Pardon Our Dust
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It’s Beginning to Look a Lot Like Cromnibus… Lawmakers in Washington are in the home stretch, with just three scheduled working days left for the 113th Congress — a legislative session that will go down in history as “The Least Productive Congress Ever,” in terms of numbers of laws passed. But before the House and Senate pack it up for the year, they must deal with a handful of last-minute legislative must-do’s, including the all-important continuing resolution/omnibus spending bill (or “cromnibus”), as well as the not-yet-across-the-finish-line package of expired tax breaks known as extenders.
With the clock running out, many expect the Senate will attach the House-passed extenders bill to the spending package for a single vote. But the cromnibus is late to the party this week, reportedly due to lingering disagreements over an extension of the Terrorism Risk Insurance Act. With current funding set to run out by Friday, the House is now expected to pass a short-term continuing resolution tomorrow in order to give the Senate more time to vote on the longer-term bill.
The one-year extenders bill that passed in the House last week, H.R. 5771, would retroactively resuscitate about 50 tax provisions that expired at the end of 2013. The one-year retroactive extension at this late stage in the game means that by the time the Senate passes the bill later this week, as we expect it will, those tax provisions will have a shelf life roughly on par with a gallon of milk — only with a price tag of about $42 billion more. Come Dec. 31, all of the extenders will expire once again, leaving the GOP-controlled Congress to begin negotiations anew in 2015.
The extenders bill also includes a package of technical corrections and a provision raising the threshold from $2 million to $5 million for triggering mandatory review of a C corporation’s tax refund or credit by the Joint Committee on Taxation (JCT).
When the bill comes before the Senate, it will also be combined with the ABLE Act, H.R. 647, a bill the House passed last week that creates state-run tax-advantaged savings plans for disabled individuals, similar to 529 education savings plans. The $2 billion ABLE Act, unlike the extenders package, is offset with a hodgepodge of pay-fors, including a provision authorizing the Internal Revenue Service to certify qualifying professional employer organizations (PEOs), allowing them to become solely responsible for their customers’ employment tax withholding and payment obligations after posting a bond and paying an annual fee.
Score for Anti-Inversion Bill Bumped Up. Rep. Sander Levin (D-MI) touted a newly updated revenue estimate of his bill to tighten restrictions on corporate inversions, which the Joint Committee on Taxation (JCT) now says would save $33.6 billion over 10 years. The bill, H.R. 4679, was introduced in May, and JCT at the time estimated the legislation would save the government $19.5 billion based on a December 2013 baseline.
In a memo accompanying the updated estimate, JCT’s Tom Barthold said the old baseline “did not properly reflect the appetite of some U.S. corporations for inversions.” Levin, the ranking member of the Ways and Means Committee, said “the new estimates make clear that immediate legislative action is necessary.”
In other inversion news, a recent report from Bloomberg claims that U.S. companies that have already carried out inversions are likely to cost the government a record $2.2 billion or more in lost tax revenue next year, double the amount in 2014, according to calculations based on companies’ financial results. The Bloomberg report, available in its entirety here, also says the deals have cost more than $9.8 billion in inflation-adjusted dollars since they began in the early 1980’s.
SEC Stepping Up Scrutiny of Corporate Tax Disclosures . The Securities and Exchange Commission (SEC) is stepping up its scrutiny of how companies report their taxes. According to Politico, SEC officials speaking at an accounting conference today said they are seeing “red flags” in companies’ disclosures that have failed to give investors enough details. The SEC officials added that it has received feedback from investors who want additional details, especially regarding foreign earnings and foreign taxes.
France, Italy, and Germany urge EU-wide corporate tax laws . The finance ministers of the Eurozone’s three biggest economies have called for EU-wide laws to hinder tax avoidance by the end of 2015. Supporters of the proposed measures say they will increase transparency, prevent companies from negotiating preferential tax deals with member states, and prohibit moving profits made in one state to another state with a lower tax rate. Read more here.
COURTS & LEISURE
EU Court to Hear Luxembourg Tax Appeal Jan. 8. Luxembourg will have a chance to fight the European Commission’s request for a complete list of tax rulings for 2010, 2011 and 2012 at a European Union court hearing in January. EU General Court has set Jan. 8 for oral hearing, according to the Luxembourg-based court’s website. A separate hearing the same day will examine Luxembourg’s fight against handing over detailed information about so-called patent boxes, the court said.
It will be a busy week on Capitol Hill as lawmakers try to take care of loose legislative ends. It appears increasingly unlikely that the House and Senate will recess, as scheduled, on Thursday. We expect votes on the longer-term spending package and tax extenders to stretch out into Friday, and possibly even Saturday.
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