The Trump Administration, the House Committee on Ways and Means, and the Senate Committee on Finance released a unified tax reform framework. The proposed reforms are intended to offer "fiscally responsible tax reform by broadening the tax base, closing loopholes and growing the economy."

The unified framework is expected to serve as a template for tax-writing committees that will develop (i) legislation and (ii) reforms to improve the efficiency and effectiveness of tax laws.

The stated goals of the unified framework are:

  • tax relief for middle-income families;
  • a simple "postcard" tax filing system for most Americans;
  • tax relief for businesses;
  • ending incentives to "ship jobs, capital, and tax revenue overseas"; and
  • broadening the tax base and closing special-interest tax breaks and loopholes.

Key business tax elements of the framework include:

  • lowering the maximum tax rate applied to sole proprietorships, partnerships and S corporations to 25%;
  • lowering the corporate tax rate to 20%;
  • eliminating the corporate Alternative Minimum Tax;
  • expensing of the cost of new investments in depreciable assets made after September 27, 2017 for at least five years; and
  • limiting the deduction for net interest expense incurred by C corporations.

Key personal tax elements of the framework include:

  • doubling the standard deduction to $24,000 for married taxpayers filing jointly and $12,000 for single filers;
  • consolidating the current seven tax brackets into three brackets (12%, 25% and 35%, with a possible fourth bracket at the high end), and revising the measure for inflation for purposes of indexing the tax brackets;
  • eliminating most standardized deductions (but keeping tax incentives for home mortgage interest and charitable contributions);
  • repealing the individual Alternative Minimum Tax;
  • repealing personal exemptions for dependents, but increasing the Child Tax Credit, increasing the income levels at which the Child Tax Credit begins to phase out, and adding a non-refundable credit of $500 for non-child dependents; and
  • repealing the estate tax.

In addition, the framework provides for a "100% exemption for dividends from foreign subsidiaries in which the U.S. parent owns at least a 10% stake." In accordance with the proposed reforms, all foreign assets would be considered as repatriated, foreign illiquid assets would be taxed at a lower rate than cash or cash equivalents, and companies would be able to pay for the resulting tax liabilities over the course of several years. Finally, the framework includes a reduced rate on the foreign profits of U.S. multinational corporations.

In an exchange with the press, President Trump said that his administration was introducing a tax plan that is the "largest tax cut, essentially, in the history of our country."

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.