This week (May 16-20)

Congress in: The House and Senate are in session.

Finance Committee hearing: On Tuesday, May 17 (at 10 a.m.), Senate Finance Committee Chairman Orrin Hatch (R-UT) will convene a hearing, "Integrating the Corporate and Individual Tax Systems: The Dividends Paid Deduction Considered," to examine corporate integration, specifically "how allowing corporations to deduct dividends could create a more efficient and fairer system of taxation of corporate profits." Chairman Hatch, who is preparing a corporate integration proposal, said in announcing the hearing: "If done right, corporate integration promises to eliminate the distortive double taxation of corporate earnings and further modernize the tax code, including simplification of the system and an end to some of the gamesmanship." Witnesses:

— Michael J. Graetz, Wilbur H. Friedman Professor of Tax Law and Columbia Alumni Professor of Tax Law, Columbia University, New York, NY
— Judy A. Miller, Director of Retirement Policy for the American Retirement Association and Executive Director of the American Society of Pension Professionals and Actuaries College of Pension Actuaries, Arlington, VA
— Steven M. Rosenthal, Senior Fellow, Urban-Brookings Tax Policy Center, Urban Institute, Washington, DC
— Bret Wells, Associate Professor of Law, Law Center, University of Houston, Houston, TX

The staff of the Joint Committee on Taxation prepared the report, "Overview of Approaches to Corporate Integration" (JCX-44-16), which provides a discussion of present law and data relating to corporate integration, and of certain approaches to corporate integration.

Ways and Means Health Subcommittee hearing: Also on March 17 (at 10 a.m.), the House Ways and Means Health Subcommittee will hold a Member Day hearing entitled "Tax-Related Proposals to Improve Health Care."

Last week (May 9-13)

Ways and Means Tax Subcommittee hearing: On May 12, the House Ways and Means Tax Policy Subcommittee held a hearing on Member proposals for improvements to the US tax system that included testimony about legislation addressing charity, research, energy, and student loan issues, among others. Chairman Charles Boustany (R-LA) said while the focus was on improvements to the current tax code, the Committee is still committed to tax reform, which was the subject of two previous Member day hearings. In an opening statement, Chairman Boustany discussed his bill (H.R. 4297) to provide protections for US companies impacted by the country-by-country reporting measures under the OECD BEPS Project, and prior testimony on the need for companies to be able to file country-by-country reports with the IRS for this year to ensure the confidentiality of the information that ultimately will be reported to foreign countries. Chairman Boustany said the Committee welcomed recent comments from Treasury indicating that they recognize the need for the IRS to accept country-by-country reports for 2016.

Rep. Pat Tiberi (R-OH) discussed the Research & Experimentation Advances Competitiveness at Home (REACH) Act (H.R. 5187) that he introduced with Rep. John Larson (D-CT), which would increase the R&D Alternative Simplified Credit from 14% to 20%. Rep. Larson discussed the Philanthropic Enterprise Act (H.R. 5007) that he sponsors with Rep. Dave Reichert (R-WA) to exempt private foundations from the tax on excess business holdings in the case of certain philanthropic enterprises that are independently supervised. Rep. George Holding (R-NC) discussed the Grow Philanthropy Act of 2016 (H.R. 4907) to exclude from the gross income of an individual who is at least 70 1/2 years of age up to $100,000 in distributions from an individual retirement plan to a donor-advised fund. Reps. Peter Roskam (R-IL) and Kevin Cramer (R-ND) discussed H.R. 5171, to expand tax-free distributions from individual retirement accounts to include rollovers for charitable life-income plans for charitable purposes. Rep. Reichert discussed the S Corporation Modernization Act (H.R. 2788). Rep. Kristi Noem (R-SD) called for updating tax incentives for alternative energy, including through a bill she introduced with Rep. Bill Pascrell (D-NJ) to extend and reform the biodiesel tax credit and ensure that it is properly focused on American production.

