November 30, 2018
The House-Proposed Tax Cut: Amendment to H.R. 88
On November 26, 2018, Chairman Kevin Brady of the
In addition to these extenders, the bill extends the 9 cent per
House Ways and Means Committee released the
barrel tax on oil that funds the oil spill liability trust fund
“Retirement, Savings, and Other Tax Relief Act of 2018.”
and the increased excise tax rate on coal that funds the
The bill was reported to the House on November 28, 2018.
black lung liability trust fund through 2019. More on these
The measure is an amendment to a minor bill already
provisions can be found in CRS In Focus IF10823, The Oil
passed by the House and Senate, H.R. 88.
Spill Liability Trust Fund Tax: Reauthorization Issues and
Legislation in the 115th Congress, by Jonathan L. Ramseur;
The proposed bill has six major parts: (1) the extension of
and CRS Report R45261, The Black Lung Program, the
expiring provisions (the “extenders”), (2) disaster relief, (3)
Black Lung Disability Trust Fund, and the Excise Tax on
provisions for retirement plans, (4) benefits for start-up
Coal: Background and Policy Options, by Scott D.
firms, (5) some technical corrections to the 2017 tax
Szymendera and Molly F. Sherlock.
revision (P.L. 115-97) and clarifications, and (6) a set of
reforms to the Internal Revenue Service (IRS). This latter
The revenue cost of provisions in this section totals $29.9
set of IRS provisions relating largely to tax administration
billion for FY2019-FY2028; $16.9 billion of the loss is due
is not addressed in this In Focus.
to the biodiesel credit, $7.1 billion is due to the extension of
excise credits and payments for alternative fuels, and $1.4
The proposal is estimated to cost $54.1 billion in revenue
billion is due to the extension of the exclusion from income
losses from FY2019 to FY2028, with a small $1.4 billion
of the discharge of indebtedness on principal residence.
saving in spending.
Disaster Relief
Some of the provisions were in a prior tax package passed
This section of the bill provides tax benefits for disasters
by the House in September 2018. See CRS In Focus
including Hurricanes Florence and Michael; Typhoons
IF10977, Tax Reform 2.0: The Ways and Means Tax
Mangkhut and Yutu; the Mendocino, Camp, and Woolsey
Proposals, by Jane G. Gravelle.
California wildfires; the Kilauea volcanic eruption and
earthquake; and Hawaii severe storms, flooding, landslides,
Extenders
and mudslides. The tax benefits include access to retirement
A number of tax provisions that have been enacted on a
accounts without penalties, employee retention credits,
temporary basis are extended or, in one case, made
temporary suspension of limits for charitable contributions,
permanent, and in another extended and phased out.
increased casualty loss deductions, and the option to use the
Expiring provisions are listed in CRS Report R45347, Tax
prior-year earnings for purposes of the child credit and the
Provisions That Expired in 2017 (“Tax Extenders”), by
earned income tax credit. For a discussion of disaster relief
Molly F. Sherlock. Specific provisions are discussed in
provisions used in the past, see CRS In Focus IF10730, Tax
CRS Report R44925, Recently Expired Individual Tax
Policy and Disaster Recovery, by Molly F. Sherlock. The
Provisions (“Tax Extenders”): In Brief, coordinated by
disaster relief provisions lose $3.8 billion in revenue from
Molly F. Sherlock; CRS Report R44930, Business Tax
FY2019 to F72028 primarily due to the increased casualty
Provisions that Expired in 2017 (“Tax Extenders”),
loss deduction.
coordinated by Molly F. Sherlock; and CRS Report
R44990, Energy Tax Provisions That Expired in 2017
Retirement and Savings
(“Tax Extenders”), by Molly F. Sherlock, Donald J.
This section provides a series of rule revisions. Many of
Marples, and Margot L. Crandall-Hollick.
these retirement provisions were in H.R. 6757 (passed by
the House on September 27, 2018). They include
The bill extends through 2018 all of the provisions that
simplifications to benefit multi-employer plans; relaxing
expired at the end of 2017, with some exceptions. First, the
certain notification requirements for electing a safe harbor
bill makes the railroad track maintenance credit permanent
status for 401(k) retirement saving plans; treating taxable
but reduces the rate from 50% to 30%. Second it extends
non-tuition fellowships and stipends as compensation for
through 2021 and then phases out over the next three years
Individual Retirement Accounts (IRA contributions cannot
the $1.00 per gallon credit for biodiesel fuel. Two of the
exceed compensation); repealing the prohibition on IRA
extenders, the special rate for capital gains on timber and
contributions by those 70½ and older; prohibiting plans
the production activity deduction for Puerto Rico were
from making loans through credit cards and similar
made obsolete because of changes in the 2017 tax revision
arrangements; allowing the transfer of lifetime income
(P.L. 115-97). The one-year extensions include three
investments (annuities) between plans or as a distribution if
individual provisions, nine business provisions outside of
no longer allowed as an investment option in a plan;
energy, and 12 energy provisions.
