Jan 31, 2017
Tax Policy Update
QUOTE OF THE WEEK:
“I have concerns about it. I want to make sure we know what
the consequences are going to be and exactly how this would
work […]. We’re getting mixed signals from the
administration on it. I think we need to pin that down.”
- Sen. John Cornyn (R-TX) on the House GOP’s border
adjustment tax proposal
Sen. John Cornyn has expressed skepticism for the House GOP’s border
adjustment tax (“BAT”) proposal. Cornyn’s concerns are understandable given
that Texas is home to a large number of oil refiners, and the BAT’s
potential impact on refiners and domestic gas prices remains an open
Cornyn’s remarks and related tweets over the weekend are noteworthy, as
Senate Republicans have largely kept quiet about the House’s proposal to
tax imports while exempting exports. But Republicans in the Senate are
beginning to wade into this debate. Although Senate Finance Chairman Orrin
Hatch’s (R-UT) corporate integration proposal has more or less fallen by
the wayside, the chairman doesn’t appear to be fully on board with the BAT.
Meanwhile, Sen. Mike Lee (R-UT) has proposed an
that calls for the complete elimination of the corporate tax. Others like
Sens. Lindsey Graham (R-SC) and Ben Sasse (R-NE) seem to consider the BAT
as a form of tariff, which they oppose.
Cornyn’s concerns could potentially put him at odds with House Ways and
Means Chairman Kevin Brady, a fellow Texan, who spent the greater part of
last week selling the border adjustment tax around Washington. Brady
defended the proposal in a speech at the U.S. Chamber of Commerce, telling
U.S. companies to get on board and engage constructively with congressional
tax writers. The chairman explained that the border adjustment provision
goes hand-in-hand with the proposal to reduce the corporate tax rate.
According to Brady, tossing out the border adjustment tax provision would
mean that “tax rates on businesses would have to increase significantly
from the proposed 15% and 20% rates.”
Batter Up: Congressional Review Act in Play.
The Congressional Review Act (“CRA”) is the star of the show
this week on the House floor. House Republicans are expected to pass a
series of disapproving resolutions that would void certain regulations
issued by the Obama Administration. Among the regulations in the crosshairs
this week, the following rules may be of interest to our tax and energy
Stream Protection Rule (Interior Department)
Disclosure of Payments by Resource Extraction Issuers (SEC)
Waste Prevention Rule (Bureau of Land Management)
Lawmakers can use the CRA to …
GOP Annual Retreat: Unity on the Outside, Divisions on the Inside.
At a POLITICO event last Friday, House Speaker Paul Ryan said congressional
Republicans emerged from their annual retreat united. Ryan laid out the
GOP’s legislative agenda for the first 200 days, and it’s an ambitious one
— the 200-day plan includes the repeal and replacement of the Affordable Care Act (“ACA”), the construction of a wall along
the Southern border, and the enactment of tax reform legislation.
Republicans are aiming to repeal Obamacare via …
Did You Hear the One About a Random Woman Sneaking into the GOP
leaked audio recordings
of the annual Republican Congressional retreat reveal a party deeply
divided on how to proceed on the repeal and replacement of the Affordable Care Act.
Several lawmakers expressed concerns with the current strategy of immediate
repeal and replacement. Republicans worried that if they failed to slow
down and carefully think through a replacement plan, a few years down the
line they would be confronted with a mess.
Others brought up promises made by the Republican Party to its
constituents, including assurances that a repeal would not leave people
without coverage. “We’re telling those people that we’re not going to pull
the rug out from under them, and if we do this too fast, we are in fact
going to pull the rug out from under them,” said Tom MacArthur (R-TX).
It is clear that Republicans are far from coalescing around a solution. One
popular Republican solution has focused on …
Koskinen May Not Make It After All.
Internal Revenue Service Commissioner John Koskinen is being targeted once
again by a group of House Republican lawmakers. This time around, it’s the
Republican Study Committee (“RSC”), whose members are calling on President
Trump to dismiss the commissioner before his term expires in November 2017.
Members of the RSC reportedly raised the issue with Vice President Mike
Pence at the GOP’s annual retreat in Philadelphia last week. Senate
Majority Leader Mitch McConnell (R-KY) appears to support the push for
Koskinen’s dismissal. “I think he’s been a disaster and I’d be shocked if
we don’t have a new [commissioner],” McConnell said.
