This Week (January 15-19)

Congress: The House and Senate are in session, beginning on Tuesday, January 16. The focus is expected to be on extending government funding, which expires after January 19, and other issues that lawmakers want to combine with a funding measure. Asked January 9 whether another continuing resolution (CR) to fund the government beyond that date is inevitable, Senate Majority Leader Mitch McConnell (R-KY) said if congressional leaders reach agreement on a broader funding measure and anything else it may entail, "it will still take a little bit of time to prepare the omnibus" spending bill — suggesting another CR is quite possible — but said he was "not ready to make an announcement yet about the way forward."

With the December enactment of the tax bill (P.L. 115-97), This Week in Tax Reform is ending its run. A new weekly Alert, This Week in Tax Policy News, will be published beginning January 19.

Last Week (January 8-12)

President, GOP leaders tout tax bill benefits: The President and Republicans in Congress highlighted the benefits of the tax bill enacted in December (P.L. 115-97) and plan to continue doing so in the run-up to the 2018 congressional elections. In a speech at The American Farm Bureau Federation's Annual Convention in Nashville January 8, President Trump said the new law's "total of $5.5 trillion in tax cuts" have spurred businesses to increase wages and that "more than 100 companies have already given bonuses and other benefits to hundreds of thousands of workers." He noted the reduction in the corporate tax rate from 35% to 21%, said "small and mid-sized businesses will receive massive tax cuts," and — "something that I think is going to be the sleeper of the bill" — that businesses will be able to deduct 100% of the cost of new equipment in the year they make the investment. He warned that Democrats want to raise taxes. "Every Democrat in the House and every Democrat in the Senate voted against tax cuts for the American farmer and for the American worker. But Republicans came together and delivered historic relief for our farmers and our middle class," Trump said. "And it wasn't easy. And we cannot let anything happen to that."

House Speaker Paul Ryan (R-WI) January 11 said 20 days had passed since the Tax Cut and Jobs Act became law and that it is already improving the lives of middle-income families, evidenced by an announcement from Walmart regarding employee bonuses attributed to tax reform. "Already, workers are seeing real increases in base wages, increases in 401(k) contributions, and in maternity and paternity leave," Speaker Ryan said. "Power companies in a number of states are planning to lower electricity bills. Think about what a relief that's going to be with the cold winters we have." Electric companies in several states have announced plans to lower rates, or potentially do so, in light of tax savings from the bill. For example, Baltimore Gas and Electric Company said January 5 it plans to pass approximately $82 million in annual tax savings to customers, resulting from federal tax cost reductions.

Following the regular Tuesday Senate Republican policy luncheon January 9, Senator Roy Blunt (R-MO) said the Missouri Public Service Commission has asked the investor-owned utilities that service the state to report back on what their new tax status is and "I think what we'll find is that those utility rates will go lower." Senator Cory Gardner (R-CO), who serves as National Republican Senatorial Committee Chairman, said the law is creating jobs and leading to employee bonuses and, "We've seen investor-owned utilities drop the cost of their electricity because of the tax relief that this Congress provided to the American people."

New members on tax-writing committees: Senator Sheldon Whitehouse (D-RI) has been added to the Senate Finance Committee in an update of committee assignments to now reflect a one-seat Republican majority on all committees. The new ratio on the Finance Committee is 14 Republicans and 13 Democrats, changed from 14-12 previously. The new party ratios on committees reflect the narrowed Republican majority in the Senate of 51-49 following the Alabama Senate election victory of Democrat Doug Jones. Jones was given committee assignments along with new Senator Tina Smith (D-MN), who filled the seat vacated by Senator Al Franken (D-MN). On the House side, Rep. Darin LaHood (R-IL) will replace Rep. Pat Tiberi (R-OH), who is leaving Congress, on the Ways and Means Committee. Additionally, Rep. Steve Womack (R-AR) was named chairman of the House Budget Committee to succeed Rep. Diane Black (R-TN), who is also retiring.