allowing custodial accounts on termination of certain plans
(Section 403 plans) to be converted into IRAs; clarifying
which individuals will be covered by church controlled

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The House-Proposed Tax Cut: Amendment to H.R. 88
organization plans; increasing a cap on increases in auto-
improvement property. The legislative language, however,
enrollment retirement plans to achieve nondiscrimination
resulted in the tax life becoming the tax life for new
safe harbors; increasing the credit (for three years) for
nonresidential buildings, 39 years, which also made the
setting up small employer plans from $500 to the greater of
property not eligible for temporary expensing of
(1) $500 or (2) the lesser of $250 times the number of non-
investments. The bill restores the 15-year life, which also
highly compensated employees or $1,500; increasing the
restores eligibility for expensing and shorter lives if
credit by $500 for small employers who establish automatic
expensing is allowed to expire.
enrollment plans; exempting individuals with accounts of
$50,000 or less from minimum distribution rules; and
(2) The bill would ensure individual shareholders of a
allowing elective deferrals by members of the Ready
regulated investment company (RIC or mutual fund) that
Reserve of the Armed Forces.
holds shares in a Real Estate Investment Trust or publicly
traded partnership to be eligible for the 20% deduction for
The proposal also has some administrative changes. It
business income.
allows due dates for establishment of employer plans on the
tax filing day rather than year-end; modifies the
(3) The bill would allow losses that occurred in 2017 and
antidiscrimination rules so they are not triggered by
predated the bill to be eligible for offset under prior-law net
participation in the plan of older, longer-service employees;
operating loss carryback provisions.
provides a safe harbor to satisfy prudence requirements for
fiduciaries who are trustees of plans; requires employers of
(4) The bill would clarify that the nondeductibility of
defined contribution plans to provide a lifetime disclosure;
attorneys’ fees for sexual harassment or abuse does not
and reduces the premiums of the Pension Benefit Guaranty
apply to plaintiffs’ costs.
Corporation (PBGC) for cooperative and small employer
charity plans that are a subset of multi-employer plans, as
(5) The bill would allow overpayments for tax installments
well as requiring use of the same discount rate used for
on accumulated income earned abroad (Section 965,
benefits to measure unfunded liabilities.
deemed repatriation) to be treated as overpayments and
refunded.
The bill also allows penalty-free withdrawals of up to
$7,500 from retirement plans in the case of birth or
The Joint Committee on Taxation reports no revenue effect
adoption.
for these provisions.
The revenue loss from these provisions total $13.5 billion
In addition to these five changes relating to the 2017 law,
for FY2019-FY2028, with $6.3 billion due to the exemption
the bill would clarify that veterans housing complies with
from the required minimum distribution rules, $3.7 billion
the general public use requirements for the low-income
due to the multi-employer plans, $1.9 billion due to
housing tax credit and tax-exempt bond treatment.
withdrawals for birth or adoption, and $1.4 billion due to
the modification of PBGC premiums.
Manager’s Amendment
The Ways and Means Committee adopted a manager’s
Provisions for Start-Up Firms
amendment that removed the provision in the 2017 act that
This proposal would increase the amount of start-up costs
taxed fringe benefits of nonprofits under the unrelated
that can be deducted immediately from $5,000 to $20,000.
business income tax (UBIT), as well as some other minor
The deduction would be phased out dollar for dollar after
changes, and would clarify refunds of overpayments and
start-up costs exceed $120,000 (up from $50,000 in current
installments of deemed repatriation net tax liability, allow
law). The proposal would also allow net operating losses
for automatic filing extensions in disaster areas and clarify
and unused tax credits arising within three years of start up
the applicability period for Section 403(b) plan revisions.
to be carried over to a new owner that continues the
The UBIT provision loses $1.8 billion in revenue for
business, without regard to the general rules that restrict
FY2019-FY2028.
these carryovers. These provisions cost $4.9 billion for
FY2019-FY2028, with each provision responsible for about
Jane G. Gravelle, jgravelle@crs.loc.gov, 7-7829
half the cost. These provisions were in H.R. 6756 (passed
by the House on September 27, 2018).
IF11033
Technical Corrections to the 2017 Tax
Cut and Clarifications
Several proposals address provisions viewed as drafting
errors in the 2017 tax revision.
(1) The 2017 act combined certain categories of real estate
improvement property (qualified leasehold improvements,
qualified restaurant property, and qualified retail
improvement property), which previously had a tax life of
15 years and was eligible for bonus depreciation (deducting
half of the cost immediately or deducting all of the cost for
certain small business) into one category, qualified
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