Tax Policy Update

January 18, 2017

Pardon Our Dust

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Source: CNN

House Speaker Paul Ryan Does the “Dab.” House Speaker Paul Ryan (R-WI) held a town hall over at CNN on Jan. 12. Thehour-long discussion focused primarily on the GOP’s plan to repeal andreplace the Affordable Care Act (“Obamacare”). In addition tohealthcare topics, Speaker Ryan also fielded questions regarding tax,trade, and the president-elect’s tweeting habits.

But the most important takeaway from the town hall came at the end whenRyan was asked which comments on social media have amused and bothered himthe most. Ryan recounted theepisode from the swearing-in ceremonywhere a lawmaker’s son sneaked in a quick “dab,” which led the speaker toask whether the kid was sneezing. Social media had a field day with Ryan’signorance of the popular dance move. Seeking to win back some cool points,Ryan showed the town hall audience that the speaker of the House ofRepresentatives knows how to dab.

On a more serious note, at the town hall, Ryan confirmed that the GOP isplanning to repeal and replace Obamacare simultaneously — although detailson how they will go about executing the replacement plan remain sparse.Policy watchers are still waiting to hear more about what the actual planwill entail. According to Ryan, the GOP plan will help Americans purchasehigh-quality and affordable healthcare insurance by providing a refundabletax credit.


Trump’s Other Border Problem. The border adjustment tax proposed in the House GOP’s tax reform blueprinthas been under attack since the start of the new year. Opposition fromDemocratic staffers of the Senate Finance Committee and the U.S. retailindustry is to be expected. But the Trump Administration threw a curveballlast week when Larry Kudlow, an economic adviser to the president-elect,publicly shot down the border adjustment tax proposal, dismissing it as aserious solution to the country’s overly complex tax code. Kudlow believesthat tax reform is doomed if Republicans insist on this proposal.President-elect Donald Trump added more firepower to Kudlow’s comments inan interview with the Wall Street Journal over the weekend, sayingthat he does not “love it.” According to Trump, the border adjustment taxwill mean the U.S. is “going to get adjusted into a bad deal.”

Trump’s comments aren’t helpful to House Speaker Paul Ryan who…

You Get Insurance! You Get Insurance! Everybody Gets Insurance! Donald Trump recently proclaimed that everybody will have insurance underthe GOP replacement for the Affordable Care Act. Trump also promisedthat the replacement law will be simpler, less expensive, and will offergreater coverage. Trump added that he was willing to use the power of thepresidency and the influence of his 140-character platform to preventCongress from getting “cold feet.”

Last week, Republicans kicked off the reconciliation process that will beused to repeal the ACA by adopting the budget resolution. In the daysleading up to the vote, ranking GOP members faced growing resistance torepealing the ACA without a replacement plan. Despite assurances that theGOP will not pursue the “repeal and delay” strategy, many within the partyare worried about the impact …

Ways and Means’ Republicans Meet to Talk Tax Reform. Republican members of the House Ways and Means Committee have beengathering in various working groups to talk through some of the remainingsticking points in their tax reform plan. One working group met last weekto discuss the tax treatment of carried interest. No agreement emergedafter the meeting, however. During the 2016 presidential campaign, Trumpvoiced his support for taxing carried interest at ordinary tax rates. HouseRepublicans appear to be divided on this issue. According to ChairmanBrady, the taxation of carried interest and of certain insurance productsare still under discussion.

Blind Credits.GOP tax-writers are looking to consolidate a number of renewable taxcredits under their plan to overhaul the tax code. According to Rep. TomReed (R-NY), the GOP’s forthcoming tax reform legislation will likelyeliminate the deduction for intangible drilling costs for oil and gas wellowners, while provisions such as the percentage depletion deduction forfossil fuels and special treatment for MLPs will likely be retained.Republicans on the energy tax working group of the House Ways and MeansCommittee hope to create a system of renewable tax incentives that is“blind” to the type of energy technology used.

States, Online Retailers May See Relief in 2017.After years of stalled action, remote sales tax legislation may finally seesome action as part of tax reform. Since the seminal 1992 case Quill Corp. v. North Dakota, lawmakers have struggled to define theparameters of states’ taxing authority over remote retailers. As onlinesales have dramatically increased, without consensus on a solution at thefederal level, states have been eager to remove federal restraints ontaxing out-of-state sellers.

There are three noteworthy pieces of legislation pending that might be keyplayers in 2017…

Congress Adopts FY2017 Budget. Last week, the House and Senate adopted the budget resolution for fiscalyear 2017. The adoption of the FY2017 budget resolution officially kickedoff the reconciliation procedures to be used for the repeal of Obamacare. Committee markups of the repeal legislation is expectedin Feb. 2017, at the earliest.

During the Senate’s amendment process for the budget resolution (so-called“Vote-a-Rama”), 19 amendments were offered up for votes. No amendments wereagreed to, however, given the points of order raised against them. A60-vote majority is required to waive a point of order, and the amendmentsbelow all failed to overcome that threshold…


Taxpayer Advocate Releases Annual Report to Congress.The national taxpayer advocate, Nina Olson, released her annual report toCongress last week. The report notes that the IRS devotes 43 percent of itsannual budget to audits and enforcement, but less than 6 percent tooutreach and education. Olson advised the agency to spend more time ontaxpayers who attempt to comply with the code and fewer resources on thosewho actively evade taxation.

