The Senate voted early Wednesday to pass major tax reform legislation.
Due to a technical change, the bill required a final vote by the House, which had already approved it Tuesday. After the second House vote on Wednesday, the legislation is headed to the White House for the president's signature before Christmas.
Both chambers voted along party lines, with the Senate approving it 51-48 and the House voting 224-201.
The tax reform package, which becomes effective in January 2018, includes permanently lower rates for corporations, which will now pay 21% instead of the current 35%.
Partnerships, including real estate and private equity firms, gained a 20% deduction for pass-through business income, but the provision expires on Dec. 31, 2025. Private equity firms saw their ability to deduct debt interest trimmed significantly, down to 30% of adjusted income from the current 100%.
For partners in private firms, the ability to pay a lower capital gains rate on carried interest was tightened to require that investments be held for at least three years, up from one year.
Lower tax rates for individuals expire in 2025.
According to the Joint Committee on Taxation, the tax reform package will add nearly $1.5 trillion to the deficit over the next decade, but Republicans estimate that economic growth stimulated by the tax cuts will reduce that projection.
Senate Finance Committee Chairman Orrin Hatch, R-Utah, a key architect of the package, said in a statement that the Senate vote "marks a pivotal moment in American history. For the first time in more than three decades, we cleared a comprehensive overhaul of the nation's tax code and delivered on our promise of creating and advancing pro-growth policies that will lift the economy and build a better future for the American people." Mr. Hatch said the changes will ensure that businesses of all sizes "can better compete and bring more jobs and investment back home."
Private colleges and universities with at least 500 students and assets of at least $500,000 per full-time student, with more than 50% of U.S. students, will see a new 1.4% tax on net investment income.
Public pension fund officials and their investment partners were relieved that the final package did not include a new unrelated business income tax on their direct investments, such as real estate and private equity.
Retirement plan sponsors were also relieved that earlier proposals to change the tax-deferred nature of contributions did not materialize, and highly compensated employees can keep using non-qualified deferred compensation plans to boost retirement savings.