CONSISTENTLY DELIVERS

Apr 5, 2017

Tax Policy Update

QUOTE OF THE WEEK

“I would assume that hopefully we’d come up with a plan that we all agree on. The president will put out principles […] in terms of what his goals are and how he wants to drive this as the process moves forward. [W]e’re going to have a robust debate about aspects of the plan, certain provisions, and certain other taxes pieces. But we’re going to work with the House and Senate on it.”

- White House Press Secretary Sean Spicer on tax reform
March 27, 2017

LEGISLATIVE LANDSCAPE

Ridin’ on a Tax Train. The White House is driving the train on tax reform, but there is a bit of confusion as to where the administration is exactly in the process. Trump convened a meeting with his top economic advisers last week to review the policy options and process for reform. In the room were Treasury Secretary Steven Mnuchin, chief strategist Steve Bannon, Jared Kushner, National Economic Council Director Gary Cohn, Special Assistant Shahira Knight, as well as Craig Phillips and Justin Muzinich, both counselors at Treasury. The president was briefed on both the House GOP tax reform blueprint and the Camp Draft.

The White House remains mum on the timing and content of the president’s tax plan. Back in February, the president said that his administration was “going to be announcing something […] over the two or three weeks that will be phenomenal in terms of tax.” It’s April, and tax policy wonks have yet to lay eyes on the White House proposal. This is perhaps a sign that the administration is taking a more deliberative approach after the healthcare debacle.

Some Republican lawmakers aren’t completely thrilled with the idea of the administration offering a competing tax proposal. Although House Ways and Means Chairman Kevin Brady welcomes the president’s leadership on tax reform, he would rather …

Sooo Over It. Like any jilted ex, the Trump Administration and congressional Republicans keep insisting that they are over health care reform, littering their news feeds with mentions of their new interest: tax reform. However, rumors keep surfacing that the White House has not moved on from the healthcare fight.

For the past week, the administration and members of the House Freedom Caucus have been trying to work out a deal to revise and revive the American Health Care Act (AHCA) On the chopping block are protections allowing adult-children under age 26 to maintain coverage under their parents’ insurance plan and essential health benefits (EHBs). EHBs include 10 services on plans: (1) ambulatory patient services; (2) emergency services; (3) hospitalization; (4) maternity and newborn care; (5) mental health and substance use disorder services including behavioral health treatment; (6) prescription drugs; (7) rehabilitative and habilitative services and devices; (8) laboratory services; (9) preventive and wellness services and chronic disease management; and (10) pediatric services, including oral and vision care. The revised bill would also allow …

Do the Roc-Away, Now Roll Back. On March 30, the Senate voted 50-49 to approve H.J. Res. 67 repealing the Municipal Auto-IRA Rule finalized under the Obama Administration. Published on Dec. 20, 2016, the rule allows large cities and counties to set up auto-enrollment retirement savings programs. Specifically, the rule establishes programs that require employers to automatically enroll their employees into IRAs managed by a city or county. It does so by providing a safe harbor from the requirements of ERISA for IRAs managed by certain political subdivisions.

Even though Trump promised on the campaign trail to allow municipalities and states to continue offering retirement plan, he is expected to sign the resolution. Trump advisor Diana Furchtgott-Roth said, “Trump believes any states who want to set up their own auto-IRAs have every right to do so and he doesn't want to interfere with their initiatives.” Republicans justified their vote in favor of H.J. Res. 67 on the grounds that …

REGULATORY WORLD

Tax Professionals Weigh in on IRS Agenda. On April 3, tax practitioners and accountants wrote a letter to Congress in support of its efforts to ensure a service-oriented, modernized tax administration system. The tax practitioners explained their role as advisers to millions of taxpayers gives them significant insight into the Internal Revenue Service (IRS), making them uniquely qualified to offer recommendations to improve the agency. The letter sets forth the “Ensuring a Modern-Functioning IRS for the 21st Century” framework, offering the following suggestions:

