Pardon Our Dust
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ZINGER OF THE WEEK:
Sen. Bob Corker (R-TN) has become the latest victim of President Donald Trump’s tweet-storm. Early Sunday morning, Trump unleashed a series of tweets accusing Corker of being “a negative voice” standing in the way of the GOP’s agenda. Trump also said that Corker “didn’t have the guts to run” for reelection because he would not endorse the senator. Shortly after, Corker fired back with the zinger above, calling the White House an “adult day care center.”
Certainly, this isn’t the first time the president has used Twitter to pick fights with lawmakers, celebs, and world leaders. The Tax Policy Update team is particularly intrigued by the Trump-Corker feud due to the implications for tax reform. More on this below.
LEGISLATIVE LANDSCAPE
Leave Corker Alone. For the sake of tax reform. With only a 52-vote majority in the Senate, the GOP cannot afford to lose more than two votes in the upcoming tax battle. Even though the plan to move tax reform via budget reconciliation removes the threat of a Democratic filibuster, Senate Republicans will still need to secure at least 50 votes to get a tax overhaul bill across the finish line. Thus, it may not be the smartest thing for Trump to pick a fight with Corker at this critical juncture, especially since the Tennessee Republican has already threatened to reject …
Senate to Vote on Budget Next Week. The Senate Budget Committee held a two-day markup of its FY 2018 budget resolution. Democrats attempted to insert amendments that would, among other things, create points of order to limit the size of potential tax cuts and protect social welfare programs — most of the Democratic amendments were defeated. The following amendments, however, did make the cut …
Senate in Recess, House in Session. The Senate is in recess this week. The House is expected to vote on another round of supplemental funding for hurricane victims. The administration requested about $29 billion for those impacted in Florida, Texas, and Puerto Rico — $13 billion for FEMA, $16 billion for debt relief for the national flood insurance program, and $576 million for western states that are battling wildfires. Lawmakers from Texas are reportedly pushing for an additional $18 billion.
In addition to disaster funding, House lawmakers may also vote on the motion to go to conference for the FY 2018 defense authorization bill (H.R. 2810). The Senate approved an amended version of the bill back in September. Before final passage, both chambers will have to resolve their differences in conference. Lawmakers are hoping to complete work on the bill by the end of October.
The Greatest Deal on Earth. President Donald Trump reportedly reached out to Senate Democratic Leader Chuck Schumer (D-NY) on Saturday to discuss a healthcare compromise. The president tweeted: “I called Chuck Schumer yesterday to see if the Dems want to do a great HealthCare Bill. ObamaCare is badly broken, big premiums. Who knows!” Of course, the “great healthcare bill” will likely never see the light of day. Schumer said that Trump had suggested another Obamacare repeal-and-replace effort, which is …
Help an Employer Out. Last week, Sens. Mark R. Warner (D-VA) and Rob Portman (R-OH) introduced the Commonsense Reporting Act of 2017 to streamline and modernize employer reporting requirements under the Affordable Care Act (ACA).
The ACA created new information reporting provisions under code Sections 6055 and 6056 that require employers and insurance companies to collect data on a monthly basis and report the information annually to the Internal Revenue Service. The information reporting is intended to verify compliance with the individual and employer mandates, and administer premium tax credits and cost-sharing subsidies under the state and federal insurance exchanges. Employers have noted that the information reporting requirements are onerous and the system is rife with issues. This legislation would address various issues with the current reporting system by…
REGULATORY WORLD
Treasury Issues Second Report on Reducing Tax Regulatory Burdens. Last week, the Treasury Department released the Second Report to the President on Identifying and Reducing Tax Regulatory Burdens, which includes recommendations to withdraw, revoke, and substantially revise eight tax regulations have been deemed burdensome to U.S. taxpayers.
This report is an implementation of Executive Order 13789, which directed the Treasury secretary to identify significant tax regulations issued in 2016 that “add undue complexity” and “exceed statutory authority.”
Interestingly, the Treasury’s Oct. 2 report announces that the department’s regulatory reform task force intends to conduct a more comprehensive review and go after regulations that predate Jan. 1, 2016 — such a retrospective review goes beyond the scope of the executive order.