Back in December 2016, the House rejected a resolution to impeach Koskinen.
The impeachment measure had been an obsession of the House Freedom Caucus,
which accused Koskinen of obstructing a congressional investigation into
the IRS’s targeting of conservative nonprofit groups and for lying under
The Trump Administration has not revealed its plans for Koskinen, but it’s
worth noting that President Trump does consider Koskinen to be a personal
Apple CEO Cozies Up to GOP-led Congress.
Apple CEO Tim Cook paid a visit to Capitol Hill last week to discuss tax
reform with Sens. Orrin Hatch, Rob Portman (R-OH), and Mark Warner (D-VA).
Tax reform is a major issue for the tech giant, especially due to the large
sum of money the company has abroad. A potential repatriation tax would
allow the company to bring profits back home without paying harsh
penalties. However, other parts of the House GOP and Trump tax plan could
be problematic for Apple. If the administration follows through with
promises to penalize firms that ship production overseas, Apple could stand
to suffer major financial losses, as many of its products are manufactured
in China. In addition to meeting with congressional lawmakers, Cook also
met with President Trump’s son-in-law and senior adviser, Jared Kushner,
and Ivanka Trump to discuss tax reform and other issues affecting the
Vestager Prepares for Face Off With Irish Parliament.
European Union Commissioner for Competition, Margrethe Vestager, is
scheduled to appear before the Irish parliament’s finance committee on Jan.
31. Vestager will defend an August decision by the European Commission
ordering Ireland to collect €13 billion in unpaid taxes from Apple. The
decision caused major political ripples in Ireland, splitting the country
into two camps — one that supports the penalty and one that is wary of the
EU trying to force the country to reform its tax code. One of Ireland’s
main attractions for major corporations is its 12.5 percent tax rate. Tax
reform may hurt the nation’s ability to compete with its more powerful
neighbors. Irish lawmakers have already expressed their displeasure with
the EU’s consolidated tax base proposal.
ROAD WORK AHEAD
Smooth Sailing for Trump’s Transportation Secretary.
The Senate is scheduled to vote today on the confirmation of Elaine Chao to
serve as Transportation secretary. While several of President Trump’s
nominees are likely to be held up (on Capitol Hill, not at an airport…) due
to the travel ban implemented through a recent executive order, Chao is
expected to be confirmed without hitting any bumps in the road. Last week,
the Senate Commerce Committee approved Chao’s nomination by voice vote
without drawing any concerns and even Senate Minority Leader Chuck Schumer
(D-NY) has omitted Chao from a
of Trump nominees he intends to oppose.
Trump Puts Priority Projects on the Fast Track.
Last week, President Trump signed an
designed to speed up environmental reviews for designated high-priority
projects. This is the first major step taken by the president to fulfill
his promise to spur massive infrastructure investment across the country.
While this action may provide some help for accelerating the construction
of new roads, transmission lines, or pipelines, it remains fairly limited
in scope and may be followed with additional legislative, regulatory and/or
executive actions aimed at cutting additional red tape and expediting
Democrats Propose $1 trillion Infrastructure Investment Plan.
Last week, Senate Democrats released their “
Blueprint to Rebuild America’s Infrastructure.” The blueprint included a wish list of proposed spending programs that
would rival a seven-year-old’s letter to Santa. Unlike Santa, President
Trump and Republicans in Congress are likely to ignore Democrats’ request.
In contrast with the Trump infrastructure plan, which is still mostly a
mystery, Democrats have loaded their stockings with massive spending at the
federal level. As previously reported in our Tax Policy Update,
Trump’s plan is more likely to deliver gifts to the private sector in the
form of tax credits and incentives to spur public-private partnerships with
some selective federal investment sprinkled on top. Here are the details on
the Democratic blueprint …
In response to President Trump’s executive order to ban certain refugees
and immigrants from entering the United States, congressional Democrats
held a vigil in front of the Supreme Court on Jan. 31.
