Tax Policy Update

January 10, 2017

Pardon Our Dust

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The total number of confirmation hearings for President-elect DonaldTrump’s appointees this week. First up is Sen. Jeff Sessions (R-AL), theU.S. attorney nominee, who will appear before the Senate JudiciaryCommittee. The flurry of hearings has drawn complaints from SenateDemocrats who believe that the expedited timeline comes at the expense ofproper vetting for each candidate. “They’re jamming them together so thatthey receive less scrutiny and attention individually,” said Sen. RichardBlumenthal (D-CO). Senate Republican leaders have brushed aside theseconcerns and are moving forward with six hearings on Wednesday. For thelist of hearings taking place this week, please see the “Looking Ahead”section at the end of this tax policy update.

Programming Note. Fair warning — our first full edition of the Tax Policy Update(“TPU”) for 2017 is a pretty long read. As our readers know, we always tryto keep our write-ups short and sweet without sacrificing the substantive.But we haven’t pushed out a full edition of the TPU since December, sowe’ve got a lot to say! So bear with us this week.

Look here — McGuireWoods’ tax policy team is adding two new sections to ourweekly update:

  1. Commander-In-Tweet. A lighthearted look at President-elect Trump’s most eyebrow-raising tweet of the week.
  2. Road Work Ahead. Infrastructure will be a hot topic this year with the incoming administration. Each week, our TPU will cover the latest developments that may be of interest to our tax policy and transportation clients.


Off to the Races: FY2017 Budget Resolution. Whoa. Senate Republicans aren’t playing around this year with the budget,which they intend to use to initiate the budget reconciliation process. Thebudget resolution for fiscal year 2017 was introduced in the very firstweek of the 115th Congress with reconciliation instructions thatwill be used to repeal the Affordable Care Act (“Obamacare”).

The resolution instructs the Senate Finance Committee, Senate HELPCommittee, House Ways and Means Committee, and House Energy and CommerceCommittee to produce legislation that achieves at least $1 billion (percommittee) in deficit reduction over a decade. The instructed committeeshave until Jan. 27 to submit their reconciliation legislation.

Senate Majority Leader Mitch McConnell (R-KY) is trying to pass the FY2017budget resolution by Friday, Jan. 13 with an eye towards passing theObamacare repeal reconciliation bill by the end of February. This ambitioustimeline is already hitting some snags, however. A group of Houseconservative members…

Welcome to the Budget Vote-a-Rama. Under current rules, senators have up to 50 hours to debate the FY2017budget resolution. After the debate time has expired, the amendment processkicks into high gear in an event known as the “vote-a-rama,” where theSenate considers and votes on dozens of amendments back-to-back. Given thatthe FY2017 budget will be used to target Obamacare, expect a majority ofthe amendments to cover…

More on the Obamacare Repeal Drama. As Republicans scramble to fulfill their longstanding campaign pledge togut Obamacare, the repeal process is shaping up to be a thorny affair. Mostrecently, Sens. Bill Cassidy, Susan Collins, Bob Corker, Lisa Murkowski,and Rob Portman filed an amendment to the FY2017 budget resolution toextend the deadline for a repeal bill until March 3.

The group of moderate senators filed the amendment hoping to buyRepublicans more time to carefully think through the consequences ofrepeal. This action comes after a half dozen Republican lawmakers last weekvoiced their concerns about the implications of repealing the healthcarelaw without a…

House REINS in Midnight Regulations. The House passed two regulatory reform bills last week.

  • The REINS Act (H.R. 26) would require any new regulations with an economic impact of $100 million or more to be subject to congressional approval. Vote: 237-187
  • The Midnight Rules Relief Act (H.R. 21) would allow Congress to use a single resolution to disapprove, en masse, regulations finalized in the final year of a president’s term. Vote: 238-184

The bills face an uphill climb in the Senate, as Democrats are opposed toboth measures. To complete the trifecta of deregulatory measures, the Housewill take up consideration of the Regulatory Accountability Act (H.R. 5) — a bill that would, among other things, reform the process by whichFederal agencies analyze and formulate new regulations and guidancedocuments, clarify the nature of judicial review of agency interpretations,and ensure complete analysis and potential impacts on small entities ofrules.

Rubio Introduces Bill Targeting IRS Sec. 2704 Rules. On Jan. 5, Sen. Marco Rubio (R-FL) resurrected a bill, the Protect Family Farms and Businesses Act (S. 47), to prevent the IRS’s proposed regulations under Section 2704 of theInternal Revenue Code from taking effect. The proposal would modify thevaluation of interests in many family-controlled entities for estate, gift,and generation-skipping transfer tax purposes. The purposes of the proposedregulations are treating the lapse of voting or liquidation rights as anadditional transfer and disregarding certain restrictions on liquidation indetermining the fair market value of a transferred interest. SeeMcGuireWoods’ analysis of the proposed ruleshere.

