Deadline for Senate Finance Committee Working Groups’ Proposals Nears, Talk of International Tax Reform Continues
After being delayed for a second time, the Senate Finance Committee Tax Reform Working Groups are expected to submit their reports to the full Committee on Tuesday, July 7. Presently, it is unclear the extent to which (if at all) the reports will be made public, although it appears that this will be left to the discretion of the various groups’ co-chairs.
In addition to timing, it is also uncertain at this time what the final recommendations will look like. While the recommendations are unlikely to be tied to specific legislative proposals, it is likely that some of the Working Groups’ proposals – especially the International Tax Working Group – will be quite detailed. Moreover, with regard to international tax reform specifically, the Organisation for Economic Co-operation and Development’s (OECD) efforts to combat base erosion and profit shifting (BEPS) have created a particular sense of urgency among lawmakers to reform the country’s current system of international taxation. However, while the OECD BEPS efforts have had an impact on the timing of reform, it does not appear that the International Tax Working Group is particularly vested in the Obama Administration’s recommendations to the OECD.
Relatedly, it appears that the future of any reforms to the U.S. tax Code this year are likely to be linked with how Congress chooses to proceed on funding the Highway Trust Fund. In the Senate, Majority Leader Mitch McConnell (R-KY) is hoping to move a two-year highway bill, as well as a package of two-year tax extenders, before highway funding expires on July 31. On the House side, however, tax-writers are likely to pursue a highway patch through the end of the year, with a six-year highway bill, a package of permanent tax extenders, and international tax reform all to be addressed later this year. While it is presently unclear what approach will triumph, the ultimate outcome may be impacted by timing constraints.
IRS Requests Comments on Rules for Passive Foreign Investment Companies, Points Paid on Residential Mortgages
In today’s Federal Register, the Internal Revenue Service (IRS) will publish a notice seeking public comments on final rules regarding passive foreign investment company purging elections. Separately, the IRS will also seek comments on final regulations related to reporting requirements for recipients of points paid on residential mortgages.
Additionally, the IRS will soon publish a correction to amend the definition of the “stock of the corporate partner” in final and temporary regulations that prevent partners from exchanging assets for stock without triggering taxable gains. Specifically, the IRS plans to publish a correction in the Federal Register to amend the text of both the preamble and the regulation itself to clarify that the term “stock of the corporate partner” includes the stock or other equity interests of a corporation that controls the corporate partner within the meaning of section 304(c) of the tax Code, except that sections 318(a)(1) and (3) of the tax Code are not applicable.