Pardon Our Dust
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Quote of the Week:
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“So I’ll be clear about how I view this proposal based on what’s being reported day in and day out in the press. It sounds to me like the plan Republicans are pushing is effectively a grocery tax. In order to pay for a trillion-dollar corporate tax cut, Republicans want to raise prices on food, clothing and other simple products Americans buy every day.” – Sen. Ron Wyden (D-OR) on the border adjustment tax |
At the Tax Policy Center last week, Senate Finance Committee Ranking MemberRon Wyden shared his thoughts on the GOP’s approach to comprehensive taxreform. In addition to criticizing the border adjustment tax (“BAT”), Wydenwarned that without bipartisan support, any overhaul of the U.S. tax codewill be short-lived. The ranking member believes that a bipartisan efforton tax is still possible, citing his previous accomplishments with Sens.Judd Gregg and Dan Coats. Bipartisanship is “the only way to do tax reformright,” Wyden concluded. Read Wyden’s prepared remarkshere.
LEGISLATIVE UPDATE
Say Yes to the BAT…which is something President Donald Trump did not do in his address toCongress. With tax reform being the talk of the town, the presidentdedicated surprisingly little time on tax reform in his speech. Those whohad expected to get more details from Trump were left disappointed.Although Trump did not officially endorse or reject the BAT, he did pointout that the current U.S. tax code tends to favor imports and disadvantageexports. This could be an indicator that the president is open to fixingthe disparity. House GOP tax writers may feel relieved that Trump …
He Came, He Saw, He Delivered. In his first address to Congress, Trump stuck to the script and struck amore presidential tone. Most viewers and pundits agree that Trump deliveredhis best performance to date. According to a CNN/ORC poll, 57 percent ofviewers said they had a positive reaction to the speech and 70 percent saidit made them feel more optimistic about the direction of the country. Thoseare some impressive numbers no matter which side of the aisle you’re on.
Trump’s speech, while largely similar to previous ones in substance, wasmore restrained and reassuring in tone. Absent was the usual bombasticpronouncements and apocalyptic rhetoric. Instead of picking fights with themedia and Democrats, Trump declared that “the time for trivial fights isbehind us,” asking both parties to put aside their differences and get towork for the American people. Trump said he would like to work withDemocrats and Republicans to enact immigration reform, improve women’shealth, provide access to affordable child care, strengthen the military,and rebuild the nation’s infrastructure.
Although many of President Trump’s talking points adhered closely to theRepublican playbook — calling for deregulation, border security, and jobcreation — he also ventured into non-GOP territory when discussing issueslike infrastructure spending, trade policy and child care tax credits.
To the dismay of policy wonks, the president provided few new details onhis top priorities: healthcare, tax reform, and infrastructure. Republicanlawmakers were hoping Trump would help fill in the policy blanks on thosehot-button issues but received little additional guidance on how to proceedlegislatively. In short, the president laid down principles rather thanpolicy details.
“I will be asking the Congress to approve legislation that produces a$1 trillion investment in infrastructure.”Trump explained that his infrastructure plan would be guided by twoprinciples: Buy American and hire American. Again, details are lacking. Thepresident, however, did make clear that his infrastructure investment plan— “a program of national rebuilding” — would include both public andprivate capital. The statement is significant because initial signals fromthe president have led many to believe his plan would rely solely onprivate financing to fix the country’s infrastructure.
Trump’s brief remarks on infrastructure left policy wonks with some openquestions: (1) Where will the administration find the public money to fundinfrastructure projects? (2) Will Trump’s infrastructure initiatives betied to tax reform or will the president ask Congress to address theinfrastructure problem in a separate piece of legislation?
“I am also calling on this Congress to repeal and replace Obamacare.”In his address, Trump did not say anything that House Republicans haven’talready heard. Trump wants to rescue Americans from the failings ofObamacare, calling on Democrats and Republicans to work with hisadministration to provide a replacement plan that lowers costs, increasesaccess, and expands choice.
Trump, however, did not provide additional details regarding the healthcarereform plan that his administration has been working on. In his view, abetter healthcare system would embrace five key principles:
- Continue to protect those with pre-existing conditions by ensuring access to health insurance coverage.
- Help Americans purchase health plans of their choice by providing age-based tax credits and expanded health savings accounts (HSAs).
- Give states more resources and flexibility with Medicaid.
- Find ways to lower the price of prescription drugs.
- Allow Americans to purchase health insurance across state lines.
