Many Tax Policy Priorities Outstanding as Congress Looks to Home Stretch

With Congress back in Washington for several weeks of work before adjourning in advance of the November Election, tax-writers have much work in store – though the lack of legislative days, coupled with the complex and divisive nature of some of the issues calls into question the feasibility of actually getting much accomplished.

The most likely issue to be addressed is a bill that would provide tax relief for U.S. Olympic medal earners. With the Senate having passed such legislation earlier this year, the House Ways and Means Committee is expected – potentially as soon as this week – to take up the House version of the bill, which was introduced by Representative Blake Farenthold (R-TX). It is rumored that the Committee may also mark-up several other bills, though exactly what the subject matter of those bills is remains unclear. In the somewhat near-term, the House will also need to determine how to move forward with its pending impeachment of Internal Revenue Service (IRS) Commissioner John Koskinen, and may see some additional movement on Representative Bob Goodlatte’s (R-VA) most-recent online sales tax legislation, which has received praised from both sides of the aisle and both Chambers of Congress. Finally, looking ahead, it appears that House tax-writers may be preparing a miscellaneous tax bill for the lame-duck session, though some are concerned that this could present a vehicle for lawmakers seeking to extend certain of the expiring tax extenders.

On the Senate side, discussions by Senate tax-writers appear to indicate that the Finance Committee may move some sort oftechnical corrections package in the lame-duck session, which would provide clarity to several existing tax provisions. Some in the Senate also hope to use this as a vehicle to extend several renewable energy tax credits that were not included when similar tax credits were extended in last year’s spending bill. Alternatively, it has been suggested that lawmakers may consider adding a tax title to comprehensive energy legislation that is presently being debated.

One major issue that seems unlikely to be addressed legislatively this Congress: how to respond to the European Commission’s $14.5 billion tax bill issued against Apple in its most-recently decided State aid case. Both Ireland and the United State oppose the ruling, with Republican and Democrats in both Congress and the Administration coming together in a rare showing of bipartisan unity against what they view as a “tax grab” of U.S. tax revenues. See our previous analysis for an in-depth analysis of the ruling. While the Administration is reportedly continuing to mull over the appropriate response, lawmakers are instead likely to use this as yet another reason why tax reform is needed – and proceed from there to argue their policy positions.

Finance Committee Focused on Retirement Savings and Pensions

After previewing his legislation earlier this year during a hearing on retirement savings, Senate Finance Committee Ranking Member Ron Wyden (D-OR) last week released a discussion draft of the Retirement Improvements and Savings Enhancements (RISE) Act, which would “help more working families and recent college graduates save for retirement, while cracking down on unfair strategies used by the privileged to rake in subsidies and dodge tax bills.” Specifically, the RISE Act would:

  • Prohibit further contributions to a Roth IRA if its total value exceeds $5 million;
  • Allow employers to make “matching” contributions to a 401(k) retirement plan while their employees make student loan repayments;
  • Make the “Saver’s Credit” refundable so that it is available to Americans with no income tax liability, simplify its structure, require that the credit amount be contributed directly to a tax-favored retirement plan, and increase its income cap;
  • Eliminate Roth conversions for both IRAs and employer-sponsored plans to prevent tax gaming and close the “back door” around income limits;
  • Eliminate “stretch IRAs” to prevent taxpayer-subsidized retirement accounts from being used as estate planning tax loopholes;
  • Gradually increase the age at which retirement plan participants are required to begin taking distributions from their accounts

While next steps on the legislation are uncertain, Ranking Member Wyden has asked that comments on the proposal be submitted to Retirement_Savings@finance.senate.gov.

Relatedly, it is rumored that the Finance Committee this week will mark-up legislation to address the Mineworkers’ pension issue, which has reportedly been the hold-up in Senate tax-writers being able to move forward with legislation to reform the U.S. pension system.

This Week’s Hearings:

  • Tuesday, September 13: The House Ways and Means Committee will hold a hearing titled “Tax-Exempt College and University Endowments.”
  • Wednesday, September 14: The House Small Business Committee will hold a hearing titled “IRS Puts Small Businesses Through Audit Wringer.”

Regulatory Activity

Treasury Continuing to Press Forward with Section 385 Regulations

As the Treasury Department continues to move forward with its debt-equity regulations under section 385 of the tax Code, it has been reported that Treasury Secretary Jack Lew may head back to the Capitol Hill this week to further address lawmakers’ concerns. Though Congress has ramped up the pressure on Treasury over the last several months, the sheer complexity of the rules makes it more difficult for lawmakers to take on Treasury’s approach; to date, there have been no hearings on the regulations and no legislative response has been introduced. Presently, Treasury appears to be on target to release the final regulations at some point this fall – possibly as soon as October – and seems unlikely to significantly change the regulations beyond those instances it has already discussed publicly (i.e., cash pooling, etc.).