Tax Writing Committee Begins Consideration of Tax Reform 2.0

Chatrane Birbal By Chatrane Birbal September 14, 2018
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Tax Writing Committee Begins Consideration of Tax Reform 2.0

Earlier this week, the House Ways and Means GOP released three bills outlining their plans for Tax Reform 2.0, largely following the same structure as the framework released July 24.  With few legislative days remaining before the midterm elections, yesterday the House Ways and Means Committee began formal consideration of Tax Reform 2.0 proposals with the goal of a House vote before election day.

The Tax Reform 2.0 proposals include the following provisions of interest to HR and the workplace:

  • Child tax credit: Proposes to change the child tax credit to $2,000 per child ($1,400 refundable), $500 for nonchild dependents and increasing income limit, which expands eligibility.
  • Moving expense deduction: Proposes to retain this deduction for armed forces personnel only.
  • Bicycle commuting reimbursement: Terminates the tax exclusion for qualified bicycle commuting reimbursement.
  • Universal savings account: Allows after-tax contributions of as much as $5,500 (adjusted for inflation) annually, which wouldn't be taxed upon withdrawal.
  • 529 education accounts: Expands 529 accounts to be used for apprenticeship fees, home schooling and student debt payments.
  • Savings for new-baby expenses: Proposes penalty-free withdrawals from retirement accounts for parents following birth or adoption.
  • Retirement savings for small employers and individuals: Includes retirement savings proposals from bipartisan H.R. 5282/S. 2526, the Retirement Enhancement and Savings Act (RESA):
    • Makes it easier for employers to join in shared multiple-employer plans (MEPs).
    • Increases credit for small-employer pension plan startup costs.
    • Adds credit for new employer-sponsored 401(k) and IRAs that auto-enroll employees.
    • Allows graduate students to contribute fellowships and stipends to IRAs.
    • Repeals maximum age (70 1/2) on traditional IRA contributions.
SHRM supports public-policy efforts to expand and incentivize access to benefits, including retirement savings, and will encourage lawmakers to preserve and enhance these benefits in Tax Reform 2.0. Additionally, while the current proposals do not include modifications to Section 127, the SHRM-led Coalition to Preserve Employer Provided Education Assistance sent a letter to Kevin Brady, Ways and Means Committee chairman, and Richard Neal, the ranking member, encouraging them to expand the benefit to include student loan repayment. It is possible that, as Tax Reform 2.0 discussions continue, the proposal is added to garner additional support from lawmakers.

The fate of the proposal in the House is uncertain at this time, and even if the bill passes the House, the proposal is not expected to pass the Senate.
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