Legislative Activity

International Tax Reform-Highway Funding Negotiations Stall

Following months of coordination between House Ways and Means Committee Chairman Paul Ryan (R-WI) and senior Senate Finance Committee member Chuck Schumer (D-NY) regarding tying international tax reform to highway funding, aides for the two lawmakers last week announced that negotiations had stalled as a result of a significant divergence over the level of transportation funding, with Democrats committed to a higher level than Republicans are presently willing to allow.

As Chairman Ryan’s staff noted, “Chairman Ryan and Senator Schumer will continue their discussions on a parallel track with the hope of reaching agreement on an international tax reform and long-term transportation package.” In the interim, House Transportation and Infrastructure Committee Chairman Bill Shuster (R-PA) and his Committee will move forward with their work, allowing Ryan and Schumer an opportunity to try and work through their differences.

Nevertheless, Senate Finance Committee Chairman Orrin Hatch (R-UT) has suggested that there will not be sufficient time for lawmakers to consider any legislation ultimately proposed by the two lawmakers. Instead, he and Senate Majority Leader Mitch McConnell (R-KY) are pushing for the House to take up H.R. 22, the Developing a Reliable and Innovative Vision for the Economy (DRIVE) Act of 2015, which the Senate passed prior to adjourning for August recess.

Budget Committee Set to Markup Reconciliation Package

The House Budget Committee is set to mark-up a reconciliation package this week, which consists of proposals submitted by the Ways and Means, Energy and Commerce, and Education and the Workforce Committees. Pursuant to the FY 2016 Budget Resolution, these Committees were required to submit to the Budget Committee proposals identifying at least $1 billion in savings.

Specifically, the Ways and Means Committee’s reconciliation proposal, which the Committee marked-up and passed out of Committee on September 29 by a 23-14 vote, would repeal the healthcare tax provisions called for under the Affordable Care Act (ACA) – including the individual and employer mandates, the “Cadillac” Tax, and the medical device tax. According to the Joint Committee on Taxation (JCT), this proposal would save an estimated $44.2 billion over the 10-year scoring window.

The Budget Committee is expected to send one reconciliation bill to the House for consideration.

 This Week’s Hearings:

  • Wednesday, October 7: The House Ways and Means Subcommittee on Oversight will hold a hearing on the rising costs of higher education and tax policy.

Regulatory Activity

OECD to Release Final BEPS Proposals

Today, the Organisation for Economic Co-operation and Development (OECD) will release many of its long-awaited final proposals to counter corporate tax avoidance as part of more than two years of work on the Base Erosion and Profit Shifting (BEPS) Project. The final BEPS proposals will be presented at the G20 Finance Ministers meeting on Thursday, October 8 in Lima, Peru, and will be considered in November during the G20 Summit in Antalya, Turkey. Additional proposals are expected to be released in December.

Though it is unclear the extent to which the final proposals will differ from the drafts previously released, industry appears to be confident that significant changes have been incorporated so as to be more favorable to business interests. Presently, it is expected that more than 50 countries will agree to adopt these proposals.

From a domestic perspective, on Friday, October 2, Robert Stack, U.S. Deputy Assistant Treasury Secretary for International Tax Affairs, announced that the U.S. has agreed to participate in discussions regarding the development of a multilateral instrument under Action 15 of the BEPS Project “because it is the best way for the United States to advance its interests in mandatory binding arbitration as the optimal method for resolving disputes and improving tax administration.” However, he went on to emphasize that this decision “by no means foreshadows any decision about whether to eventually join in signing such an instrument” – though he did acknowledge that the Administration will consult with Congress as appropriate “as the process moves along.”

IRS Seeks Comments on Definition of Section 48 Qualifying Energy Property

On Friday, October 2, the Internal Revenue Service (IRS) issued Notice 2015-70, announcing that the IRS and Treasury “anticipate” they will issue new regulations to define certain types of property qualifying for the energy credit under section 48 of the Internal Revenue Code. The notice requests comments on how to define these types of property. Specifically, the IRS is seeking comments on the definition of: certain equipment using solar energy; certain equipment used to produce, distribute, or use energy derived from a geothermal deposit; qualified fuel cell property; qualified microturbine property; combined heat and power system property; qualified small wind energy property; and equipment using the ground or ground water as a thermal energy source.

Comments are due by February 16, 2016.