Rep. Warren Davidson (R-OH) introduced a companion bill (H.R. 308) in the House on the same day. According to a joint statement from Rubioand Davidson, the bill would prevent “bureaucrats from ignoring 25 years oftax precedent and unilaterally reinterpreting death tax law.”

New Members to House Ways and Means & Senate Finance. Washington, D.C. welcomed the 115th Congress last week. NewCongress means new committee assignments for some. Here are the memberssitting on the House and Senate tax-writing panels…


Richard Cordray—Here to Stay? The Consumer Financial Protection Bureau just announced leadership changeswithin the bureau. The following positions were announced today:

  • Chief of Staff : Leandra English. English comes from the Office of Personnel Management where she served as principal deputy chief of staff.
  • Chief Information Officer : Jerry Horton: Horton was previously with the Department of State.
  • Chief Financial Officer : Elizabeth Reilly. Reilly previously served as deputy chief financial officer.
  • Assistant Director of Consumer Lending, Reporting, and Collections Markets : John McNamara. McNamara previously served as the acting assistant director.
  • Assistant Director for the Office for Service Member Affairs : Paul Kantwill. Prior to joining the bureau, he was director at the Office of Legal Policy at the Pentagon

The announcement of senior leadership seems to indicate that…


This week, we are launching a new section dedicated to transportation andinfrastructure happenings on Capitol Hill and at the regulatory agencies. This addition to our regular Tax Policy Update content istimely given the close ties between transportation, infrastructure and tax— and let’s be honest, the president-elect has had a lot to say about thesubject, often times exceeding 140 characters. Therefore, we hope thecontent is valuable and groundbreaking (the use of transportation andinfrastructure puns will be a constant theme). So, to get things started…

Can Trump “Trump” Congress and Achieve Monumental InfrastructureInvestment?Unless you have been living under a rock, it’s not news thatPresident-elect Trump plans to push a “HUGE” infrastructure plan in theearly stages of his administration. On the off chance you have been livingunder a rock or have chosen to ignore this facet of the incomingadministration’s policy agenda, the president-elect has been touting hisplan to invest $1 trillion in America’s infrastructure. While the plan isstill in the conceptual phase, here is what we do know:

  • Trump has promised a $1 trillion investment in the nation’s infrastructure (across all or most types of infrastructure) over a 10 year period – this investment will largely come from the private sector through public-private partnerships.
  • The $1 trillion figure is an estimate of private capital investment that will be incentivized by tax credits.
  • Trump has proposed providing a tax credit equal to 82 percent, which he claims is revenue neutral because the credits will be repaid through incremental tax revenues that result from project construction.
  • Additionally, Trump’s plan proposes the use of repatriation at 10 percent to further incentivize private equity investment in public infrastructure projects to offset companies’ tax liability when bringing back money to the United States.
  • Trump’s plan also emphasizes a reduction in regulatory burdens to expedite projects and reduce their overall costs.
  • Finally, there has been talk of establishing an infrastructure bank to provide low-cost financing for infrastructure projects.

While Trump appears committed to his plan, key lawmakers like SenateCommerce Committee Chairman John Thune (R-SD) have admitted they have yetto receive details on the proposal. Despite having limited information onthe actual mechanics of the intended infrastructure investment, leadershipin the House and Senate have felt comfortable commenting. Senate MajorityLeader McConnell would lead some to believe that Senate Republicans areless than enthusiastic about pushing through a major infrastructure billwith such a significant price tag. Senate Minority Leader Chuck Schumer(D-NY) has expressed potential bipartisan support for a package thatprovides funding (not just financing) for repairing roads, bridges, ports,and more.

Over on the House side, Speaker Paul Ryan (R-WI) mentioned just last weekthat he wants to address the “infrastructure issue” in his chamber’s springbudget, while not revealing any specifics on the price of a potentialpackage.

In sum, the path forward for any type of infrastructure investment remainsunpaved and riddled with potholes such as the Obamacare repeal, regulatoryrollbacks, and other competing priorities coming from Congress. Althoughthe incoming administration itself has sent mixed messages about theprioritization of infrastructure, the president-elect has not wavered farfrom his huge campaign commitment. Time will tell (as will we throughforthcoming TPU updates) whether Trump’s grand plan will pay off forAmerica’s roads, bridges, airports, ports, and more. Stay tuned…


With President-elect Trump’s penchant to communicate his thoughts,policies, and righteous anger directly to the American people and the worldvia Twitter, it would not be entirely inaccurate to call him our firstcommander-in-tweet.

That said, welcome to “Commander-in-Tweet” — a new section we’re adding tothe Tax Policy Update! This section intends to offer a lightheartedlook at the tweets of our 45th president.

