Senate Passes Tax Reform Bill—Key Compensation and Benefits Provisions Stay Same as Senate Finance Bill and House Bill but Alternative Minimum Tax Retained

December 7, 2017

On December 2, 2017, the U.S. Senate passed its version of the Tax Cuts and Jobs Act (the "Senate Bill"). The passage of the Senate Bill follows approval by the Senate Finance Committee on November 16, 2017, of a version of the Tax Cuts and Jobs Act (the "Senate Finance Bill"). The key compensation and benefits provisions in the Senate Bill are similar to the Senate Finance Bill and the version of the bill passed by the U.S. House of Representatives on November 16, 2017 (the "House Bill"), except that the Senate Bill would retain the Alternative Minimum Tax (AMT) for individuals (as discussed below).

Please see our WSGR Alert dated November 17, 2017, for an overview of compensation and benefits matters in the Senate Finance Bill, including a comparison between that version of the bill and the House Bill. The alert makes clear that the compensation and benefits provisions of the House and Senate versions generally are similar, and presents our initial thinking on the potential impact of the proposed law.

Alternative Minimum Tax for Individuals Survives

In a departure from the House Bill and the Senate Finance Bill, the Senate Bill maintains the AMT for individuals. However, the Senate Bill increases the amounts exempted under the AMT and the phase-out of those exemptions by approximately 27 percent for tax years beginning after December 31, 2017, and before January 1, 2026.

 Current 2018 AMT Exemption*Senate Bill 2018 AMT Exemption*Current 2018 AMT Phase-Out Threshold*Senate Bill 2018 AMT Phase-Out Threshold*
Married Filing Jointly$86,200$109,400$164,100$208,400
Married Filing Separately$43,100$54,700$82,050$104,200
* These amounts are adjusted for inflation in each taxable year.

While not as welcome as an outright repeal of the AMT for individuals, these changes may decrease the number of individuals affected by the AMT.

Next Steps

A conference committee of the House and Senate will take up discussion of the House Bill and Senate Bill in an effort to reconcile differences and produce a final bill. If either bill is modified by the committee, the chamber(s) whose bill is modified must pass the revised bill.

Given the substantial differences between the House Bill and the Senate Bill, any tax reform legislation is likely to continue to change. We will continue to monitor the status of the legislation and provide updates as the legislative process moves forward. In the meantime, we encourage you to review your company's compensation plans and programs and reach out to any member of the employee benefits and compensation practice at Wilson Sonsini Goodrich & Rosati to discuss how tax reform may impact these programs.

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