House GOP Tax Reform Task Force Releases Aspirational Blueprint

Published by Michael Novogradac on Monday, June 27, 2016 - 12:00am

The House Republicans Tax Reform Task Force last week released a blueprint and two-page summary calling for three individual tax brackets and the reduction of individual and business tax rates. The blueprint’s implications for the tax credit community are uncertain, but could be substantial.

The Tax Reform Task Force is one of six task forces charged with developing policy recommendations to serve as the framework of the House Republicans’ agenda that could be advanced after the November election. The tax reform task force was the last to release its blueprint.

The stated goals of the tax reform blueprint are to fuel job creation and create opportunity, make the tax code simpler and fairer, and improve the Internal Revenue Service’s (IRS’s) customer service. The blueprint does not contain any legislative text. Instead it is the policy framework that the House will consider as it continues its work on tax reform. Furthermore, while the blueprint was not, and given the lack of details, could not be officially evaluated for its impact on tax revenue, House Ways and Means Committee Chairman Kevin Brady, R-Texas, said the intent was to create a plan that was revenue neutral on a dynamic basis.

The blueprint calls for three individual tax brackets with a top rate of 33 percent, and a 20 percent corporate tax rate. It proposes to limit the deductibility of business interest expense, but allow businesses to fully and immediately expense the cost of investment (excluding land), as well as repeal the corporate alternative minimum tax. While the blueprint does explicitly propose to retain the Research & Development tax credit, it made no mention of the low-income housing tax credit (LIHTC), new markets tax credit (NMTC), historic tax credit (HTC), tax-exempt private activity bonds, and the renewable energy investment tax credit (ITC) and production tax credit (PTC). The document does say said that tax reform as proposed “generally will eliminate special-interest deductions and credits in favor of providing lower tax rates.” Initial media reports suggested that the blueprint would include retaining the LIHTC, the published report did not do so.

The Tax Reform Task Force describes the blueprint as “the beginning of our conversation about how to fix our broken tax code.” The House Ways and Means Committee is expected to turn the blueprint into legislative language before Jan. 20, 2017, when the next president is inaugurated.

Many tax policy analysts have described the blueprint as an aspirational document‑a sort of idealized version of tax reform that Republicans would enact if they took the White House, remained in control of the House, and had 60 votes in the Senate. While it appears likely that the House will remain in Republican hands after the election, and it is possible that the presumptive Republican nominee could win the White House, at this point, it appears unlikely that Republicans will have 60 votes in 2017.

Nonetheless, tax credit professionals will need to reach out to their representatives, especially those on the Ways and Means Committee, to urge Rep. Brady and Speaker Paul Ryan, R-Wis., to retain the LIHTC, NMTC, HTC, ITC, PTC, and private activity bonds during the tax reform process.