Olson also discussed the IRS Future State Initiative, once againemphasizing her concerns that the agency maintain phone services, even asthey increase their online capabilities. Olson also suggested that the IRSoverhaul its approach to tax collection, citing to the fact that the agencyasked for a 7.2 percent increase in enforcement funding for 2017, but justa 3.1 percent boost for taxpayer services. Olson pointed out that theagency’s funding requests might be remiss given that the IRS was barelyable to answer half the phone calls it received in fiscal year 2016, upfrom 38 percent of calls in 2015.

And Then There Were Sixteen.Last April, the Senate Finance Committee unanimously recommended theconfirmation of Elizabeth Ann Copeland and Vik Edwin Stoll. However, thefull Senate never confirmed the nominees, leaving the 19-member court withthree vacancies.

The American Bar Association’s tax section and a separate group of 52 taxexperts sent letters to Senate leaders after the election, urging them toconfirm both nominees. The letters cautioned that the Tax Court would notbe able to function properly without the two additional judges. Delays inconfirmations will have unintended consequences including longer waits forcases to be heard, increases in accrued interest and potential penalties,and increased workload for other Tax Court judges.

EU Proceeds with CCCTB. The EU is forging ahead with plans to introduce a common consolidatedcorporate tax base (CCCTB). The new tax takes a two-step approach: thefirst step will require large multinational corporations operating in theEU to comply with the common corporate tax base (CCTB); and the second stepwill involve drafting a set of rules for the CCCTB.

Dutch MEP Paul Tang and European People’s Party MEP Alain Lamassoure havebeen tasked with shepherding steps one and two, respectively, through theEuropean Parliament.


Trump’s DOT Nominee Signals Administration’s Direction onInfrastructure.On Jan. 11, President-elect Trump’s pick for transportation secretary,Elaine Chao, appeared before the Senate Commerce Committee for herconfirmation hearing. Chao’s hearing was filled with friendly faces whopraised her qualifications, including her experience serving as laborsecretary and deputy secretary of the Department of Transportation. Chaoalso served as deputy administrator for DOT’s Maritime Administration andchair of the Federal Maritime Commission, giving her deepwater roots in theshipping industry.

During the hearing, Chao illuminated a number of key issues that will pavethe way for her time at the Department of Transportation and reaffirmed theincoming administration’s commitment to invest in infrastructure. Some ofthe biggest takeaways from the discussion include…


Washington, D.C. is bracing itself for Inauguration Day on Jan. 20 — thecity is expecting up to one million visitors this week. Seeherefor the full inauguration schedule.


  1. Rep. Bob Latta (R-OH) introduced a bill (H.R. 451) to repeal the estate tax and retain the stepped-up basis at death.
  2. The House passed, 238-183, the Regulatory Accountability Act to reform the process by which federal agencies analyze and formulate new regulations and to clarify the nature of judicial review of agency interpretations.
  3. The Treasury Department released a report on major infrastructure investments. To highlight the benefits of infrastructure investment and its potential impact on the economy, the Treasury Department commissioned a study identifying 40 proposed transportation and water infrastructure projects across the United States of major economic significance, which can be found here.
  4. Last week, U.S. DOT revealed its “ 2015 Status of the Nation’s Highways, Bridges and Transit: Conditions and Performance” report, confirming that more investment is needed to overcome a nearly trillion-dollar investment backlog in road and transit projects.
  5. The IRS’ Whistleblower Office has helped the agency rake it in — collecting $3.4 billion since its inception a decade ago. The IRS has also doled out $465 million in whistleblower rewards over the same period. The whistleblower program is a bipartisan initiative spearheaded by Sen. Chuck Grassley (R-IO), who wrote provisions in 2006 legislation improving incentives for reporting tax fraud.
  6. The Treasury Department and Department of Health and Human Services released new data that highlights how the Affordable Care Act has helped entrepreneurs and small business owners. The report indicates that one in five 2014 marketplace consumers is a small business owner or self-employed, suggesting that the healthcare law has helped alleviate “job lock”—a significant impediment to entrepreneurship.
  7. The IRS recently released T.D. 9812 (RIN: 1545-BL00, RIN 1545-BM45) – the most recent piece of anti-inversion guidance. The final and temporary rules will answer the question of when the agency will disqualify the stock of a foreign corporation in determining whether an inversion is in compliance with regulations.
  8. Donald Trump recently indicated that his team is currently working with Congress to get the corporate tax rate “as close to 15 percent” as possible. Trump is set on the 15 percent rate, hoping that it will lead to a “mushrooming of jobs moving back” to the U.S.


Congressional Activityy

Wednesday, 1/18

Senate Foreign Relations Committee
The full committee meets for a hearing on the nomination of Nikki Haley tobe ambassador to the U.N.

Senate Commerce Committee
The full committee meets for a hearing on the nomination of Wilbur Ross tobe commerce secretary.

Senate EPW Committee
The full committee meets for a hearing on the nomination of Scott Pruitt tobe administrator of the EPA.

Thursday, 1/19

Senate Finance Committee
The full committee meets for a hearing on the nomination of Steven Mnuchinto be Treasury secretary.

Senate Energy Committee
The full committee meets on the nomination of former Gov. Rick Perry to beEnergy secretary.

Friday, 1/20

Inauguration Day

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