It's been 31 years since the last tax reform overhaul. In today's tax reform post, we discuss the last reform from a tax attorney's perspective and where she sees the next steps happening.
REFORMING THE TAX CODE TAKES TIME. HOW WERE YOU INVOLVED DURING THE LAST REFORM?
The last time Congress undertook a complete overhaul of the tax code in the mid-1980s, I was a summer associate with the law firm of Patton Boggs. In anticipation of tax reform, the firm drafted 50 percent of its new associates into the Tax Department. Starting full time in fall of 1985, much of my initial tax work was legislative in nature—including being dispatched to Capitol Hill for meetings with staff and members, preparing background documents and covering Committee action. The 1985-86 tax code overhaul took 13 months—counting from the first Ways & Means Committee markup on September 18, 1985 until the bill was signed into law by President Reagan on October 22, 1986.
NOW THAT THE TAX REFORM FRAMEWORK HAS BEEN RELEASED, WHAT ARE THE NEXT STEPS?
The next step is going on currently behind the scenes—drafting the Tax Reform Framework into a bill that can be introduced in the House and marked up by the Ways & Means Committee. Although it could be delayed, I expect that the legislative drafting in anticipation of markup will be completed no later than early November.
Once the initial legislative drafting is complete, a Ways & Means Committee markup will be scheduled. It is interesting to recall that in 1985, it took the Committee 26 days of markup sessions over a two month period to complete work on the Tax Reform Act. I do not expect that Ways & Means Chairman Brady will preside over such a protracted process. I believe that his goal is to move the bill through the Committee much more quickly so it can be voted on by the full House before Thanksgiving.
Senate action on a tax bill typically begins after the House has finished its work. Senate Finance Committee Chairman Hatch previously said that his Committee will not be a “rubber stamp” on tax reform. In 1985-86, Senate Finance action did not begin until 3 months after the House passed the bill, and consumed another two months of time.
Unless the Senate bill is identical to the House bill, a Conference Committee must be appointed to iron out the differences. Back in 1986, that process consumed another 3 months. Based on public statements, it is clear that the White House is hoping to avoid that kind of protracted negotiating process this time around. It would like a final bill for President Trump’s signature before year end.
Kathleen M. Nilles is a partner in the Washington D.C., office of Holland & Knight where she focuses her practice on resolving critical tax and business organizational issues for tax-exempt and governmental entities. She is a frequent speaker at NAFOA’s events and has co-authored (with Karen Atkinson) a publication distributed by NAFOA--the Tribal Business Structure Handbook. She also contributed to NAFOA’s Financial Reporting and Information Guide for Tribal Governments and Enterprises (Orange Book).