NUMBER OF THE WEEK: 53
George Clooney’s age – can you believe that? More importantly, it’s the percentage of Americans who disapprove of the job President Obama is doing according to the latest Gallup poll. With 21 days left until the midterm elections, Obama’s low approval rating continues to be a liability for Democrats in competitive races across the country. All eyes are on the Senate races in Lousiana, Arkansas, and Alaska. Democrats must eke out a victory in at least one of these states in order to maintain control of the Senate.
Koskinen: Pass Extenders ASAP. Congress needs to act on tax extenders as soon as it returns for the lame-duck session in November to avoid delays in the 2015 tax season and the processing of tax refunds for millions of taxpayers, according to a letter from Internal Revenue Service Commissioner John Koskinen sent to Senate Finance Committee Chairman Ron Wyden (D-OR) last week.
Wyden issued a statement in response, calling on Congress to “act swiftly on these important tax provisions so it can get to work on a comprehensive overhaul of the tax code and lift the fog of uncertainty from taxpayers.”
Republicans Ready to Negotiate? We expect to see movement from Senate Republicans to broker an agreement on extenders with their Democratic counterparts during the lame-duck session—regardless of the outcome of the midterm elections. Parameters of such a deal are not yet known, but there is a growing sense among Republican leaders and tax writers that putting off extenders until 2015—when many expect the GOP will hold majorities in both houses of Congress—would do too much economic and political damage.
Dynamic Scoring: Voodoo or Must-Do? New York Times columnist Paul Krugman recently wrote that we may “find ourselves in deep voodoo” if Republicans take over the Senate and use their control of both houses of Congress to change the legislative scoring rules used by the nonpartisan Joint Committee on Taxation (JCT). Krugman’s pun refers to “voodoo economics,” the derisive term used to describe Ronald Reagan’s 1980 campaign contention that lowering top marginal tax rates would spur economic growth, paying for the cuts by making up for the lost revenue. The Tax Foundation provided an immediate critique of Krugman’s analysis and a defense of so-called dynamic scoring, available here.
Rep. Paul Ryan (R-WI), the most likely successor to the helm of the House Ways & Means Committee in the next Congress, has declared his intention to change the JCT’s scoring protocols to include the “macroeconomic effects” of tax reform proposals—which is a way to plug dynamic scoring without uttering a phrase that immediately raises political hackles. The Tax Policy Center also has an interesting take on the political dynamics of dynamic scoring, available here.
Just the FATCA. The Securities Industry and Financial Markets Association (SIFMA) hosted a symposium Oct. 6 and 7 to discuss the intricacies and implementation of the Foreign Account Tax Compliance Act (FATCA) rules. Panels focused on a diverse array of topics, including the future of FATCA, its impacts on global capital markets and the operational challenges of compliance. One highlighted issue was the key differences between the Common Reporting Standard (CRS) developed by the Organisation for Economic Co-Operation and Development (OECD) and the standard developed under FATCA. The U.S. took the initiative for worldwide information sharing with FATCA, but the OECD’s reporting standard is different to reflect its applicability on an international scale. Because of the differences, the CRS and FATCA are not wholly compatible. One panelist saw this as a “high-profile issue” that needs legislative action to conform FATCA to the CRS. While the administration has proposed rules to conform with the CRS, Congress has not acted on it yet.
Dividend Equivalent Rule Set for End of Year Completion. Also during the FATCA symposium, an IRS official said that the agency is working to finalize rules aimed at curbing the ability of foreign investors to skirt the withholding tax on dividends under tax code Section 871(m) by the end of 2014.
EU Ministers Set to Vote on FATCA-Inspired Reporting Measures . European Union finance ministers are expected to vote Oct. 14 on a measure modeled after FATCA provisions requiring the automatic exchange of data about dividends, capital gains and other income generated from assets held in financial accounts. The EU measure also incorporates the Organization for Economic Cooperation and Development’s (OECD) common reporting standards (CRS) that the OECD adopted in July. The measure requires unanimous consent of the 28 member states, and BloombergBNA reported that consensus is expected, according to an anonymous EU diplomat.
COURTS & LEISURE
Former Swiss Bank Exec on Trial. In a pivotal case for the U.S. Department of Justice’s anti-tax evasion program, the trial of Raoul Weil, a former top executive with Swiss bank UBS, begins tomorrow in a South Florida federal court. Weil is accused of overseeing the bank’s program that helped 20,000 American clients hide $20 billion from the Internal Revenue Service (IRS). Those accusations led to a 2009 settlement agreement in which UBS paid a $780 million fine and turned over thousands of American clients’ names to U.S. authorities. Read more here.
There are no relevant agency meetings scheduled for this week.
Congress is still out on the campaign trail, returning the week of Nov. 12.