Congress releases final tax bill
Retirement | TRS | Social Security Congress | Federal
Date Posted: 12/16/2017
The U.S. House and Senate have finalized a conference tax bill that is expected to be voted on by each body over the course of next week. After the individual chambers passed their own bills pertaining to reforming provisions of the current tax code, a conference committee was appointed to work out the differences in the bills. The final bill must now receive the support of both chambers and the signature of the president before it becomes law.
ATPE wrote members of the Texas delegation last week to urge members of the conference committee and leaders in both chambers to stand with teachers on two issues: maintaining a credit for educators who spend personal money on classroom supplies and omitting a potential new tax on investments of public employee pensions like the Teacher Retirement System (TRS) of Texas. ATPE is pleased to report that the final bill reflects our requests on both issues.
The educator expense deduction was maintained at up to $250 a year, giving educators who use money from their own paychecks a nominal but meaningful credit for at least a portion of what is spent to give all students and classrooms access to needed supplies. The House bill originally scrapped the deduction altogether, while the Senate bill doubled the max deduction to as much as $500.
The Unrelated Business Income Tax (UBIT), as it related to public pensions, was ultimately scrapped under the final bill. The House bill would have applied the tax to public pension investments, including the TRS trust fund, which could have weakened its financial soundness by subjecting it to new additional tax liability. The Senate’s bill did not apply the new tax to public pension investments.
Another issue that garnered significant attention was a provision termed to be one aimed at “school choice” and was included in varying forms under both bills. The Senate’s provision on the topic was added in the final hours of debate by Senator Ted Cruz (R-TX). The final bill includes a negotiated version of the provision, which expands spending eligibility for 529 college savings accounts. If the bill becomes law, parents will be able to use the money they’ve saved in a 529 account to pay for up to $10,000 a year in K-12 education expenses, including at private schools.
ATPE appreciates the conference committee’s final decision on both the educator expense deduction and the UBIT. We also appreciate the help of legislators and leaders who advocated on behalf educators. High-profile provisions of the final plan include a reduction of the corporate tax rate from 35 to 21 percent, a smaller top tax rate for individuals (at 37 percent instead of just under 40), omission of the Obamacare-era tax fine for those who don’t buy health insurance, and a cap on the deduction of state and local taxes (SALT) at $10,000.
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