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Congressional Outlook for Tax Reform

House and Senate Republicans have been working to pass tax reform legislation by the end of this year. The House passed its proposed tax bill, the Tax Cuts and Jobs Act (H.R. 1), on Nov. 16.

Senate Finance Committee Chairman Orrin Hatch (R-UT) released a detailed description of the Senate’s version of the Tax Cuts and Jobs Act on Nov. 9, but has yet to unveil any legislative text. Throughout the week, the Senate Republican proposal was considered and amended in the Finance Committee, which then approved it the night of Nov. 16. Senate Republicans hope to vote on their version of the bill in the full Senate the week after Thanksgiving.

Once the House and Senate pass their versions of the act, they will have to reconcile the differences between the bills. A final bill will then have to be passed by both chambers before it can be signed into law by the president. Republicans hope to have the final bill passed before the end of the year.

The House GOP bill does the following:

Removes the current tax deduction for employers who help defray the cost of commuting for their employees, thereby creating a possible disincentive for workplaces to offer this critical benefit. The bill would retain the commuter tax benefit for individuals as the pretax payroll deduction.

Repeals the use of Private Activity Bonds (PAB), which are an important infrastructure financing mechanism, thus eliminating PABs as a tool to attract private-sector investment and encourage public-private partnerships.

Eliminates the advance refundability of municipal bonds, and therefore the ability to take advantage of lower interest rates for a one-time refinance. The advance refundability contributes significantly to the attractiveness and utility of municipal bonds, which are an important infrastructure financing mechanism.

Fails to extend the alternative fuels and related infrastructure tax credits that expired on Dec. 31, 2016. In particular, U.S. ­public transit agencies benefit from the 50-cent-per-gasoline gallon equivalent tax credit offered to transit agencies fueling their vehicles with compressed or liquefied natural gas.

While legislative text for the Senate’s version of the Tax Cuts and Jobs Act has not been released, and is subject to amendment in the Finance Committee, its current form:

Removes the current tax deduction for employers who help subsidize the cost of commuting for their employees, as in the House language. It appears, like H.R. 1, to continue the pretax commuter benefit, which allows employees to use pretax dollars to get to work and a payroll tax deduction for employers.

Eliminates the advance refundability of municipal bonds and fails to extend the alternative fuels and related infrastructure tax credits, just as the House bill does.

Retains the use of PABs, another important infrastructure financing tool. Keeping PABs as a way to attract private-sector investment and encourage public-private partnerships is a positive difference between the Senate and House bills.

Unfortunately, neither bill would address the long-term solvency of the Highway Trust Fund. This tax bill represents the best and most realistic oppor­tunity to accomplish this goal.

APTA urged Congress to “use this once-in-a-generation opportunity to reform the tax code to encourage greater investment in our nation’s infrastructure.”

For more details on the House Republican bill, see the APTA Legislative Alert and read APTA’s letter to the members of the House Committee on Ways and Means. APTA has conveyed its concerns with the Senate Republican proposal in a letter to the Senate Finance Committee. For more information on the Senate proposal, see APTA’s Legislative Alert.

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