This is what the president has to say about the public show of solidarity:
- Making good on his campaign promise to ease the federal regulatory
burden, President Trump signed an executive order on Jan. 30 stipulating
that for every new federal regulation finalized, two regulations must be
rescinded. This executive order will likely delay the IRS’s partnership
audit rules. Until the administration clarifies whether the executive order
applies to regulations that are mandated by statute, the IRS will have to
postpone finalizing the rules.
- On Jan. 31, the House Oversight Committee will mark up the first
tax-related legislation of the 115th Congress. The Tax Accountability Act of 2017 (
) would prohibit the award of a contract to a potential contractor or grant
application with a “seriously delinquent tax debt” and would prohibit
individuals with seriously delinquent tax debts from federal employment.
- The ghost of the ACA past continues to call people in an effort to
promote HealthCare.gov as open enrollment draws to a close for this
year. After the Trump administration
withdrew $5 million in ads as part of an effort to cut costs, they reversed
their position, with officials from the Department of Health and Human
Services stating that automatic phone calls and other online and digital
outreach would continue through the Jan. 31, the deadline for obtaining
- The mortgage interest deduction and charitable deductions may be safe
under the GOP’s tax overhaul, according to Treasury secretary nominee
Steven Mnuchin’s written responses to the Senate Finance Committee’s
- German Chancellor Angela Merkel has made cracking down on corporate tax
avoidance a key part of her bid for a fourth term this fall. Over the
weekend, Merkel attacked Starbucks, accusing them of employing tax
avoidance strategies. The company is an easy target due to an EU ruling
ordering the coffee giant to pay €30 million in back taxes.
- In a major shift in policy, online retail giant, Amazon.com, continues
to go out of its way to collect sales tax, even in jurisdictions where it
does not have a physical presence. While this ensures more revenue for the
states, for online sales companies it signifies the importance of Congress
passing online sales tax legislation.
- The Organization on Economic Cooperation and Development (OECD) recently
revised its international guidance on transfer pricing. This could
translate to a small administrative cost for the IRS, in addition to
additional compliance costs for multinational companies. A GAO
report was sent to
Sen. Orrin Hatch, explaining the consequences of the latest round of OECD
- Elon Musk, the founder of Tesla, introduced the idea of the Trump
Administration backing a carbon tax. Musk has openly supported former Exxon
CEO Rex Tillerson to be secretary in state, partially because of his
openness to a carbon tax.
Senate Finance Committee
The full committee meets to vote on the nominations of Rep. Tom Price to be
the secretary of the Department of Health and Human Services and Steven
Mnuchin to be Treasury secretary.
House Oversight and Government Reform Committee
The Healthcare Subcommittee will hold a hearing on “Fraud, Waste, and Abuse
under the Affordable Care Act.” The full committee will also meet to markup
the Tax Accountability Act of 2017.
Senate Budget Committee
The full committee holds a hearing on “The Congressional Budget Office’s
Budget and Economic Outlook for FY2017-2027”
Senate HELP Committee
The full committee holds a hearing on “Obamacare Emergency: Stabilizing the
Individual Health Insurance Market.”
House Education and Workforce Committee
The full committee holds a hearing on “Rescuing Americans from the Failed
Health Care Law and Advancing Patient-Centered Solutions.”
House Budget Committee
The full committee holds a hearing on the CBO’s budget and economic
Department of the Treasury
The Departmental Offices (DEPO) will hold a closed meeting of the Debt
Management Advisory Committee on discussions and debates of the issues
presented to the Committee by the Secretary of the Treasury and the making
of recommendations of the Committee to the Secretary.
Committee for a Responsible Federal Budget
The Committee for a Responsible Federal Budget (CRFB) and the Kaiser Family
Foundation (KFF) hold a forum on “Major Considerations for Repealing and
Replacing the Affordable Care Act.”
Washington DC Economic Partnership
The Washington D.C. Economic Partnership holds a discussion on “Breakfast
Breakdown: Team Trump on Taxes,” focusing on what Trump's proposed tax cuts
means for economic development for Washington, D.C.
Peterson Institute for International Economics
The IIE holds a conference on “Border Tax Adjustment and Corporate Tax
Center for Strategic and International Studies
CSIS holds a discussion on “BP Energy Outlook,” focusing on the key issues
that will shape energy supply and demand through 2035 and explores possible
Cato holds a discussion on “Everything You Wanted to Know about Border
Adjustability But Were Afraid to Ask.”
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