Last night, the Trump Administration and Republican leadership in Congress released a tax reform framework that will be used to craft U.S. tax reform legislation. Here is a summary of key provisions:

1. Corporate tax rate to be reduced to 20%; corporate AMT (alternativeminimum tax) may be eliminated
2. Full expensing of the cost of new investments made after 27September 2017, for at least five years
3. Net interest expense of C corporations will be partially limited (rulesnot specified)
4. Domestic manufacturing (Section 199) deduction and numerous otherspecial exclusions and deductions to be repealed or restricted (detailsnot specified)
5. Deemed repatriation of earnings held offshore in foreign subsidiaries,subject to reduced tax rates; earnings held in illiquid assets will besubject to even lower tax rates (rates not specified)
6. Full exclusion of dividends paid by offshore subsidiaries in which theU.S. parent owns at least a 10% stake
7. Foreign profits of U.S. multinational corporations to be taxed at areduced rate on a global basis (rates not specified)
8. Rules yet to be specified to “level the playing field” for both US-headquartered parent companies and foreign-headquartered parentcompanies
   

1. The current seven tax brackets will be reduced to three – 12%, 25%and 35% – with the potential for an additional top rate for the highest-income taxpayers (rate not specified)
2. The standard deduction will be increased to $12,000 (single filers) and$24,000 (married filing jointly) but personal exemptions for taxpayerand spouse will be repealed
3. Many itemized deductions primarily used by the wealthy will be eliminated but tax incentives for home mortgage interest and charitable contributions will be retained
4. Tax incentives for work, higher education and retirement security will be retained
5. Child tax credits will be significantly increased but personal exemptions for dependents will be repealed
6. Estate tax and generation skipping transfer tax to be repealed
7. Individual AMT (alternative minimum tax) to be repealed
8. The framework limits the maximum tax rate for small and family-owned businesses conducted as sole proprietorships, partnerships or S corporations to 25%
9. Section 199 deduction to be eliminated

What the legislation will actually say, and whether and when it will pass, are not clear. It is expected the U.S. Senate will be a major hurdle because 60 votes are needed, but Republicans hold only 52 votes. If U.S. Senate Republicans want to pass the proposed tax legislation with a simple majority, then the tax legislation will need to be “revenue neutral” under the budget reconciliation process, and it is not clear whether that will be the case.