The report also notes that the task force, along with the IRS Office of Chief Counsel, has already identified “over 200 regulations for potential revocation.” This laundry list includes both temporary and proposed regulations that have not yet been finalized. The Treasury and IRS are planning to initiate the rulemaking process in the fourth quarter of the 2017 to roll back these regulations.
In the meantime, the Treasury has recommended the following actions for the eight specific regulations that are deemed to be overly complex and burdensome:
| Regulations | Recommendation |
|
Proposed Regulations under Section 2704 on Restrictions on Liquidation of an Interest for Estate, Gift and Generation-Skipping Transfer Taxes |
Withdraw |
| Proposed regulations under Section 103 on Definition of Political Subdivision |
Withdraw |
| Final Regulations under Section 7602 on the Participation of a Person Described in Section 6103(n) in a Summons Interview | Revoke in part |
| Temporary Regulations under Section 752 on Liabilities Recognized as Recourse Partnership Liabilities |
Revoke in part |
| Final and Temporary Regulations under Section 385 on the Treatment of Certain Interests in Corporations as Stock or Indebtedness |
Revoke in part |
| Final Regulations under Section 367 on the Treatment of Certain Transfers of Property to Foreign Corporations | Substantially revise |
| Final Regulations under Section 987 on Income and Currency Gain or Loss With Respect to a Section 987 Qualified Business Unit | Substantially revise |
| Temporary regulations under Section 337(d) on Certain Transfers of Property to Regulated Investment Companies (RICs) and Real Estate Investment Trusts (REITs) | Substantially revise |
Killing It Softly. The Trump Administration is expected to issue a new executive order this week rolling back certain Obama-era healthcare policies. While it may not be the same death-blow that a repeal effort would have dealt, the executive order will likely further destabilize the individual market. The order is expected to include the following:
- Expand access to less comprehensive and lower-cost health insurance plans. The Obama Administration limited these plans to 90 days — the present administration will likely allow coverage under these plans for up to a year.
- Access to AHPs (Association Health Plans), exempting them from the ACA’s coverage requirements and consumer protections.
- Allow consumers to use Health Savings Accounts (HSAs) to pay insurance premiums.
These less comprehensive, lower-cost health plans will likely appeal to healthier consumers, which may cause the individual market to deteriorate even further. If more healthy individuals exit the individual market, the risk pool will consist of an even greater number of high-risk and older individuals. As a result, insurers will continue to raise their rates.
CFPB Cracks Down on Payday Lenders. Last week, the Consumer Financial Protection Bureau (CFPB) issued a rule that tightens requirements for payday lenders. The rule targets small-dollar loans with repayment terms two weeks and over, with interest rates of 300 percent or more.
Specifically, the new rule will:
- Require payday lenders to verify income and take other steps to ensure that borrowers have the ability to repay their loans.
- Limit how often a lender can attempt to debit a borrower’s account. This has been a concern in the past because repeated attempts can rack up bank fees for borrowers.
- Constrain a lender’s ability to make several loans to the same borrower.
The new rule stops shy of …
European Competition Commissioner Continues to Pursue State Aid Cases. European Competition Commissioner Margrethe Vestager ordered Luxembourg tax authorities to revoke €250 million from Amazon, after ruling that their 2003 tax deal amounted to illegal state aid. Vestager noted that as a result of the deal, nearly 75 percent of Amazon’s profits were not taxed, allowing the company to pay four times less tax than other local companies.
This verdict follows a 2016 order that Apple pay €13 billion to Ireland and shows that Vestager will continue to pursue tax deals between European Union members and multinational companies. In August 2016, the European Commission determined that two tax rulings issued by Ireland to Apple in 1991 constituted illegal state aid. As a result of the tax rulings, the European Commission has concluded that Apple was able to artificially lower its tax rate and pay an effective corporate tax rate of 0.005 percent in 2014. The commission noted the tax benefit that Apple received gave the company a significant advantage over other businesses subject to a higher tax rate, making the arrangement illegal.
