Tax Reform Discussions Persist, Proposals Due Out This Month
House Ways and Means Committee Chairman Kevin Brady (R-TX) remains focused on efforts to overhaul the U.S. tax Code and is expected to release his tax reform “blueprint” this month. He recently stated that he anticipates continuing to concentrate efforts on the blueprint “through June,” after which the Committee will possibly turn to a miscellaneous tax bill, which may include some of the proposals already introduced and discussed during the recent Member Day hearing. Representative Charles Boustany (R-LA), Chairman of the House Ways and Means Subcommittee on Tax Policy, recently suggested using the technical corrections bill, which was introduced back in April to make some minor corrections to last year’s tax extenders package.
For the Senate’s part, it is still expected that Senate Finance Committee Chairman Orrin Hatch (R-UT) will release his corporate integration proposal this month as well, though as has been evident in the hearings held thus far on the matter, there remain various issues (e.g., the proposal’s potential impact on retirement plans and tax exempts, etc.) that still need to be resolved.
LIHTC Stepping Into the Spotlight
Senator Maria Cantwell (D-WA) recently secured co-sponsorship from Chairman Hatch on a measure to expand the 30-year-old low-income housing tax credit (LIHTC). This proposal has the potential to move either as a part of a year-end tax package or in broader tax legislation in the next Congressional session. The Senate has yet to take up any of the miscellaneous tax bills approved by the Senate Finance Committee back in February 2015, making such measures unlikely vehicles to move the LIHTC legislation. In the House, Representative Pat Tiberi (R-OH), a long-time LIHTC advocate, indicated that he plans to examine the Cantwell bill and is considering developing similar legislation.
Treasury Not Yet Convinced by Feedback on Earnings Stripping Rules
Mark Mazur, Treasury Assistant Secretary for Tax Policy, recently indicated that Treasury has not yet received any feedback that would dissuade it from finalizing the Section 385 debt-equity regulations as quickly as originally planned. According to Mr. Mazur, “I don’t think I’ve seen anything that’s a showstopper at this point.”
As reported previously, Internal Revenue Service (IRS) Commissioner John Koskinen has indicated that the IRS does not intend to put out any “significant” regulations past Labor Day, which creates a rather tight timeframe for Treasury to digest the responses to its proposed regulations and still finalize the regulations this year. In recent weeks, several business groups have written letters to both Treasury and Congress, requesting that Treasury: (1) extend the comment period end date from July 7, 2016, to at least October 5, 2016; (2) delay its timetable for finalizing the regulations; and 3) reconsider setting April 4, 2016, as the effective date. Treasury Deputy Assistant Secretary Bob Stack has promised that Treasury “will have an intense comment period, [and] be listening to taxpayers.” It is now up to taxpayers to offer their input expeditiously if they are to be heard before the regulations are finalized.
BEPS Project Seeks Public Input on Multilateral Instrument
Action 15 of the Base Erosion Profit Shifting (BEPS) Project Action Plan calls for the development of a multilateral instrument (MLI) to modify existing tax treaties. With BEPS implementation now well underway, the OECD recently released a discussion draft of the MLI and is seeking input from the public. An Ad Hoc Group began its work developing the MLI in May 2015 and aims to conclude its work and open the MLI for signature by December 31, 2016.
With the exception of the development of a MAP (Mutual Agreement Procedure) arbitration provision, the mandate of the Ad Hoc Group does not include changing the substance of the BEPS outputs or creating new measures that were not developed during the BEPS Project. With that in mind, the Group is seeking comments on technical issues of implementation and on issues related to the development of a MAP arbitration provision; comments are due no later than June 30, with a hearing on the MLI set for on July 7.