In the final weeks of 2017, the House and Senate wrangled and horse- traded their way into a new tax law known as the Tax Cuts and Jobs Act, and the President signed it into law on December 22. One surprising result was that many items slated for elimination somehow survived the political process. For example, despite the broad ambitions of the original House bill, tax-exempt bonds were not eliminated, nor was the so-called Johnson Amendment. That 1954 amendment bans political campaign activity by charities. It was stricken from the proposed legislation by the Senate because it violated the Byrd Rule.1
Still, the changes that made it into the tax code were significant, especially in the income and estate tax areas, and long-term reverberations are likely in the charitable sector.
This edition of Professional Notes provides a chart summarizing the major changes affecting individuals and trusts and estates, as well as some of the significant changes affecting charities, corporations, and pass-through entities. Future columns will consider the impact of these changes on individuals and charities, and explain how The New York Community Trust can help those considering charitable gifts under the new law.
(If you intend to print these charts, we recommend downloading the article as a PDF for crisper print quality.)
Many of these changes upend long-standing policies, such as the reduction in the amount of mortgage indebtedness qualifying for the mortgage interest deduction, which for decades promoted home ownership. Another change is the limit on state and local tax deductions, which particularly affects residents of high tax states including New York, New Jersey, and Connecticut.
Almost all the changes to individual income tax provisions are temporary (most expire in 2025) while most of the corporate provisions are permanent. This will undoubtedly create tax complexity and political difficulties in the years ahead.
Our upcoming issues of Professional Notes will examine some of these changes in greater detail and offer ways The New York Community Trust might be helpful.
1 The effect of the so-called “Byrd Rule,” named for Senator Robert Byrd of West Virginia, has been to prevent the use of the reconciliation process for provisions that would increase the deficit beyond 10 years after the reconciliation measure or are otherwise “extraneous,” by permitting senators to block such measures. (2 U.S.C. § 644) The removal of such provisions has been described as a “Byrd Bath.”
Written by Jane L. Wilton, general counsel, The New York Community Trust
© The New York Community Trust 2018
The material is published for informational purposes only. The publisher is not rendering legal, accounting, or other professional advice.