CONSISTENTLY DELIVERS

May 17, 2016

Tax Policy Update

NOTABLE QUOTABLE

“It’s none of your business. You’ll see it when I release, but I fight very hard to pay as little tax as possible.”

- Donald Trump
On releasing his tax returns for public scrutiny

Republican presidential nominee Donald Trump has no immediate plans to release his tax returns, explaining that his taxes are undergoing a routine audit by the Internal Revenue Service. Trump added that voters do not have a right to see the information but said he would present the returns after the audit ends.

LEGISLATIVE LANDSCAPE

Wyden to Release Tax Proposal for Financial Products. As a follow-up to his proposal to simplify depreciation schedules, the Senate Finance Committee’s top Democrat, Ron Wyden (D-OR), is planning to release a draft proposal to modify the tax treatment of certain financial products. Though details are scarce, expect Wyden to rely heavily on the provisions in the Tax Reform Act of 2014 (so-called “Camp Draft”). Among other things, the Camp Draft includes provisions that would require investors to…

Senate Finance Committee to Hold Corporate Integration Hearing. The Senate’s tax-writing panel will hold a hearing to consider Chairman Orrin Hatch’s (R-UT) forthcoming dividends paid deduction proposal. The witness panel will include policy experts and academics who will help lawmakers assess the merits of corporate integration.

In preparation of the hearing, the Joint Committee on Taxation released…

House GOP to Consider Impeachment of IRS Commissioner. This week, House Republicans will decide whether to impeach IRS Commissioner John Koskinen based on allegations of misconduct. The House Judiciary Committee plans to hold two hearings in the coming weeks to examine accusations that Koskinen lied to Congress about the status of emails involving the IRS tea party scandal. The House GOP claims that…

Parade of Tax Proposals . The House Ways and Means Tax Policy Subcommittee held a “Member Day” tax reform hearing on May 12, offering members of Congress an opportunity to showcase their proposals. Subcommittee Chairman Charles Boustany (R-LA) reiterated that the tax-writing panel is serious about overhauling the tax code and that the hearing helps to ensure reform is done through an open and transparent process.

More than 30 lawmakers appeared before the subcommittee to share their ideas — each member was given three minutes to talk about the importance and impact of his or her legislation. Of note, Rep. Jim Renacci (R-OH) announced that he would soon introduce a proposal to repeal the corporate tax and replace it with a single-digit tax rate on business activities. Renacci said America’s outdated tax system and high corporate tax rate are holding back U.S. businesses, negatively impacting hiring, investments, and economic growth.

Throughout the hearing, lawmakers from both sides of the aisle paraded dozens of tax legislation before the subcommittee. The proposals addressed a variety of tax policy issues, including clean energy, charitable giving, tax administration, research and development credits, alcohol excise tax, and the Earned Income Tax Credit.

Below is a list of select bills that were raised at the hearing…

REGULATORY WORLD

Businesses Continue to Raise Concerns over Section 385. Since the Treasury Department’s release of proposed regulations under I.R.C. § 385 in April, the business lobby has vociferously complained about the consequences of the new rules.

The proposed regulations provide for the automatic treatment of related-party debt instruments as equity for U.S. tax purposes if the parties fail to meet certain record keeping requirements or if the instruments are issued under circumstances deemed to be abusive by the IRS. The treatment of related-party debt as equity would result in a disallowance of interest deductions on the debt instruments. These rules will prevent companies from…

Private Equity Firms Under Attack. Labor groups have been urging the Obama Administration to issue guidance against private equity companies’ deduction of monitoring fees. Currently, private equity firms are able to deduct fees that a purchased company pays to the new owner for consulting on various matters. After news broke in 2014 that private equity firms…

Groups Urge IRS to Promote Greater Tax Transparency. In 2010, the U.S. began a worldwide movement to share tax and other financial information through its commitment to the Foreign Account Tax Compliance Act (FATCA). Since then, while other countries have ramped up their information sharing programs to help combat tax evasion, the U.S. has fallen behind, according to Treasury Secretary Jacob Lew. Advocates of tax transparency are now urging the IRS to actively push…

U.S. May Appear on a List of Tax Havens. The European Green Party recently remarked that the European Union should consider adding the United States to a list of tax havens. The Green party cited to a new study that claims that the process to set up a shell company in more than a dozen states is very simple and the U.S. must share…

IRS Urged by Lawmakers to Ease Student Debt. A bicameral and bipartisan group of lawmakers, including Sens. Chuck Grassley (R-IO) and Jack Reed (D-RI), as well as Reps. Todd Young (R-IN) and John Larson (D-CT), are urging officials to make it easier for nonprofit lenders to use tax-exempt bonds to refinance student loans. Lawmakers would like the IRS to simplify the loan refinancing process through technical changes to…

LINE ITEMS

  • The IRS has issued a request for public comment on Notice 2009-83, guidance relating to the carbon dioxide sequestration tax credit under section 45Q. Comments are due by July 12, 2016.
  • On May 16, the House passed, by voice vote, the Stolen Identity Refund Fraud Prevention Act (H.R. 3832), a bill aimed to strengthen taxpayer protection by creating a central point of contact at the Internal Revenue Service to help identity theft victims report and resolve their cases in a timely manner.

LOOKING AHEAD

Congressional Activity

Tuesday, 5/17

House Ways and Means Committee
The Health Subcommittee holds a hearing on "Tax-Related Proposals to Improve Health Care." Read more.

Senate Finance Committee
The full committee holds a hearing on "Integrating the Corporate and Individual Tax Systems: The Dividends Paid Deduction Considered." Read more.

Thursday, 5/19

Senate Banking Committee
Securities, Insurance, and Investment Subcommittee hearing on "Improving Communities and Businesses Access to Capital and Economic Development." Read more.

Agency Activity

Wednesday, 5/18

IRS
The IRS holds a meeting by teleconference of the Taxpayer Advocacy Panel Toll-Free Phone Line Project Committee. For more information, contact Linda Rivera, 888-912-1227 or 202-317-3337.

Other Activity

Tuesday, 5/17

National Taxpayer Advocate Public Forums
Nina E. Olson, national taxpayer advocate, convenes a public forum at the IRS. The forum will include speakers from the tax community, tax preparation industry, IRS advisory boards, and nonprofit and government researchers to discuss the future state of the IRS.

POLITICO
Politico hosts a "Morning Money" lunch briefing on the future of the U.S. economy. Participants include: Politico's chief economic correspondent Ben White; Federal Reserve Bank of Atlanta President and CEO Dennis Lockhart; and Federal Reserve Bank of San Francisco President and CEO John Williams.

Thursday, 5/19

Information Technology and Innovation Foundation
The ITIF holds a discussion on "Checking the Innovation Box: How Lower Taxes on Innovation-Based Activities Could Boost U.S. Competitiveness." Read more.

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 and decisions may impact their business and industry. To learn more about how our team can help you monitor, analyze, and navigate all relevant legislative and regulatory developments, please contact any of our attorneys and consultants below at (202) 857-1700. For more information on how to subscribe to our weekly Tax Policy Update and tax news alerts, please contact Radha Mohan, , (202) 857-2944.

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