This week (May 2-6)

Congress out: The House and Senate are out of session.

Tax Policy Center event on foreign tax changes: On May 3 (at 3 p.m.), the Urban-Brookings Tax Policy Center will hold an event, "How foreign tax changes affect U. S. businesses and the prospects for tax reform," to examine the implications of foreign tax changes for tax reform in the United States. An announcement of the event noted changes such as: reductions in corporate tax rates in other nations as the US rate remains the same; the fact that most other countries exempt most foreign-source income of their multinationals from tax while the United States continues to tax repatriated profits; other nations establishing patent boxes; and the OECD BEPS project. Bob Stack, Deputy Assistant Secretary, International Tax Affairs, U.S. Department of the Treasury, is the featured speaker.

Last week (April 25-29)

Wyden depreciation draft: Senate Finance Committee Ranking Member Ron Wyden (D-OR) April 26 released a discussion draft that proposes replacing the current Modified Accelerated Cost Recovery System (MACRS) and Alternative Depreciation System (ADS) with a revenue neutral simplified pooled depreciation system under which assets would be assigned to pools based on their current MACRS property class assignments. Alternative depreciation calculations for the Alternative Minimum Tax and the determination of earnings and profits would be eliminated. The plan would replace current depreciation rules under Internal Revenue Code section 168(a)-(j) with a revised accelerated cost recovery system for "pooled property" (most tangible property and computer software) and a straight line recovery system for "straight line property" (residential rental property, nonresidential real property, water utility property, and railroad grading or tunnel bore). Under the Accelerated Mass Asset Cost Recovery and Reinvestment System (A-MACRRS), the remaining adjusted basis of all capital assets would be transferred into six pools of 49%, 34%, 25%, 18%, 11%, and 8%. Each pool's balance would be increased by the amount of any assets placed in service assigned to each pool, and reduced by the proceeds of any asset dispositions from the pool and by previous depreciation deductions. At year-end, each final pool balance would be multiplied by its applicable recovery rate to determine the year's depreciation deductions. Senator Wyden said the draft, which is similar to a 2013 plan by former Finance Committee Chairman Max Baucus (D-MT), will provide a basis for broader tax reform but also stands on its own merits.

Finance members on international tax reform: During the April 26 Finance Committee hearing on business tax reform, senators reaffirmed their interest in a revamp of international tax rules that some witnesses said is necessary in order for US companies to be competitive. Senator Rob Portman (R-OH) referred to a recent Senate floor speech in which Chairman Orrin Hatch (R-UT) said there was a "glimmer of hope" with the recommendations of the leaders of the International Tax Reform Working Group last year, though its prospects were threatened "by the politics of the moment." Portman, who headed the group with Senator Chuck Schumer (D-NY), said without reform, the uncompetitive international tax system means the United States will keep losing workers and does not take advantage of the $2 trillion-plus locked up overseas. Senator Schumer said during the hearing that he remains ready to work with Chairman Hatch to get something done on the international side first, possibly even this year. Bloomberg BNA reported Chairman Hatch as later saying one impediment is agreeing on a tax rate for the overseas income Portman referred to. He repeated his desire to move international tax changes along with the corporate integration plan that he expects to release in June, and that was his focus during the hearing. Senator Wyden advocated his depreciation reform proposal. There was also some attention paid to the report of the Business Income Tax Working Group led by Senators John Thune (R-SD) and Ben Cardin (D-MD), which endorsed reducing the corporate tax rate without specifying a target rate and discussed patent/innovation boxes and cost recovery issues, among other topics.

Brady on tax reform: At an April 27 event sponsored by The Atlantic, House Ways and Means Committee Chairman Kevin Brady (R-TX) continued to say the Administration's recent anti-inversion regulations may have the effect of keeping investment out of the United States and that the Committee is continuing to scrutinize the regulations. He also said there will likely be a hearing in May on member priority tax issues that could include discussions on tax extenders and employee stock ownership plans (ESOPs), Bloomberg BNA reported. (Ways and Means member Dave Reichert (R-WA) sponsors a bill, the Promotion and Expansion of Private Employee Ownership Act of 2015 (H.R. 2096), that was the subject of an April 27 House Small Business Committee hearing.) The Ways and Means Tax Policy Subcommittee subsequently announced a Member Day Hearing on Tax Legislation to take place on Thursday, May 12 (at 10:00 a.m.). Tax Notes reported Chairman Brady as having said April 28 that the "consensus blueprint" being developed by the House Tax Reform Task Force — which is part of a broader effort by House Republicans to develop a policy agenda and different from the Committee's examination of international tax issues — will likely be released at the end of June.

Ways and Means markup: On April 28, the Ways and Means Committee approved three bills:

— by voice vote, the Recovering Missing Children Act (H.R. 3209), sponsored by Rep. Erik Paulsen (R-MN) and intended to help local law enforcement agencies find missing or exploited children using information from the IRS;

— by a vote of 23-15, the Preventing IRS Abuse and Protecting Free Speech Act (H.R. 5053), sponsored by Rep. Peter Roskam (R-IL), to prohibit the Secretary of the Treasury from requiring that the identity of contributors to 501(c) organizations be included in annual returns; and

— by voice vote, the Stolen Identity Refund Fraud Prevention Act (H.R. 3832), sponsored Rep. Jim Renacci (R-OH), which includes provisions to prevent tax-related identity theft and tax fraud.

Rep. Renacci's bill was amended to remove a new criminal penalty for identity theft-related tax fraud, to create a local law enforcement liaison within the Criminal Investigative Division of the IRS to administer information-sharing initiatives and respond to local law enforcement inquiries, and to require a TIGTA report on solutions to the IRS phone scam.

Wyden on corporate tax gap: On April 28, Senator Wyden called on the IRS to put a system in place to identify the sources of corporate tax avoidance, evasion, and noncompliance in response to a report from IRS that: the average annual gross tax gap was $458 billion for the years 2008-2010; and the corporate tax gap was an annual gross average of $44 billion for those years. "It is absolutely unacceptable that the country has lost more than $400 billion dollars over the past ten years from corporations dodging their tax payments," Wyden said. "This is money that could be put to good use shoring up critical programs such as Medicare. It's time the IRS put an effective tracking and auditing system in place to locate this lost money."

Quote of the Week

"In the recent past identifying and developing certain bipartisan policy proposals and moving them through the legislative process has proven especially difficult. But I am an optimist, and I believe we can, and should, find common ground on a path forward for comprehensive tax reform." — Senate Finance Committee Chairman Orrin Hatch (R-UT), April 26

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