WASHINGTON — The Senate approved the final tax reform plan 51-48 early Wednesday, the second-to-last obstacle before sending it to President Trump for his signature.
The bill is supported by banks because it would sharply reduce corporate tax rates for all businesses.
Although the bill was approved by the House on Tuesday, the Senate parliamentarian found three provisions that did not comply with that chamber's rules and had to be stripped from the bill. As a result, the House must vote again on the revised bill Wednesday before it can be sent to the president.
The bill is a significant victory for Trump, who has struggled to enact important legislation during his first year in office. During the Senate vote, all 48 Democrats opposed the measure, while all Republicans supported it. (Sen. John McCain, R-Ariz., missed the vote due to medical problems, but he had indicated he would have supported it.)
The bill would lower the corporate tax rate from 35% to 21%, a reduction hailed by the financial services industry. The final report also addressed some concerns that financial institutions had about an earlier version's treatment of mortgage servicing rights.
However, the bill will force some banks to have to write down the value of deferred tax assets because of their lower tax obligation. The plan also makes it harder for banks to deduct the costs of Federal Deposit Insurance Corp. premiums. It eliminates the deduction for banks with more than $50 billion in assets, and limits the deduction for banks with assets of $10 billion to $50 billion. Banks with assets of less than $10 billion will still be able to write off their deposit insurance premiums.
The bill also imposes a $750,000 cap on loans that qualify for the mortgage interest deduction. That cap was a compromise between the competing House and Senate plans, which, respectively, had set caps of $500,000 and $1 million.