  • Any effort to modernize the business practices and technology of the IRS should build on the foundation established by the June 25, 1995 report of the National Commission on Restructuring the IRS.
  • As part of congressional oversight, the annual joint hearing review should be reestablished.
  • The Joint Committee on Taxation should provide a bi-annual report on the overall state of the federal tax system.
  • The GAO should review the IRS Oversight Board and determine if it is an essential component to allow the IRS to become a respected, service-oriented organization.
  • The IRS should utilize the full range of available authorities to hire and compensate qualified and experienced professionals from the private sector, as needed, to improve the agency’s ability to meet its mission.
  • The legislative and executive branches should determine the appropriate level of service and compliance they want the IRS accountable to provide and then dedicate appropriate resources for the agency to meet those goals.
  • Customer satisfaction surveys should continue as a measure of success for the agency.
  • The IRS should provide the needed face-to-face interaction to accommodate those taxpayers who cannot afford or choose not to use the online account features.
  • The IRS must designate a new dedicated “executive-level” practitioner services unit. Under this service unit, the IRS should provide tax practitioners with a tax professional account with immediate account access to all of their clients’ information. The secure account must also include single sign-on authentication.
  • The IRS should offer robust practitioner priority hotlines with higher-skilled employees capable of addressing complex technical and procedural issues.
  • Finally, the IRS should assign customer service representatives to address complex issues that practitioners are unable to resolve through the priority hotlines.

Tax practitioners hope that these recommendations will help the IRS improve, noting that the “current degradation of the IRS’ services is unacceptable."

The letter comes as Congress once again contemplates slashing the agency’s funding, which has been drastically reduced for years by Republicans. The letter stopped short of recommending increased funding for the IRS.

Battle over CFPB’s Constitutionality Continues. In a legal brief filed on March 31, the Consumer Financial Protection Bureau (CFPB) urged the U.S. Court of Appeals in Washington D.C to uphold the agency's constitutionality, noting that "[t]he president has no less control over a single-director agency than he does over a multi-member commission.” The CFPB’s breach cited various precedent, including the fact that the U.S. Supreme Court has allowed independent agencies run by officers that a president does not have the power to remove without cause.

The Justice Department filed its brief on March 17, arguing that the president should be allowed to fire the CFPB’s independent director at will. The Justice Department wrote …

COMMANDER-IN-TWEET

President Trump is gunning for the House Freedom Caucus after the GOP’s failed attempt to repeal Obamacare:

LINE ITEMS

  1. A group of House Democrats led by Rep. Keith Ellison (D-MN) is calling on the House Appropriations Subcommittee on Financial Services to increase funding for the Internal Revenue Service for fiscal year 2018. Democrats are asking for $12.9 billion for the IRS, arguing that an increase would help the tax-collection agency to better address cybersecurity threats and provide timely service to taxpayers. The agency’s current budget is about $11.2 billion. President Trump has proposed to cut the IRS budget by $239 million.
  2. President Trump is expected to nominate David Kautter to the post of assistant secretary for tax policy at the Treasury Department. Kautter is currently the managing director of the Kogod Tax Center at American University. Prior to joining the university, Kautter was a partner at Ernst & Young.

LOOKING AHEAD

Congressional Activity

Wednesday, 4/5

Joint Economic Committee
Full committee hearing on "The Decline of Economic Opportunity in the United States: Causes and Consequences."

Senate Banking Committee
Economic Policy Subcommittee hearing on "The Current State of Retirement Security in the United States."

House Financial Services Committee
Full committee hearing on "The 2016 Semi-Annual Reports of the Bureau of Consumer Financial Protection."

House Agriculture Committee
Full committee hearing on "Agriculture and Tax Reform: Opportunities for Rural America."

Thursday, 4/6

Senate Finance Committee
Full committee hearing on the 2017 filing season and IRS operations. IRS Commissioner John Koskinen will testify.

House Financial Services Committee
Financial Institutions Subcommittee hearing to examine the federal financial regulatory system and opportunities for reform.

House Small Business Committee
Full committee hearing on "Scam Spotting: Can the IRS Effectively Protect Small Business Information."

Other Activity

Tuesday, 4/4

Alliance for Health Reform
Webinar on “What’s Next for Health Policy.”

Insured Retirement Institute
Discussion on the challenges that women face when planning retirement.

Brookings
The Brookings Institution holds a report launch discussion on "Read My Lips: Why Americans are Proud to Pay Taxes."

Wednesday, 4/5

National Press Club
Newsmaker Luncheon address with IRS Commissioner John Koskinen.


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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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