This week (March 21-25)

Congress: The House is in session but the Senate is in recess for two weeks, with the next vote scheduled for April 4.

Ways and Means members hearing: On March 22 (at 2:30 p.m.), the Ways and Means Tax Policy Subcommittee will hold a hearing on Member proposals relating to fundamental reform of the income tax system. The hearing will focus in particular on cash-flow and consumption-based approaches to taxation, according to a Committee advisory that also said it will be the first in a series of subcommittee hearings on tax reform proposals by Members of Congress, with the next hearing focused on income-based approaches to taxation. Rep. Devin Nunes (R-CA) will testify regarding his American Business Competitiveness Act (H.R. 4377), which would make changes that include: a 25% top rate on the net business income of both corporations and owners of unincorporated businesses; 100% expensing of all capital expenditures by a business and full cash accounting by corporate and unincorporated businesses; a territorial international tax system, in which only income from business activities within the US is taxed, and repeal of the current anti-deferral "subpart F" rules with no minimum tax or other replacement anti-base erosion measures; and non-deductibility of interest expense.

Last week (March 14-18)

Brady says no timetable for international proposal: House Ways and Means Committee Chairman Kevin Brady (R-TX) said March 14 there is no timetable for the international tax reform proposal that he has charged the Committee, and Tax Policy Subcommittee Chairman Charles Boustany (R-LA) in particular, with developing. "I'm not setting a deadline for it," Brady said, as reported by Politico. Boustany had previously said he was aiming for the end of March to assemble a proposal. "We're going to let the consensus in the policy drive the timetable," Chairman Brady said. "I intend to hold a vote on this, this year — again, we're going to let the process work out."

'Deeper dive' on corporate integration: Meanwhile, Chairman Brady told a Tax Executives Institute conference March 15 that Ways and Means is taking a "deeper dive" into ideas Senate Finance Committee Chairman Orrin Hatch (R-UT) has shared regarding his forthcoming discussion draft on corporate integration, Tax Notes reported. Chairman Brady said the proposal would be complementary to international tax reform efforts. Tax Notes also reported Brady as saying an innovation box proposal is still under development by Rep. Boustany and the Tax Policy Subcommittee. Boustany said both the political cycle and the House Tax Reform Task Force have required attention from members and staff, complicating development of an international tax reform proposal. The Task Force is focused on ideas for comprehensive tax reform and part of a process that Speaker Paul Ryan (R-WI) referred to March 17 as "an effort for all of our members of the House Republican caucus to offer an agenda to the country so that we can take an agenda to the men and women of America to show them how we get America back on track." Chairman Hatch's corporate integration discussion draft, expected to be circulated later this spring, is intended to significantly reduce or eliminate the current double taxation of corporate income and could include the establishment of a dividends-paid deduction for corporations, coupled with a withholding tax.

House Budget Committee FY 2017 resolution: On March 16, the House Budget Committee approved 20-16 its FY 2017 budget resolution after adopting an amendment urging House leaders to attach a separate $30 billion deficit reduction package to must-pass legislation if the Senate does not otherwise take it up. To address opposition over adherence to the Bipartisan Budget Act of 2015's $30 billion increase in discretionary spending caps for FY 2017 (to $1.07 trillion), the resolution calls for $30 billion in additional mandatory spending reductions in FY 2017 and FY 2018 and $140 billion total over 10 years. Such savings could be achieved through proposals like recovering improper Affordable Care Act tax credits and requiring a Social Security number to claim the refundable portion of the child tax credit, both of which were approved by the Ways and Means Committee March 16. The House Freedom Caucus opposes the budget resolution, creating uncertainty over whether it can pass the House. The Senate Budget Committee has postponed possible action on a resolution.

The House resolution calls for comprehensive tax reform that reduces the corporate tax rate and transitions the tax code to a more competitive system of international taxation. It references points made during a recent Ways and Means Committee hearing, including that:

— the US corporate tax restrains economic growth and job creation and "fosters a variety of complicated multinational corporate practices intended to avoid the tax, which have the effect of moving the tax base offshore and destroying American jobs";

— recent and coming global developments, specifically the OECD Base Erosion and Profit Shifting (BEPS) project, heighten the urgency of tax reform;

— the US worldwide tax system puts domestic companies at a significant competitive disadvantage; and

— "reforming the tax code would boost the competitiveness of United States companies operating abroad and significantly reduce tax avoidance."

FAA reauthorization: The Senate March 17 approved by unanimous consent a bill (H.R. 4721) to extend Federal Aviation Administration (FAA) programs and revenue provisions through July 15, 2016. The House version approved earlier in the week included the same programmatic extension but pushed revenue provisions out until March 31, 2017, or one year beyond the current expiration. That mismatch met with opposition in the Senate. The FAA extension is one of the few deadlines confronting Congress this year and potentially the only must-pass revenue bill that could carry other tax provisions. With the Senate on a two-week recess and the FAA authorization and taxes expiring during that time, the House could be expected to accept the Senate amendment to H.R. 4721. The stopgap measure is necessary while lawmakers seek agreement on a long-term bill.

Wyden on extenders: Senate Finance Committee ranking member Ron Wyden (D-OR) is eyeing a longer-term FAA bill to carry tax provisions slated to expire at the end of the year, as Bloomberg BNA and Politico both reported. "I'm working with my colleagues on the Finance Committee, in leadership and in the House to make sure the renewable energy extenders set to expire this year don't get left behind," Senator Wyden told the American Council on Renewable Energy policy conference on March 17. Chairman Brady earlier suggested he does not share that priority. "Extenders were dealt with last year, so all those provisions that were not made permanent will be part of the discussion on overall tax reform," Brady said.

JCT 'Bluebook' on 2015 tax legislation: On March 14, the Joint Committee on Taxation released a "Bluebook" that includes explanations of tax legislation enacted in 2015. JCT said the Bluebook is generally prepared at the end of each Congress, but because of the substantial amount of tax legislation enacted during the first session of the 114th Congress, Joint Committee staff prepared the explanation of legislation enacted during the first session.

Lew on taxes: Asked about balanced budget issues during a March 16 House Appropriations Financial Services and General Government Subcommittee hearing on the Treasury budget request, Treasury Secretary Jack Lew said the right approach to a broad budget deal would be "a bipartisan conversation where we agree on the need to protect senior citizens, where we agree on the need to have a fair and more simple tax system and where we have an honest discussion about what the trade-offs are." Addressing an issue raised during a similar hearing in the Senate March 8, Secretary Lew said, "on the tax side, if we could figure out a way to work together to stop inversions, that's something that the American people are offended by on the Democratic and the Republican side alike. We find it wrong and we know how to stop it. I hope we can at least come together on that."

Sanders letter: In a March 18 letter to Secretary Lew, Democratic presidential candidate Senator Bernie Sanders (I-VT) urged the Treasury Department to block the corporate inversion planned by Pfizer. Sanders also said that until legislation addressing inversions can be enacted, Treasury should act to prevent "hopscotch loans" and earnings stripping.

Quote of the Week

"Our plan calls for fundamental tax reform so the tax code is simple to understand and treats families and businesses fairly. Tax reform will give incentives to bring profits back to the United States where they can be invested in growing our economy and creating jobs. It will keep more money in the pockets of hard-working Americans who have earned it, so that they can spend and invest as they see fit." — House Budget Committee FY 2017 resolution summary document

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