President-elect Trump’s thoughts on…Schumer and Obamacare:


  1. President-elect Donald Trump’s team met with House Speaker Paul Ryan on Jan. 9 to walk through the House GOP’s A Better Way agenda for tax reform. The Trump entourage included Reince Priebus, Jared Kushner, Steve Mnuchin, Stephen Bannon, and Stephen Miller.
  2. Jay Clayton, a partner at Sullivan & Cromwell, is President-elect Donald Trump’s top choice for the chairmanship at the Securities and Exchange Commission. “Jay Clayton is a highly talented expert on many aspects of financial regulatory law, and he will ensure our financial institutions can thrive and create jobs while playing by the rules at the same time,” Trump said of his nominee. See Clayton’s bio here.
  3. Rep. Joe Wilson (R-SC) introduced H.R. 355— a bill to delay for two years the effective date of the Department of Labor’s fiduciary rule.
  4. President-elect Donald Trump’s pledge to institute a hiring freeze and downsize the IRS would be problematic for the agency, according to Commissioner John Koskinen. Agency officials have met with the Trump administration to discuss the consequences of a hiring freeze for taxpayer services during filing season.
  5. Companies will have to disclose the potential impacts of Brexit in their year-end financial reports. This includes information on how the U.K.’s decision to leave the EU will affect deferred taxes, inventory values, liquidity, and capital resources.
  6. The rumor mill is buzzing with news that former Utah governor and ambassador to China, Jon Huntsman, may challenge Senate Finance Chairman Orrin Hatch (R-UT) in the 2018 primaries.
  7. The IRS, in conjunction with the tax preparation industry announced new steps to combat identity theft refund fraud in the 2017 filing season. Specifically, the IRS will expand its W-2 verification code pilot program from 1 million forms last year to about 48 million forms in 2017. The agency will also be implementing an earlier filing deadline for W-2s, as mandated by the 2015 Protecting Americans From Tax Hikes ( PATH) Act.
  8. The deduction for state and local taxes and the tax exemption for municipal bonds are in danger of being repealed as a part of tax reform. As two of the more expensive provisions that are viewed as benefiting the wealthy, there is some appetite for their removal. Of the two, the state and local tax deduction, which tends to benefit areas that lean Democrat, is more likely to be axed.


Congressional Activity

Tuesday, 1/10

Senate Judiciary Committee
The full committee holds a hearing on the nomination of Sen. Jeff Sessionsto be Attorney General.

Senate Homeland Security and Governmental Affairs Committee
The full committee holds a hearing on the nomination of John Kelly to besecretary of the Department of Homeland Security

Wednesday, 1/11

Senate HELP Committee
The full committee holds a hearing on the nomination of Betsy DeVos to beeducation secretary. POSTPONED TO JAN. 17.

Senate Commerce, Science and Transportation
The full committee holds a hearing on the nomination of Elaine Chao to betransportation secretary.

Senate Foreign Relations Committee
The full committee holds a hearing on the nomination of Rex Tillerson to besecretary of state.

Senate Intelligence Committee
The committee holds a hearing on the nomination of Rep. Mike Pompeo to bethe director of the CIA.

Thursday, 1/12

Senate Commerce, Science and Transportation
The full committee holds a hearing on the nomination of Wilbur Ross to becommerce secretary.

Senate Banking Committee
The full committee holds a hearing on the nomination of Ben Carson to beHUD secretary.

Agency Activity

Wednesday, 1/11

Financial Stability Oversight Council
The council meets in a closed session. The preliminary agenda includes anupdate on market developments, a discussion of the quantitative thresholdsapplied in Stage 1 of the Council’s nonbank financial company designationprocess, a discussion of the Council’s 2017 annual report, and a discussionof recent developments relating to money market mutual funds.

Other Activity

Monday, 1/9

National Press Club
The club holds a luncheon with HHS Secretary Sylvia Burwell on theconsequences of potential ACA repeal.

Tuesday, 1/10

Washington International Trade Association
WITA holds USTR Michael Froman’s final keynote address on the futurepriorities of trade.

Thursday, 1/12

CNN Town Hall: House GOP’s “A Better Way”
CNN holds a town hall discussion with House Speaker Paul Ryan to discussthe “Better Way” agenda.

American Bankers Association
The Economic Advisory Committee holds a news conference on monetary policypredictions and the economic forecast.

Friday, 1/13

Urban Institute
The Urban Institute holds a discussion on “Are Entrepreneurs Overtaxed?”

For listings of all the week’s tax and financial services happenings, read below to find out how you can become a subscriber.

The McGuireWoods’ Tax & Financial Services Policy Group assists clients in understanding how the latest legislative and regulatory proposals anddecisions may impact their business and industry. To learn more about how our team can help you monitor, analyze, and navigate all relevant legislativeand regulatory developments, please contact any of our attorneys and consultants below at (202) 857-1700. For more information on how to subscribe toour weeklyTax Policy Update and tax news alerts, please contact Radha Mohan,, (202) 857-2944.

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