The U.S. House of Representatives passed a tax reform bill Thursday along partisan lines, with 227 Republicans voting for it and all 192 voting Democrats opposing it, along with 13 Republicans.
The next step is for the Senate Finance Committee to finish marking up its version of the Tax Cuts and Jobs Act in the next day or two, and then forward it for a full Senate vote. After that, the House and Senate versions will have to be reconciled in conference, with particular concern that any final bill does not add more than $1.5 trillion to the federal debt. One contentious issue in the Senate version is that it repeals a health insurance mandate.
The House bill does not differ from the version passed by the House Ways and Means Committee last week.
Both the House and Senate versions keep intact the tax treatment of 401(k) contributions, and the House version keeps highly compensated employees' ability to use non-qualified deferred compensation plans to boost retirement savings.
Both versions also change the tax treatment of private university endowments and private equity firms, plus certain investments by public pension funds. Larger private university endowments would see a new 1.4% tax on their net investment income.
In the House bill, private equity, real estate and venture capital firms won a lower, 25% tax treatment of pass-through business income for partnerships, but lost the ability to deduct more than 30% of interest expenses in a single tax year except for certain real estate transactions. The ability for partners to pay a lower capital gains rate on carried interest was limited to investments held for at least three years.