CONSISTENTLY DELIVERS

May 24, 2016

Tax Policy Update

NOTABLE QUOTABLE

Russ Sullivan

“As the House GOP finalizes its blueprint for tax reform, Congressman Devin Nunes (R-CA) is under consideration as one of the lead architects of the business taxation title. His ABC Act could represent a bold move for Republicans towards full expensing of capital costs funded by equity investments.”

– Russ Sullivan, Partner

 

In January 2016, Nunes introduced the American Business Competitiveness Act, or also known as the “ABC Act”. The ABC Act would generally lower tax rates on business income to 25 percent. Further, the proposal would allow for immediate full expensing of business costs while eliminating most of the other credits and deductions available to taxpayers. In particular, interest expense and property tax deductions would not be permitted. Additional information on the ABC Act is available linked here.

Programming Note: The McGuireWoods Tax Policy Update will be taking a break for the Memorial Day recess. We will be back in your inboxes Monday, June 6!

LEGISLATIVE LANDSCAPE

Wyden Unveils Financial Derivatives Discussion Draft. Senate Finance Committee Ranking Member Ron Wyden (D-OR) has released draft legislation on the taxation of financial derivatives. The Modernization of Derivatives Tax Act of 2016 aims to simplify the taxation of derivatives by establishing a single …

Senate Finance to Hold Second Hearing on Corporate Integration . The Senate Finance Committee will hold a second hearing on corporate integration on May 24. This hearing will focus on the question of debt financing versus equity financing. In preparation of the hearing, the Joint Committee on Taxation has issued a report providing an overview on the tax treatment of corporate debt and equity.

“Corporate integration, if done correctly, could reverse the tide and instead reward companies that build value for their shareholders, while also making the tax system better for American businesses to grow and create jobs here at home. This hearing will give members of the Committee the opportunity to explore how we can work to reduce debt-equity distortions in the tax code as we continue to examine the pros and cons of corporate integration,” Chairman Orrin Hatch (R-UT) said upon announcing the hearing.

In its first hearing on corporate integration, the committee …

Innovation Box — Yes. No. Maybe. What? Rep. Charles Boustany (R-LA) conceded that an innovation box may not be needed for comprehensive tax reform, especially if the corporate tax rate drops below a certain point. Tax policy watchers are still waiting for the release of an updated innovation box proposal from the House lawmaker. Boustany, chairman of the Ways and Means Tax Policy Subcommittee, has argued that his proposal would make the U.S. tax code more competitive internationally but also admitted last week that it would add …

Levin Introduces Legislation to Protect U.S. Corporate Tax Base. As a follow-up to a Democratic bill introduced earlier this year to stop earnings stripping, Rep. Sandy Levin (D-MI), ranking member of the House Ways and Means Committee, dropped a bill last week aimed at limiting the practices of “hopscotching” and “de-controlling” …

Congress Examines Large College Endowments as Part of Overall Tax Reform. As student debt continues to increase, Congress remains concerned that educational institutions are not using enough of their endowments to lower the cost of education for students. The lack of transparency around endowment spending has also led some to question the tax-exempt status that many universities enjoy. In February, the Senate finance Committee and the House Ways and Means Committee asked 56 institutions with endowments of over $1 billion to disclose certain information with regards to endowment spending and management. Congress has started to receive responses from universities and is starting to tease the information to understand opportunities for reform.

Harold Hancock, tax counsel to the House Ways and Means Committee, indicated that…

REGULATORY WORLD

IRS to Relaunch “Get Transcript” Program After Fraud Last Year. After nearly 1 million taxpayers were hacked last year, the IRS discontinued its “Get Transcript” service. The agency is now planning to start …

EU to Begin Work on Tax Haven Lists. European Union finance ministers will meet Wednesday to create a common list of tax havens as part of a continued effort to curb tax evasion. Currently, each of the 28 EU member states has its own list of tax havens and decides unilaterally on what sanctions to impose on these countries. The move to create a common list follows the Panama Papers leaks in April, which revealed details of …

European Commission Further Restricts State Aid by Member States. The European Commission, amidst major tax battles with corporations like Amazon, Apple, McDonald’s, and Starbucks, is further restricting the ability of individual member states to enter into favorable tax agreements to help draw investment from multinational corporations.

