NUMBER OF THE WEEK: 36 percent

The average effective tax rate paid by Republican presidential candidate Jeb Bush over the past 7 years, since leaving the Florida governor’s office. With the release of tax returns dating back to 1981, Bush became the first candidate in the 2016 presidential race to publicly share detailed information regarding his earnings and tax payments with the public. In a statement released with the tax returns, Bush said his tax payments “will show voters how I earned a living over the past three decades and how much of that living I had to give back to Uncle Sam. (Spoiler Alert: A LOT).” He added that he paid a higher tax rate than the Clintons in 2014, despite earning less money. Bush then turned his release into a plug for tax reform, saying “it's time for a flatter, fairer tax code. The labyrinth of rules and special interest carve outs need to go.” Read more here.

LEGISLATIVE LANDSCAPE

REGULATORY WORLD

LINE ITEMS

LOOKING AHEAD

LEGISLATIVE LANDSCAPE

On the Road Again. The House and Senate return to the legislative grind today, with just four weeks left to find a way to refill the nearly empty Highway Trust Fund, which is set to run dry July 31. Efforts to tie the funding to some limited form of international tax reform appear to be largely abandoned at this point, with a short-term patch, providing funding just through the end of 2015 looking increasingly likely. House Ways and Means members are meeting today, and, we suspect, are trying to coalesce around a funding strategy. Senate Republican leaders would prefer a two-year funding solution to get through the 2016 elections, but the required $35 billion (roughly) to get there would be a very heavy lift. Stay tuned …

Tax Reform Recommendations Expected Today. The twice-delayed recommendations for tax reform coming from the five bipartisan working groups of the Senate Finance Committee are expected later today. We expect that at least some of the groups—divided into business, international, individual, savings and investment, and community and infrastructure—will make their recommendations public.

REGULATORY WORLD

ISDA Asks for Delay Of NPC Regulations. The effective date of the temporary regulations concerning notional principal contracts (NPCs) with nonperiodic payments should be delayed, said the International Swaps and Derivatives Association (ISDA) in a letter to Treasury. ISDA noted that “market participants do not have systems in place to track whether NPCs … qualify for [the] exceptions” and will not have the operational ability to comply in time. Moreover, the building of systems should follow after “a number of uncertainties and ambiguities” are addressed. The temporary regulations were released on May 7, 2015, and allowed a six-month period for compliance with the rule that all NPCs with nonperiodic payments would be subjected to the embedded loan rule, regardless of whether the significant was payment. The letter can be found here.

IRS “May Company” Rules are Clarified. The IRS clarified that “stock of a corporate partner” includes the stock or other equity interests of a corporation that controls the corporate partner within the meaning of section 304(c), except that section 318(a)(1) and (3) shall not apply. Last month, the IRS had issued final and temporary regulation preventing a corporate partner from avoiding corporate-level gain through transactions with a partnership involving equity interests of the partner; however the definition of “stock of a corporate partner” did not line up with the intent stated in the preamble. The regulations curb such avoidance through a deemed redemption rule and a distribution rule. The regulations can be found here.

LINE ITEMS

  • The IRS is seeking public comments regarding: (1) final rules on clear reflection of income in hedging transactions; (2) final rules providing guidance on passive foreign investment companies purging elections; and (3) final rules requiring partners to track the oil and gas well percentage depletion separately from partnerships. Comments are due by August 31, 2015.
  • European Commission President Juncker canceled his planned appearance before the European Parliament special tax committee concerning his role in setting up 300 tax deals between Luxembourg and multinational companies. Juncker claimed that the Greece debt crisis demanded his attention.
  • Senate Finance Ranking Member Ron Wyden (D-OR) applauded the Supreme Court’s decision on marriage equality, announcing that he will introduce legislation to ensure same-sex couples receive equal treatment under U.S. tax laws. Read more here.

LOOKING AHEAD

Wednesday, 7/8

Bipartisan Policy Center  The BPC hosts a discussion titled, “Innovative Financing: Filling the Infrastructure Pothole.” Special guests include Senators Ron Wyden and John Hoeven. Read more here.

Thursday, 7/9

POLITCO’s Morning Money Breakfast Briefing  POLITICO hosts a breakfast briefing with Congressman Paul Ryan to discuss trade policy and the U.S. economy. Read more here.

National Economists Club  The National Economists Club holds a luncheon discussion on “Demographics and Retirements Savings: How They Are Changing Household Demand for Bonds and the Implications for Bond Markets.” Read more here.

The Cato Institute  Cato holds a briefing on “In the Wake of King v. Burwell: Options for Congress.” Read more here.

Friday, 7/10

America’s Fiscal Future  POLITICO hosts an all-day event to examine how policy, politics and national trends are influencing the fiscal landscape – with special guest U.S. Treasury Secretary Jack Lew.