The lack of specifics left policymakers and lawmakers with three big policyquestions: (1) What will the administration and Republicans do to encourageinsurers to stay in the market to help ensure a stable transition? (2) Thecost of providing tax credits and expanding HSAs is substantial, where willcongressional Republicans find the money to pay for them? (3) How will thefederal government allocate resources in an equitable way to give statesthe flexibility to manage their respective Medicaid programs?
The Great Reveal. Abracadabra! The Republicans finally pulled a replacement for the Affordable Care Act out of their proverbial hats. On March 7,both the House Ways and Means Committee and the House Energy and CommerceCommittee unveiled their long-awaited legislation to repeal and replace theACA— the American Health Care Act (AHCA). We’ve been waitingover six years (or 2,540 days and 60 repeal votes later) for the GOP torelease a replacement plan and while the jury is still out on whether theAHCA was worth the wait, below is a list of major provisions in the repealand replace bill …
REGULATORY WORLD
Survivor 2: IRS Rules Granted Immunity? In last week’s edition of our Tax Policy Update, we noted thatTreasury and IRS officials are still figuring out the impact of executiveorders, and in particular, the order calling for the repeal of two rulesfor every new rule written. Those in the legal community believe that theTreasury regulations will unlikely be affected by this order. According toan interim guidance memo from the Office of Information and RegulatoryAffairs, the executive order …
Partnership Audit Rules Still On Track.According to a Treasury official, the new partnership audit regime ismoving forward to be implemented for tax years beginning in 2018 despitetaxpayer concerns. Rochelle Hodes, an associated tax legislative counselwith Treasury, said that “nobody should think this isn’t going to happen,because right now it is.”
The rules as enacted under the Bipartisan Budget Act of 2015 raisedmany questions concerning substance and procedure. To allay concerns,Treasury issued proposed regulations providing guidance on the new regimeearlier this year, but White House Chief of Staff Reince Priebus issued aregulatory freeze two days later. The proposed regulations sought toclarify many of the procedures and definitions outlined in the partnershipaudit rules that were enacted under the Bipartisan Budget Act of 2015. With Treasury Secretary Steve Mnuchinin place and ready to address concerns, there is time remaining, albeitlimited, for taxpayers to prepare for the implementation of the new regime.
COMMANDER-IN-TWEET
Amid the latest uproar over his campaign team’s contacts with Russia,President Trump found the time to weigh in on The Apprentice:
LINE ITEMS
- Highly-related parties will be subject to a “higher level of scrutiny” under the Section 385 regulations, and in particular, under the documentation rules requiring substantiation of certain debt transactions. Speaking at a recent tax law conference, Filiz Serbes, IRS special counsel, added that the documentation rules help the examining agent see the taxpayer’s process in determining the debt or equity characterization of a transaction.
- The Labor Department proposed to extend the Fiduciary Rule’s applicability date by 60 days. The proposal is open for a 15-day comment period.
- Treasury Secretary Steven Mnuchin told reporters that a comprehensive tax reform bill would be signed into law by the August recess. Read more.
LOOKING AHEAD
Congressional Activity
Wednesday, 3/8
House Ways and Means Committee
Full committee markup: “Budget Reconciliation Recommendations to Repeal andReplace Obamacare.”House Energy and Commerce Committee
Full committee markup: “Budget Reconciliation Legislative Recommendations.”House Appropriations Committee
Subcommittee on Transportation to hold a hearing on “Investing in America:Funding Our Nation’s Transportation Infrastructure Needs.”House Oversight and Government Reform Committee
Government Operations Subcommittee and Health Care, Benefits andAdministrative Rules Subcommittee joint hearing on “Examining IRS CustomerService Challenges.”
Thursday, 3/9
House Financial Services Committee
Full committee markup of securities-related bills. See listhere.Senate Banking Committee
Full committee markup of securities-related bills. See listhere.
Other Activity
Wednesday, 3/8
Cato Institute
Cato to hold a discussion on “Setting Infrastructure Priorities:Considerations for the 115th Congress.”Washington Post
Washington Post to hold a discussion on “Infrastructure: The Road Ahead.”
Thursday, 3/9
Ripon Society
Discussion on how the Senate plans to use reconciliation to repeal theAffordable Care Act, and what a replacement healthcare proposal should looklike.
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, rmohan@mwcllc.com, (202) 857-2944.
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Russell Sullivan |
Rosemary Becchi |
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Danielle Dellerson Hayes |
Charlie Iovino |
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Jessica Monahan |
Radha Mohan |
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Lai King Lam |
Daniel Chung |