Legislative Activity

House Tax-Writers Continue Moving Forward with Work on Tax Reform

This week, on Wednesday, April 13, the House Ways and Means Subcommittee on Tax Policy will hold a hearing to continue the Committee’s efforts to examine “fundamental tax reform proposals.” In March, Ways and Means Committee members examined legislative proposals related to cash-flow and consumption-based approaches to taxation.

This week’s hearing come as both Tax Policy Subcommittee Chairman Charles Boustany (R-LA) and full Committee Chairman Kevin Brady (R-TX) continue their work on international tax reform. At the same time, Senate Finance Committee Chairman Orrin Hatch (R-UT) is working to refine his “corporate integration” proposal, which appears to be delayed beyond original estimates (which took into account the initial delay for scoring and structuring of the bill). Note that both of these efforts come as Representative Bob Goodlatte’s (R-VA) legislation, H.R. 27, the Tax Code Termination Act – which would abolish the Internal Revenue Code by December 31, 2019, and require Congress to approve a new federal tax system by July of that same year – is gaining traction (the bill presently has 129 co-sponsors). Despite increased pressure for reform, however, it is unlikely that any tax reform efforts will be finalized prior to 2017.

FAA Reauthorization May Provide Vehicle for Tax Extenders

With the Senate expected to move forward with its Federal Aviation Administration (FAA) reauthorization bill this week, the final holdup appears to be the bill’s tax title, which may well be a vehicle for tax extenders. In particular, Senate Finance Committee Ranking Member Ron Wyden (D-OR), among others, is pressing for the inclusion of provisions that would extend several energy tax credits (geothermal, fuel cells, small wind and other renewable technologies) not fully addressed in last year’s omnibus spending bill. Though the tax title has not yet been made public, its inclusion likely opens the door – much to the chagrin of Chairman Brady, who had hoped to save the extenders debate for next year – for additional jockeying to include other tax extenders, which were not made permanent in last year’s package. While it is too soon to know what the ultimate outcome will be, the FAA’s current authorization is set to expire in mid-July, leaving only three months for lawmakers to resolve any remaining differences between the competing approaches.

This Week’s Hearings:

  • Tuesday, April 12: The Senate Finance Committee will hold a hearing titled “Cybersecurity and Protecting Taxpayer Information.”
  • Wednesday, April 13: The House Ways and Means Subcommittee on Tax Policy will hold a hearing titled “Fundamental Tax Reform Proposals.”
  • Wednesday, April 13: The House Small Business Subcommittee on Economic Growth, Tax and Capital Access will hold a hearing titled “Keep It Simple: Small Business Tax Simplification and Reform, Main Street Speaks.”
  • Wednesday, April 13: The House Small Business Committee will hold a hearing titled “Keep It Simple: Small Business Tax Simplification and Reform, the Commissioner Responds.”
  • Thursday, April 14: The House Ways and Means Subcommittee on Trade will hold a hearing titled “The Miscellaneous Tariff Bill: Helping U.S. Manufacturers through Tax Cuts.”
  • Thursday, April 14: The House Ways and Means Committee will hold a hearing titled “Tax Treatment of Health Care.”
  • Thursday, April 14: The House Science, Space, and Technology Subcommittee on Research and Technology will hold a hearing titled “Can the IRS Protect Taxpayers’ Personal Information?”
  • Thursday, April 14: The House Small Business Committee will hold a hearing titled “Regulation: The Hidden Small Business Tax.”

Regulatory Activity

Treasury Moves Forward with Anti-Inversion Regulations

On Monday, April 4, the Department of the Treasury released its highly-anticipated next round of regulations targeting corporate inversion transactions, which include proposed “earnings stripping” regulations that are not limited solely to inverted companies. The regulation package also includes regulations implementing the prior inversion guidance outlined in Notice 2015-79 and Notice 2014-52, as well as new provisions that were not part of those Notices.

Despite the issuance of these new regulations, Treasury Secretary Jack Lew again acknowledged that the regulations alone are not enough to fully stop corporate inversions and urged Congress to take legislative action on the matter. There remains a clear divide between Congressional Democrats and Republicans on the next course of action, however, as Democrats remain staunchly committed to taking further action to curb corporate inversions, while Republicans are focused on using overall tax reform as the way to address the inversion issue. A full analysis of these regulations, including a political analysis as to next steps, can be found here.

IRS to Hold Committee Meetings

This week, the Internal Revenue Service (IRS) will hold two meetings to address improving customer service at the agency. Specifically, on Wednesday, April 13, the IRS will hold a meeting of its Taxpayer Advocacy Panel Taxpayer Assistance Center Improvements Project Committee, followed by a meeting of its Taxpayer Advocacy Panel Tax Forms and Publications Project Committee on Thursday, April 14.