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Spotlight

House Ways and Means Committee Chairman Kevin Brady (R-TX) recently commented on the lawsuit filed by the US Chamber of Commerce challenging the anti-corporate inversion regulations issued last April, saying the case is the "direct result of regulations that will make it harder for America to compete." The Chairman, who in July was quoted as saying he would attempt to shut down the anti-inversion rules legislatively, further said Republicans would continue to press forward with their tax proposals in the House Republican tax reform Blueprint released in June.

Meanwhile, Republican presidential nominee Donald Trump on 8 August revised his tax plan to align closer to the House Blueprint and said he would work with lawmakers to advance the plan if elected. Trump also highlighted previously announced elements of his tax plan, including a 15% corporate income tax rate and a matching 15% business income tax rate within the personal income tax system for pass-through entities. Absent a matching rate for pass-throughs and corporations, typical small businesses would pay almost twice as much as large corporations under the Trump plan, which would not be politically feasible. Additionally, Trump proposed a one-time deemed repatriation tax of 10% on accumulated foreign earnings and immediate expensing for new business investments in another move that brings his plan closer to the House Republican Blueprint.

In an economic speech on 11 August, Democratic presidential nominee Hillary Clinton rebutted the Trump tax plan, calling his proposed 15% tax rate on pass-through entities the "Trump loophole" since reportedly most of Trump's businesses are not incorporated.

Clinton largely highlighted previously stated tax positions rather than announcing new proposals. She called for a "more progressive, more patriotic tax code that puts American jobs first," including by: ending the ability of corporations to write off the cost of outsourcing of jobs and production; clawing back the US tax benefits received by outsourcing companies; and establishing an exit tax for inverting companies. More generally, she also called for cracking down on "tax gaming by corporations."

In other news, the American Bar Association Section of Taxation on 4 August submitted comments to the IRS on the taxation of cloud transactions. The letter recommends that the government not extend or modify existing software regulations under Section 861 to apply to cloud transactions, but rather promulgate new regulations that would generally characterize cloud transactions as services arrangements, with an exception for certain transactions treated as leasing transactions.

The Section of Taxation noted that the tremendous growth in the cloud industry has created a pressing need for tax guidance and that other countries are looking at the issue. Subsequent ABA Taxation Section comment letters will address source taxation, as well as additional inbound, treaty, and outbound taxation issues.