The commission continues to pursue the Apple case. Last week, Vestager announced that the commission will be taking Ireland to the European Court of Justice (ECJ) — the EU’s highest court — over delays in Ireland, collecting the €13 billion in unpaid back taxes. Vestager noted that it has been over a year since the commission issued its August 2016 decision and Ireland has yet to make sufficient progress to restore competition. The commission had set a January 2017 deadline for Apple to repay the taxes. Ireland noted that it is still looking for an investment manager to oversee the money, which would be deposited into an escrow account over time.
Apple, along with the Irish and U.S. governments, is determined to continue to fight the commission; the U.S. has complained that the commission is unfairly targeting American companies. Sen. Orrin Hatch (R-UT), chairman of the Senate Finance Committee, had previously noted that any ruling that is inconsistent with international tax standards and harms American business abroad with retroactive measures is inherently unfair and encroaches on U.S. tax jurisdiction.
Since 2015, the European Commission has been investigating whether individual countries’ tax breaks granted to certain companies violate state aid rules. Investigations have been opened in several EU member states. In October 2015, the EC published its first two decisions ordering Fiat and Starbucks, operating in Luxembourg and in the Netherlands respectively, to repay up to €30 million in “illegal state aid.”
LINE ITEMS
- The White House will reportedly release an outline of its $1 trillion infrastructure plan this week. Most observers do not expect the outline to contain any new detailed proposals: It will likely reiterate the need for more targeted federal investments and public-private partnerships.
- At the Oct. 4 House Financial Services Committee hearing, SEC Chairman Jay Clayton stated that any potential future rulemaking related to the standards of conduct for investment advisers should be based on choice, clarity, consistency, and cooperation.
- The Treasury Department issued its second of four reports on the administration’s Core Principles of Financial Regulation. The report outlines various ways that U.S. financial regulators can streamline and improve the regulatory regime for capital markets.
- The Senate confirmed the nomination of Randal Quarles to be the vice chair for supervision at the Federal Reserve. His term as vice chair will expire in 2022; his term as a Federal Reserve governor will end in 2032.
- The House Financial Services Committee is set to mark up a bill (H.R. 3312) that would exempt community banks from certain Dodd-Frank regulations and roll back the requirement that banks with assets over $50 billion would automatically be designated as a SIFI. The bill would give the Federal Reserve more flexibility to determine which banks should be subject to enhanced supervision. The committee will also consider a bill that would, among other things, repeal the Department of Labor’s fiduciary rule and set a best interest standard for broker-dealers.
- Sarah Schaefer has joined the Senate Finance Committee’s Democratic staff as tax policy advisor for small businesses and passthroughs. “Sarah is a seasoned Certified Public Accountant who has advised and consulted on partnership tax issues for several years. Her experience and partnership expertise will play a key role in coming up with new policies that help small businesses and curb potential passthrough abuse,” Ranking Member Ron Wyden said in a written statement.
IN THE QUEUE
Congressional Activity
Wednesday, 10/11
House Financial Services Committee
Markup of a series of bills – for the full agenda, click here.
House Ways and Means Committee
Subcommittee hearing on U.S. trade relationships in the Asia-Pacific region.
House Transportation Committee
Hearing on building a 21st century infrastructure for America, featuring highways and transit stakeholders’ perspectives.
Thursday, 10/12
House Financial Services Committee
Hearing on the future of housing in America and the oversight of HUD with Secretary Ben Carson testifying.
House Small Business Committee
Hearing on “Fostering Women’s Entrepreneurial Success”
Agency Activity
Wednesday, 10/11
SEC
Open meeting to consider a proposed rule to simplify the disclosure requirements under Regulation S-K
Other Activity
Wednesday, 10/11
Financial Services Roundtable
Discussion titled, “America’s Tax Reform Opportunity.” Rep. Patrick McHenry will be among the featured speakers.
The Hill
“Cracking the Tax Code: Prospects for Reform” discussion at the Newseum with special guests Rep. Richie Neal and Rep. Peter Roskam.
Third Way
Discussion on the “One Grant, One Loan” system and other higher education-related topics.
Thursday, 10/12
Brunswick Group
Breakfast discussion on the future of financial regulation, looking at whether policies created 10 years ago during the financial crisis are still fit for purpose.
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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Harold Hancock |
Charlie Iovino |
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Jessica Monahan |
Radha Mohan |
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Lai King Lam |
Daniel Chung
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Anne C. Starke |
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