The federal tax bill that passed Congress this week retains tax incentives and exemptions that could boost the recycling sector.
The final bill text was released on Friday, Dec. 15, after several days of negotiations to secure key votes in the House and Senate. The chambers previously approved their own tax bills, both of which contained provisions lauded by groups as beneficial for the recycling industry.
A conference committee with lawmakers from both chambers met to work out the differences. The final bill favors some components from the House bill and some from the Senate proposal.
The Senate passed the bill in the early hours of Dec. 20 and the House approved the final bill later in the morning. The votes came largely along party lines, with most Republicans in support and all Democrats opposed. The bill now goes before President Trump for his signature.
Here are some of the key components of the final bill for the recycling industry, and how they differ from the previous proposals:
- Cuts the corporate tax rate to 21 percent, up from the 20 percent both chambers had previously proposed but down from 35 percent under current law.
- Favors the Senate method of allowing deductions for pass-through companies, as opposed to businesses organized as C corporations. Under the final bill, pass-through businesses can deduct 20 percent of qualified business income, down from 23 percent in the Senate proposal. A threshold provision prevents businesses from converting personal income to “business income” that would be eligible for the deduction.
- Retains the “interest charge domestic international sales corporation” export incentives, allowing certain export income for businesses to not be taxed.
- Allows immediate and full expensing on qualified equipment purchases from September 2017 through 2023 and then begins to lower the expensing allowance each subsequent year. According to the Institute of Scrap Recycling Industries (ISRI), this could impact all manner of recycling industry equipment.
- Repeals the corporate alternative minimum tax, a provision that ensures businesses pay at least a certain amount of tax each year. The House repealed the provision in its proposal, but the Senate had left the corporate minimum tax in place.
- Stipulates that research and development expenses must be capitalized and amortized over five years, rather than allowing full deduction upfront. This means the write-offs would have to be spread out into smaller amounts over five years.
- Allows small businesses to deduct qualified asset purchases up to $1 million, rather than the current $500,000 cap.
- Retains the tax-exempt private-activity bond provision (see related story), which allows recycling facilities to receive tax exempt financing akin to government bonds.
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