sunsetting provisions, the outcome of the election will significantly determine how both the process moves forward and the outcome of that process.

Key TCJA-related provisions that are scheduled to change after 2025 going into 2026 include:

• An increase in the top individual tax rate from 37% to 39.6%
• A decrease (by roughly 50%) in the standard deduction amount
• A decrease (by roughly 50%) in the estate tax exemption amount
• A return of personal exemptions for taxpayers and dependents
• Changes to various itemized deductions and the alternative minimum tax – including the elimination of the $10,000 State and Local Tax (SALT) cap
• Expiration of the Section 199A pass-through deduction (allowing for a 20% deduction of qualified business income)
• An increase in the Base Erosion and Anti-Abuse Tax (BEAT) rate from 10% to 12.5%
• The research credit no longer being a benefit for any BEAT taxpayers
• An increase in the Global Intangible Low-Taxed Income (GILTI) tax rate
• The Foreign-Derived Intangible Income (FDII) benefit becoming less generous.

It is important to realize that the TCJA enacted a number of permanent tax law changes, such as a reduction in the statutory corporate tax rate, and substantive changes to the way international corporations are taxed. Even though those provisions are permanent, they will be part of the upcoming tax reform debate and are subject to change as part of the upcoming tax reform process. There are also a number of other non-TCJA extenders that have either expired or are due to expire, as well as a broad array of tax proposals that were part of the Build Back Better deliberations a few years ago but which did not ultimately become enacted into law. All of these provisions are on the table, as are the tax provisions that were enacted as part of the Inflation Reduction Act – including the corporate alternative minimum tax, the stock buy back excise tax, and numerous alternative energy tax incentives.

Attached below are the Tax Team Assignments. We will continue to monitor events as they evolve. For more information, see the Ways and Means Committee Press Release.

Attachment: Tax Team Assignments

*Denotes Vice-Chair