Pardon Our Dust
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MEME OF THE WEEK:
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Government Shutdown Showdown. Heeeey…déjà vu. Congress must pass a spending bill to fund the rest of fiscal year 2017 (FY2017) by the end of Friday or face a government shutdown. Disagreements over hot-button political issues like funding for the border wall, Obamacare cost-sharing subsidies, and sanctuary cities have been jamming things up. The good news is that the government will likely keep its lights on, as lawmakers are looking to pass a clean, short-term continuing resolution or “CR” to give themselves a little more time to sort things out. |
LEGISLATIVE LANDSCAPE
Oh the Possibilities! Here are the big-ticket items to keep an eye on this week: (1) a possiblegovernment shutdown, (2) a possible healthcare vote, and (3) a possibleunveiling of President Trump’s tax reform plan.
The White House would like a vote on repealing Obamacare this week, but itis unlikely that House GOP leadership has secured the necessary votes topass an updated version of the American Health Care Act (“AHCA”).And it’s hard to imagine leadership rushing to hold a vote when everyone isstill waiting to see the legislative text. But hey, anything goes thesedays, so we shall see.
Here’s what we do know about the healthcare bill:
House Speaker Paul Ryan has been working with Rep. Tom MacArthur (R-NJ),co-chair of the centrist Tuesday Group, and Rep. Mark Meadows (R-NC), chairof the Freedom Caucus, on a compromise to garner votes from both factions.While the final proposal has not been released, below are a few items thatthe new AHCA may include…
When the Chips Are Down. With the risk of collapsing Obamacare markets and a potential governmentshutdown on the line — President Trump is threatening to use cost-sharingsubsidies as a bargaining chip to draw Democrats to the negotiating tableon health care. Democrats have of course scoffed at the idea, noting thatthey do not negotiate with “hostage takers.” With the budget deadlinelooming, a high-stakes drama has been unfolding over the fate of thesesubsidies.
Obamacare mandates the payment of cost-sharing subsidies to help insurerscover low-income enrollees’ deductibles and co-pays. In 2014, HouseRepublicans sued the Obama administration for appropriating money throughthe Treasury Department to pay marketplace insurers for cost-sharingsubsidies. The House argued that Congress had…
Any Given Wednesday. President Trump told reporters last week to expect his tax reform plan onWednesday, April 26. However, in an earlier interview with the Wall Street Journal, the president said he would not release detailson his tax plan until Congress repeals Obamacare. The back-and-forth isgiving administration officials whiplash.
When pressed for details, administration officials gave conflicting reportsas to what will be in Wednesday’s release. Office of Management and BudgetDirector Mick Mulvaney indicated that the release will contain more …
Tax Reform by August! Just Kidding… During recess, Treasury Secretary Steven Mnuchin came to the soberingrealization that getting tax reform done by August is “not realistic atthis point.” But the secretary remains optimistic that tax reform willhappen in 2017.
Before Congress left for recess, House Ways and Means Chairman Kevin Brady(R-TX) held meetings with House Democrats, which led tax policy observersto wonder whether Republicans can get some Democrats on board to help passtax reform. Payroll tax cuts and other middle-class tax cuts are reportedlybeing floated around to gauge interest. But McConnell isn’t holding hisbreath — he believes that Republicans and Democrats are too far apart onpolicy and does not expect Democrats to participate meaningfully.
Back on the House side, the Ways and Means Committee is gearing up to holda few hearings on tax reform. There were talks of the Tax PolicySubcommittee holding a hearing on the border adjustment tax this Thursday,but that has been postponed. If the committee uses the entire month of Mayfor hearings, House tax writers may be able to put out legislative textaround mid-June — but this is still a very optimistic timeline.
REGULATORY WORLD
Trump Calls for Review of Tax and Financial Services Regulations. On April 21, President Trump issued an executive order and two presidentialmemos related to tax and financial services regulations:
1. Executive Order on Identifying and Reducing Tax Regulatory Burdens
- Purpose : to reduce regulatory burden on American taxpayers.
- Treasury Secretary Steven Mnuchin is ordered to review all significant tax regulations issued in 2016 and identify those that are burdensome, overly complex, and exceed statutory authority. An interim report is due in 60 days (June, 20, 2017).
- Within 150 days of the executive order, Mnuchin has to provide a final report detailing the actions to be taken to mitigate the tax burden imposed by the regulations identified in the interim report.
2. Presidential Memo on the Financial Stability Oversight Council (FSOC)
- Purpose : to ensure that the designation process for identifying nonbank SIFIs actually help to reduce systemic risk and promote market discipline.
- Mnuchin is ordered to review the Financial Stability Oversight Council’s determination and designation process for identifying systemically important nonbank financial institutions (SIFIs).
- The Treasury Department has to submit a report within 180 days assessing whether these processes are fair and transparent.
- The report must also make the following determinations:
- whether the FSOC designation process could cause instability in the U.S. financial system.
- whether the designation process is consistent with the administration’s Core Principles for the Regulation of the U.S. Financial System.