The European Commission has released a report outlining new rules that reduce a member states’ ability to make …

IRS to Release Regulations That Review Treatment of Certain Stock Dispositions. Marie Milnes-Vasquez, special counsel to the IRS’s associate chief counsel (Corporate), indicated that the agency will be releasing regulations that will revise the treatment of certain stock dispositions as asset sales under I.R.C. § 336(e).

I.R.C. § 336(e) generally permits …

CAMPAIGN CORNER

  • On Sunday’s Meet the Press, Hillary Clinton called out Donald Trump for withholding his tax information. Mitt Romney also joined the fray last week, opining that it would be “disqualifying for a modern-day presidential nominee to refuse to release tax returns to the voters, especially one who has not been subject to public scrutiny in either military or public service.” Meanwhile, Senate Majority Leader Mitch McConnell (R-KY) said it is ultimately Trump’s decision even though most past presidential candidates have released their returns as a matter of tradition.
  • Kentucky and Oregon held their presidential primaries May 17. Democratic front-runner Hillary Clinton took Kentucky, while Sen. Bernie Sanders secured victory in Oregon. The next set of Democratic contests will take place June 7 in ND, CA, MT, NJ, NM, and SD.

Here is the latest delegate count:

Source: AP & Google

LOOKING AHEAD

Congressional Activity

Tuesday, 5/24

Senate Finance Committee
The full committee holds a hearing on “Debt versus Equity: Corporate Integration Considerations.” Read more.

House Small Business Committee
The full committee holds a hearing on “The Sharing Economy: A Taxing Experience for New Entrepreneurs, Part I.” Read more.

House Judiciary Committee
The full committee holds a hearing on “Examining the Allegations of Misconduct Against IRS Commissioner John Koskinen, Part 1.” Read more.

Wednesday, 5/25

House Ways and Means Committee
The Tax Policy Subcommittee holds a hearing on “Perspectives on the Need for Tax Reform.” Read more.

House Ways and Means Committee
The Oversight Subcommittee holds a hearing on “Protecting Small Businesses from IRS Abuse.” Read more.

Thursday, 5/26

House Small Business Committee
The full committee holds a hearing on “The Sharing Economy: A Taxing Experience for New Entrepreneurs, Part II.” Read more.

Agency Activity

Wednesday, 5/25

Internal Revenue Service
The IRS holds a meeting by teleconference of the Taxpayer Advocacy Panel Joint Committee on improving customer service at the Internal Revenue Service. For more information, contact Kim Vinci, 888-912-1227.

Internal Revenue Service
The IRS holds a meeting by teleconference of the Taxpayer Advocacy Panel Notices and Correspondence Project Committee to discuss various letters, and other issues related to written communications from the IRS. For more information, contact Theresa Singleton, 888-912-1227 or 202-317-3329.

Other Activity

Tuesday, 5/24

SIFMA: Fixed Income Market Structure Seminar 2016
This event will bring together market participants and policy makers to discuss the regulatory initiatives and priorities in the Treasury market, the potential for innovation in electronic trading to alter the landscape for corporate and municipal bonds, and the transformative use of market data. Read more.

Bipartisan Policy Center
The Bipartisan Policy Center (BPC) holds a discussion on “Tax Reform in 2017: A Bipartisan Pathway.” Read more.

Thursday, 5/26

SIFMA: C&L Monthly Luncheon
Join us at the monthly luncheon featuring a panel on “Understanding the DOL’s new BIC Exemption, and Ideas on Next Steps to Take in Your Firm." 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.

Russ Sullivan

Rosemary Becchi

Danielle Dellerson Hayes

Dan Chung

Radha Mohan

Lai King Lam