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April 27, 2017

The Trump administration yesterday (April 26, 2017) shared its ambitious but very short outline for U.S. Tax Reform as presented by Treasury Secretary Steven Mnuchin and National Economic Council Director Gary Cohn during a press briefing.

Game Changer?

Don’t worry if you missed the briefing. As expected, the outline has exciting prospects of significantly reducing and simplifying taxes in the U.S., reaffirming many of the administration’s campaign promises. But there was no detail in the announcement. More importantly, there was no vision of how to get the outline past the inevitable political and economic hurdles.

The Plan From Here

The administration has committed to working out details in May with Congress and stakeholders, and plans to release more details in the future.

First Offer?

To us, by presenting the outline without detail, without advanced party consensus and without economic support seems akin to a first offer in a negotiation process. We will, of course, be watching closely and providing our insights on the process.

Key Elements

In the meantime, here are a few key takeaways that are most relevant to our audience:

  • Corporations
    The outline aggressively lowers the corporate tax rate to 15 percent and explicitly embraces a territorial system, but is notably silent on the border-adjustable tax (BAT) favored by House Republicans. Although the BAT would raise revenue and seems consistent with the campaign pledge to help domestic business, its controversial nature may present too much political risk to the administration. The administration also remained silent on capital expenditure and interest deductions.
  • Pass-through
    The outline gives the same low 15 percent business tax rate to pass-through owners on their individual tax returns — a boon for many small and mid-sized business owners.
  • Individuals
    The outline lowers rates further than expected but eliminates many deductions, saving mortgage interest and charitable deductions. Notably, state taxes would no longer be deductible, favoring low-tax-state residents. Also, the alternative minimum tax (AMT), the 3.8 percent net investment income tax and estate taxation would be eliminated.

Alvarez & Marsal Taxand Says:

As you know, we are following the topic closely and will be communicating about developments on a regular basis, particularly about what the proposal will mean to specific industries and client profiles. In the meantime, please reach out to any of our Tax Reform steering committee members with questions and comments: Albert LiguoriDrew JohnsonErnie PerezAdam BensonJill HardingBrian Cumberland, and Doug Sayuk.

Disclaimer

The information contained herein is of a general nature and based on authorities that are subject to change. Readers are reminded that they should not consider this publication to be a recommendation to undertake any tax position, nor consider the information contained herein to be complete. Before any item or treatment is reported or excluded from reporting on tax returns, financial statements or any other document, for any reason, readers should thoroughly evaluate their specific facts and circumstances, and obtain the advice and assistance of qualified tax advisors. The information reported in this publication may not continue to apply to a reader's situation as a result of changing laws and associated authoritative literature, and readers are reminded to consult with their tax or other professional advisors before determining if any information contained herein remains applicable to their facts and circumstances.

About Alvarez & Marsal Taxand

Alvarez & Marsal Taxand, an affiliate of Alvarez & Marsal (A&M), a leading global professional services firm, is an independent tax group made up of experienced tax professionals dedicated to providing customized tax advice to clients and investors across a broad range of industries. Its professionals extend A&M's commitment to offering clients a choice in advisors who are free from audit-based conflicts of interest, and bring an unyielding commitment to delivering responsive client service. A&M Taxand has offices in major metropolitan markets throughout the U.S., and serves the U.K. from its base in London.

Alvarez & Marsal Taxand is a founder of Taxand, the world's largest independent tax organization, which provides high quality, integrated tax advice worldwide. Taxand professionals, including almost 400 partners and more than 2,000 advisors in 50 countries, grasp both the fine points of tax and the broader strategic implications, helping you mitigate risk, manage your tax burden and drive the performance of your business.

To learn more, visit www.alvarezandmarsal.com or www.taxand.com

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