This week (July 11-15)

Congress in: The Senate and House are in session.

IRS hearing on Section 385 regulations: The IRS will hold a public hearing on the Section 385 proposed regulations on July 14 (at 10 a.m.).

TPC event: On July 14 (at 9 a.m.), Urban-Brookings Tax Policy Center, the Oxford University Centre for Business Taxation, and the Robert D. Burch Center for Tax Policy and Public Finance at the University of California, Berkeley, host an international group of economists and lawyers for a discussion on corporate tax reform. Assistant Secretary for Tax Policy Mazur is among scheduled participants.

Last week (July 4-8)

Tax reform Blueprint: The Tax Foundation July 5 released an analysis and score of the House Republican Blueprint for tax reform, finding that it would reduce federal revenue by $2.4 trillion over the first decade on a static basis but only $191 billion if effects on the economy and broader tax base are considered. The group estimated that reduced marginal tax rates on labor and investment under the plan would boost long-run GDP by 9.1%. The report said the Blueprint, released as part of Speaker Paul Ryan's (R-WI) "Better Way" campaign to provide voters policy choices, would reduce individual income tax revenue by $981 billion over the next decade and corporate tax revenue by $1.2 trillion; the remainder of the revenue loss would be due to the repeal of estate and gift taxes. Ways and Means Committee Chairman Kevin Brady (R-TX) released a statement July 5 saying: "The Tax Foundation's analysis proves that our Blueprint will deliver a tax code built for growth and will improve the lives of all Americans. The Foundation specifically confirmed that our Blueprint will grow the U.S. economy by 9.1%, create 1.7 million new jobs, and significantly raise Americans' wages." A Citizens for Tax Justice analysis released June 29 estimated that the House Republican Blueprint would add $4 trillion to the national debt over 10 years.

Chairman Brady continued to say the Blueprint is the beginning of the conversation. "As we turn this into actual legislative text, we will ensure the final product is revenue neutral within dynamic scoring," he said. In an interview published by National Journal July 5, Chairman Brady said the tax plan represented "pretty bold ideas" on simplicity and fairness. "We're going to invite the American public to respond about a simpler, fair way to tax, a better way to get our businesses growing again locally and competing around the world, and then we're going into big listening mode," he said.

Ryan on Trump: Presumptive Republican presidential nominee Donald Trump returned to Washington for meetings with House and Senate Republicans July 7. Asked during a news conference whether there was discussion of the "Better Way" agenda, which included the tax reform Blueprint released on June 24, Speaker Ryan said, "Yeah. We talked about it quite a bit. We talked about the ideas. Most of the members brought up the components of the agenda that they feel passionate about. We specifically talked about Article 1 of the Constitution and the REINS (Regulations from the Executive in Need of Scrutiny) Act. … We talked about tax reform as well. And so we clearly have a presumptive nominee who wants to work with us on moving this agenda forward." Meanwhile, Chairman Brady told reporters that Trump staff have reacted positively to the House tax reform Blueprint. "They loved the direction we're going on growth and on simplicity and accountability," he said July 7, as reported by Bloomberg BNA.

Section 385 regulations: Treasury's debt-equity proposed regulations under Section 385 remained a focus on Capitol Hill amid a July 6 Joint Committee on Taxation (JCT) briefing and discussion of issues related to the regulations for tax-writing committee members, and a separate Senate Finance Committee briefing the following day featuring Treasury Secretary Jack Lew, Assistant Secretary of the Treasury for Tax Policy Mark Mazur, and Deputy Assistant Secretary for International Tax Affairs Robert Stack. The officials are said to have signaled that they are attentive to concerns about the regulations, including with regard to cash pooling, but unlikely to delay the regulations. Senate Finance Committee Chairman Orrin Hatch (R-UT) July 7 questioned whether Treasury is "making enough accommodations" for specific issues in finalizing the rules, Tax Notes reported. Ways and Means Chairman Brady released a statement [http://waysandmeans.house.gov/brady-statement-discussion-administration-officials-regarding-section-385-regulations/] saying there was a "frank discussion about the negative consequences of the proposed regulations and about the Administration's response to the American people's extensive comments and concerns" about the proposal. "During our discussion, I made it clear that this is neither the time nor the place for such unilateral action from the Administration," Brady said. "In the days and months ahead, there must be a robust conversation among the Administration, the tax-writing committees, and affected stakeholders about the next steps in this process … Ways and Means Members will consider all legislative options going forward." Secretary Lew told reporters after the July 7 meeting that Treasury would take a "hard look" at comments and concerns about the regulations. The meetings followed letters to Lew from members expressing concerns about the regulations.

FAA bill: Leaders of the House Transportation and Infrastructure Committee and the Senate Commerce, Science, and Transportation Committee July 6 announced a bipartisan, bicameral agreement on a Federal Aviation Administration (FAA) extension through September 30, 2017. The extension is expected to be considered in Congress the week of July 11, ahead of the current expiration on July 15. Senator John Thune (R-SD), who chairs Commerce, Science, and Transportation and also serves on the Finance Committee, said there was a push from both parties in the House and Senate to add unrelated tax provisions to the bill but the effort was abandoned as the deadline approached. Members have been pushing for inclusion of provisions such as extensions of tax credits for energy technologies said to be inadvertently left out of the 2015 tax legislation. Senate Democratic Leader Harry Reid (D-NV) released a statement July 8 expressing disappointment that credits for some energy technologies erroneously omitted from last year's bill could not be added. "Instead of working with Democrats to fix these errors by adding a provision to the FAA reauthorization bill, Republicans demanded Democrats accept a pair of anti-environment provisions," Senator Reid said. "Democrats refused to do unnecessary harm to our environment. Republicans should not hold American workers and businesses hostage with far-right riders."

Quote of the Week

"As the Blueprint indicates, we believe the proper measure of revenue neutrality uses a current policy baseline that reflects the extension of existing temporary tax provisions. With an adjustment to the current policy baseline referenced in the Blueprint, the Tax Foundation's analysis will yield a positive revenue result on a dynamic basis." — House Ways and Means Committee Chairman Kevin Brady (R-TX), July 5

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