Questions over enthusiasm for reform: In a May 7 keynote speech at the American Bar Association Section of Taxation conference, Treasury Assistant Secretary for Tax Policy Mark Mazur said a "sea change" is needed in the political environment for tax reform, in which some view opposition to elements of reform plans as dooming the whole effort. He also suggested that a greater degree of enthusiasm will be necessary for the issue to advance. "I think in order to move tax reform ahead, it really has to become a top-tier issue for the public, for the business community, for America across the board," Mazur said, as reported by Bloomberg BNA. Similar assessments about impediments to reform have been made recently. At the BakerHostetler Annual Legislative Seminar May 11, House Ways and Means Tax Subcommittee Ranking Member Richard Neal (D-MA) said until the presidential candidates start talking about tax reform, it will be hard to gain traction for the effort. He also suggested that the White House, with time remaining in the President's term waning, likely saw that tax reform was not going anywhere and opted not to devote significant resources to the issue. At the same event, Senate Finance Committee member Rob Portman (R-OH), who led the International Tax Reform Working Group with Senator Chuck Schumer (D-NY) last year, said it's "not crazy" to think something could come together on international tax reform over the next six months, given that lawmakers know what needs to be done. He said one possible impediment is the inability for the business community to come together. Bloomberg BNA May 11 reported Senator Schumer as saying he would continue advocating the benefits of international tax reform tied to infrastructure spending, and that he has had some discussions with House Ways and Means Committee Chairman Kevin Brady (R-TX) on the issue.

Trump plan flexible: There has been renewed focus on presumptive Republican presidential nominee Donald Trump's tax plan in the wake of his recent comments that taxes on higher-income individuals may have to be increased, at least above what he initially proposed. Released in September 2015 amid a crowded Republican presidential field, Trump's plan proposes a 15% rate on all business income, a top individual income tax rate of 25%, a one-time deemed repatriation at a 10% tax rate, and an end to deferral of taxes on corporate income earned abroad without an accompanying move toward a territorial system. Appearing on NBC's Meet the Press May 8, Trump said he would "make sure the middle class gets good … tax breaks" and "fight very hard for business." Regarding the tax burden for the wealthy, Trump said, "I think, frankly, it's going to go up — and, you know what, it really should go up." He also said his plan is really a floor, subject to negotiation with members of Congress. On CNN May 9, Trump clarified that "everybody's getting a tax cut," and that taxes on the wealthy may need to be increased relative to his initial proposal, not where they are currently. Asked by the Wall Street Journal May 10 whether the plan would be changed, Trump said, "I always believe in flexibility and remaining flexible." He also bemoaned the high corporate tax rate and said of potential negotiations with Democrats, "it will be give and take and they're going to want other things having nothing to do with this." There have been conflicting reports over whether Trump is planning to revise the proposal. The focus on the tax plan came amid meetings between Trump and congressional Republicans that produced conciliatory comments from both sides following recent tensions, especially with House Speaker Paul Ryan (R-WI).

"Panama Papers" searchable database: On May 9, the International Consortium of Investigative Journalists published a searchable database intended to allow users to identify "who's behind almost 320,000 offshore companies and trusts from the Panama Papers and the Offshore Leaks investigations." The release of the "Panama Papers" more than a month ago, detailing the use of shell companies, focused additional attention on tax avoidance in Washington and elsewhere. Senate Finance Committee Ranking Member Ron Wyden (D-OR) sent letters to the Secretaries of State for Nevada and Wyoming inquiring about anonymous shell companies with ties to the Panamanian law firm whose records were leaked.

Anti-Corruption Summit in UK: World leaders including UK Prime Minister David Cameron and US Secretary of State John Kerry released a communique May 12 following an Anti-Corruption Summit in London, calling for ending the "misuse of companies, other legal entities and legal arrangements, including trusts, to hide the proceeds of corruption," by enhancing "transparency over who ultimately owns and controls them" to expose wrongdoing. "We will ensure accurate and timely basic and beneficial ownership information (including legal ownership information) is collected, available and fully accessible to those who have a legitimate need for it, including to help prevent abuse," the document said. The communique said nations will work to ensure that beneficial ownership information can be used effectively to detect and fight corruption, and charged groups including the OECD to develop initial proposals on ways to improve the implementation of the international standards on transparency, including on the availability of beneficial ownership information and its international exchange. "We have talked about the need for more action from multinational companies. There was a great challenge for anti-corruption [organizations] to work more closely together — to deliver a more coordinated effort," Prime Minister Cameron said in closing the summit. "We've talked about the need for every country to ultimately reach what I call the gold standard of a having a public register of beneficial ownership." The summit, which sought to galvanize a global response to tackle corruption, followed the recent US finalizing of the Treasury customer due diligence rule, which requires banks, mutual funds, and other financial institutions to identify and verify who owns and profits from the companies that make use of their services, i.e., the "beneficial owner."

Quote of the Week

"As we all know too well, the annual, chaotic process of extending temporary tax provisions was time consuming and, when extended retroactively, made no sense. Fortunately, with the permanent tax relief in the PATH Act, we were able to put to rest this decades old problem. Now, we are returning to a regular order process. We are deliberately and thoughtfully considering improvements to the tax code that will grow our economy and make the tax code fairer and simpler." — House Ways and Means Committee Chairman Kevin Brady (R-TX), May 12

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