On May 22, the House passed H.R. 1, the One Big Beautiful Bill Act (OBBBA), and it now goes to the Senate Finance Committee where changes will occur. Some of the House provisions will need to be removed due to the Senate using the Budget Reconciliation Process which calls for restrictions on the nature of the changes, such as they must deal with revenues. And, the Senate will have different ideas on what is currently in the bill which includes over 40 tax changes and some non-tax provisions.
One item of contention among members of both parties is whether to keep the TCJA $10,000 SALT cap that expires at the end of this year. This is an important provision because it could cause the bill to not get enough votes to pass so compromise is likely. The House bill will increase the cap but adds a lot more, particularly to IRC Section 275, Certain Taxes. This rule is in Part IX of Subchapter B of Chapter 1 of Subtitle A or Title 26 (IRC); Part IX is titled Items Not Deductible. With the TCJA, the SALT cap was at IRC Section 164(b)(6) and was brief.
Where a legislative proposal or public law makes changes to various parts of an existing Code section, I often find it helpful to create a track changes of the affected Code sections to get a better understanding of the changes. I have created such a document for the House's SALT changes which you can find in this 18-page pdf with changes shown using track changes. Part of the reason it is long is because I include all of Section 164 despite few changes to it in order to get a better understanding of the changes to Section 275. The SALT cap changes also change a few partnership provisions.
I wish I could explain here how the SALT cap changes work, but I still need more time to figure it all out as the changes are a bit intertwined with other Code sections and H.R. 1 changes. This change does not meet the principle of simplicity!
If you have figured it all out I applaud you! Please leave comments to help us all out.
It is likely that the Senate and Conference Committee will continue to make changes.
What do you think?
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