WASHINGTON -- Republicans working this week to reconcile the House and Senate tax bills will grapple with several business- related provisions including changes in the corporate tax rate, "pass through" business income and the alternative minimum tax for corporations.
Party leaders insist that there are no irreparable differences between their two bills. Still, the bills feature differences worth hundreds of billions of dollars.
Republicans insist they will pass a final version of the tax legislation for President Donald Trump to sign before Christmas.
Trump endorsed the work of the conference committee early Tuesday afternoon, calling the panel a "mixer," where lawmakers will pick the good things and get rid of the things they don't like.
The result will be "something that is perfecto," Trump said.
Discussions are expected to continue throughout the week and could conclude as early as next week with the drafting of a so-called conference report that constitutes the final legislation. That bill must pass each chamber before Trump can sign it into law.
The most delicate discussions will probably take place over how to tax so-called "pass-through" businesses. There are millions of these firms in the United States, and they can range from small businesses to large real estate companies or professional sports franchises. They are often owned by a single entity or partnership, and their income is passed through to the owners, who pay taxes on that money through the individual income tax code.
The two bills take markedly different approaches to the taxation of pass-through business income, with the House bill providing a much larger tax cut.
But it could be impossible to adopt the House approach to the issue given the rigid budget rules under which the bill must be passed in the Senate. The House bill, multiple aides said, would not pass muster under those rules because it would increase deficits in the long run, beyond the coming decade. The Senate-passed bill contains multiple compromises and phaseouts of certain tax cuts to limit its effect on the deficit.
There has also been a flurry of complaints in recent days from businesses about the Senate's last-minute decision to retain the alternative minimum tax for corporations. There is expected to be immense pressure from business groups to force Republicans to repeal or scale back this tax.
Two influential Republican senators -- Rob Portman of Ohio, one of the chamber's main tax writers, along with Orrin Hatch, chairman of the tax-writing Senate Finance Committee -- said their preference is to repeal the corporate alternative minimum tax.
"I'm not a big AMT fan," said Portman, who also wants to repeal the individual alternative minimum tax. "I'd like to end up there, but we've got to do the back-and-forth with the House."
Hatch added: "I'd like to get rid of it."
In a last-minute change, the Senate bill preserved the corporate alternative minimum tax at its current 20 percent rate, along with a modified version of the individual alternative minimum tax. The House legislation repeals both levies.
Another Republican, Sen. David Perdue of Georgia, said he too would like to see the House-Senate conference committee eliminate the alternative minimum tax.
"We couldn't go all the way because we needed the revenue," Perdue said, referring to the corporate alternative minimum tax. Repealing it would have cost about $40 billion over a decade.
House Chief Deputy Whip Patrick T. McHenry, R-N.C., said leaders had to keep in mind the party's narrow margin in the Senate and the byzantine rules the Republicans had to use to get the tax bill through that chamber, but he said the House package was designed with the more complicated Senate considerations in mind.
There are several other issues that need to be resolved.
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Both bills would lower the corporate tax rate from 35 percent to 20 percent, but the Senate bill begins lowering the rate in 2019, and the House bill begins lowering it in 2018. The House and Senate bills take different approaches to the individual tax brackets: The House bill has only four brackets, and the top rate remains unchanged at 39.6 percent; the Senate bill keeps seven brackets but lowers the top rate to 38.5.
The House bill creates a five-year "family flexibility credit" that aims to help families lower their taxes. The Senate bill doesn't have such a measure.
The House bill entirely eliminates the estate tax -- a tax paid on inheritances that is limited near exclusively to the very wealthy -- beginning in 2024, while the Senate bill scales it back dramatically without getting rid of it entirely.
The Senate moved to resolve one potential sticking point between the two chambers -- moving to scale back, rather than eliminate entirely, the deduction for state and local taxes. The Senate bill adopts a House compromise that would allow individuals to deduct up to $10,000 in property taxes only. But some House Republicans, including ones from California and New York, have continued to push for some deductibility for state income taxes, and GOP aides said that could become an issue in the conference.
Information for this article was contributed by Erica Werner, Damian Paletta, Mike DeBonis and Karen Tumulty of The Washington Post and Laura Litvan, Laura Davison, Steven T. Dennis, Kaustuv Basu and Jennifer Epstein of Bloomberg News.
A Section on 12/06/2017