- Until the review is complete, FSOC will refrain from making additional SIFI determinations and designations.
3. Presidential Memo on Orderly Liquidation Authority (OLA)
- Purpose : to assess whether OLA enables taxpayer-funded bailouts of financial companies in distress and encourages risk-taking.
- Mnuchin is ordered to conduct a review of the federal government’s Orderly Liquidation Authority.
- Within 180 days, Mnuchin has to submit a report assessing whether OLA encourages risk-taking and has a negative impact on U.S. financial stability.
- The Treasury Department is ordered to evaluate possible alternatives to OLA — specifically, whether enhanced bankruptcy procedures would be a better, feasible alternative.
More on the Tax Regulation E.O. President Trump’s April 21 executive order requiring Treasury SecretarySteven Mnuchin to review all significant tax regulations issued in 2016might put the Obama Administration’s inversion regulations in itscrosshairs. During this review, the Treasury Department will take anotherlook at an April 2016 rule aimed at serial inverters and regulations underSec. 385 of the code targeting earnings stripping. The regulations underSec. 385 came under heavy fire, with members of the Obama Administrationadmitting that the rules target even normal business transaction.
Mnuchin’s review of the regulations are part of the overall tax andregulatory reform efforts to simplify the tax code and eliminate rules thatstymie growth. After the completion of the review, in order to repeal theregulations, Treasury would have to go through the formal process ofproposing a plan to rescind the rules and allowing for a public commentperiod. This process could take six months to complete.
Taxman Comin’. On April 4, the IRSrevived a programthat employs private companies to collect outstanding tax debts. As of now,only four private groups are authorized to participate in this program: CBEGroup of Cedar Falls, Iowa; Conserve of Fairport, N.Y.; Performant ofLivermore, Calif.; and Pioneer of Horseheads, N.Y.
The IRS will send out letters to a select group of taxpayers who might beinvolved with the four private debt collectors this month. The debtcollection companies will follow up and call taxpayers over the phone. Thedebt collection companies will have to follow certain steps to ensure thatthey properly identify themselves to taxpayers, lowering the chances offraud. Agency officials will closely monitor to ensure that tax scammers donot take advantage of the collection program.
IRS personnel indicated that the private debt collection companies arelikely to start with cases involving less than $50,000 in tax debt, withabout 100 cases assigned to each company per week, before building up to1,000 cases a week.
ROAD WORK AHEAD
Kicking the Can Down the Road.With the Trump Administration approaching its 100-day mile marker, it’sonly natural to reflect on how the president’s top priorities haveprogressed since Inauguration Day. With no legislative victories to date,it appears that President Trump is stalled by inside-the-Beltwaycongestion.
So what does this mean for infrastructure? Trump’s focus on healthcarelegislation and tax reform has pushed back the release of an infrastructurepackage. A couple of weeks ago, Transportation Secretary Elaine Chao saidshe expected to roll out an infrastructure plan in May. Chao has assuredthat her department is on track to unveil a proposal this summer. However,it appears that rather than moving on to other priorities that have thepotential to garner bipartisan support, such as infrastructure investment,the president is opting to take the rockier road with issues that are sureto drive division in Washington.
COMMANDER-IN-TWEET
LINE ITEMS
- The Internal Revenue Service is seeking comments for the agency’s 2017-2018 Priority Guidance Plan. Notice 2017-28 invites the public to identify tax issues that should be addressed in the guidance plan.
- As tax reform ramps up, the Big 7 coalition of non-partisan groups representing state and local governments is asking Congress to preserve the exemption on interest from municipal bonds. Coalition members are concerned that Republicans might end the exemption as a way to finance tax cuts. The coalition is currently made up of the following groups: National Governors Association, the National Association of Counties, the Council of State Governments, the National League of Cities, the National Conference of State Legislatures, the U.S. Conference of Mayors and the International City/County Management Association.
LOOKING AHEAD
Congressional Activity
Wednesday, 4/26
House Transportation Committee
Full committee hearing on “Building a 21st CenturyInfrastructure for America,” April 26-27.House Ways and Means Committee
Social Security Subcommittee hearing on “Stopping Disability Fraud: Risk,Prevention, and Detection.”House Ways and Means Committee
Oversight Subcommittee hearing on “Examining the 2017 Tax Filing Season.”House Financial Services Committee
Hearing on “A Legislative Proposal to Create Hope and Opportunity forInvestors, Consumers, and Entrepreneurs.”
Agency Activity
Tuesday, 4/25
CFPB
Meeting of the Community Bank Advisory Council to discuss alternative dataand consumer access to financial records.
Other Activity
Monday, 4/24
Brookings Institution
Forum on “Reflecting on Trump’s First 100 Days.”POLITICO
Discussion on “Rebuilding America: A New Infrastructure Agenda.”
Wednesday, 4/26
The Hill
Newsmaker Series with Treasury Secretary Steven Mnuchin
Thursday, 4/27
Bloomberg Government
Discussion on “Tax and Trade: Changing Border Tax Policies and the Impacton U.S. Business.”
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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