Potential for technical corrections: There has been continued speculation about the prospects for a technical corrections bill, which House Ways and Means Committee Chairman Kevin Brady (R-TX) previously said is inevitable and which Democrats may not be inclined to cooperate with. During a January 12 event hosted by the Economic Club of Washington, Treasury Secretary Steven Mnuchin said the Administration would look into items for a potential technical corrections bill, but there is nothing definitive along those lines thus far. Meanwhile, House Ways and Means Democrats January 10 urged their colleagues in the full House to hold off for now on introducing legislative changes to the law, until there is a "reasonable process" for considering each change. In a Dear Colleague letter, the members said they would refrain from offering fixes related to the law until the Committee has held hearings on proposed changes. "Rushing proposed fixes will only exacerbate the problems created by the majority, not solve them," they wrote.

Cooperatives issue: One issue gaining attention in the press is the potential for the law's pass-through deduction to treat sales by farmers to cooperatives more favorably than sales to other buyers. Senators John Thune (R-SD) and John Hoeven (R-ND) said the potential for disparate treatment was unintentional and they are working on a solution. "Right now in terms of the technical fixes, this is the one that probably needs to get fixed the most," Thune, a Finance Committee member and the third-ranking Senate Republican, said January 11, as reported by Bloomberg Tax. He said it was unclear whether a fix for the provision would move with a government funding bill. On January 12, the U.S. Department of Agriculture's Under Secretary for Marketing and Regulatory Programs Greg Ibach said of efforts to address concerns with changes to Section 199A of the tax code and questions about potential market effects on cooperatives and independent grain-related businesses: "While the goal was to preserve benefits in Section 199A for cooperatives and their patrons, the unintended consequences of the current language disadvantage the independent operators in the same industry. The federal tax code should not pick winners and losers in the marketplace. We applaud Congress for acknowledging and moving to correct the disparity … "

Tax extenders: The tax extenders have also been discussed as an add-on to a government funding measure. Bloomberg Tax reported Ways and Means Committee Chairman Brady as saying January 9 he did not think the tax extenders would be part of the upcoming spending bill, then subsequently saying January 11 that there are many conversations among congressional leaders about how to address tax and Medicare extenders, the Children's Health Insurance Program, and delays of some Affordable Care Act taxes. Senate Finance Committee Chairman Orrin Hatch (R-UT), who introduced a tax extenders bill (S. 2256) on December 20, said no decisions have been made about including extender provisions in a spending bill.

Withholding tables: On January 11, the Treasury Department and IRS released new withholding tables for 2018. During the regular White House press briefing the same day, Secretary Mnuchin said the guidance will result, starting in February, in larger paychecks for workers, 90% of whom will see an increase in take-home pay because of the new tax law. Secretary Mnuchin said a new withholding calculator will be released by the end of February. This week's release followed a January 8 letter from Senate Finance Committee Ranking Member Ron Wyden (D-OR) and House Ways and Means Ranking Member Richard Neal (D-MA) questioning whether the Administration was pressuring the IRS to produce 2018 withholding tables that would result in systematic under-withholding of federal taxes from taxpayer earnings. In the letter to Acting IRS Commissioner and Assistant Secretary for Tax Policy David Kautter, Wyden and Neal asked about interactions between White House officials and the IRS regarding the development of the tables and said if an undue amount of taxes are under-withheld by employers now, millions of hardworking Americans will owe taxes next April instead of receiving a tax refund. They sent a separate letter asking the Government Accountability Office to analyze the 2018 tables and the potential for systematic under-withholding.

FASB discusses accounting issues arising from tax reform: The Financial Accounting Standards Board (FASB) on January 10 added a narrow-scope project to its standard-setting agenda on the reclassification of certain tax effects stranded in accumulated other comprehensive income (OCI) and discussed other issues that have arisen as companies evaluate the accounting for the Tax Cuts and Jobs Act.

Quote of the Week

"These new tables will help deliver the tax cuts as soon as possible to as many Americans as possible, with as little disruption as possible. This will continue to focus and fuel the optimism in economic growth that is returning to this country." - Treasury Secretary Steven Mnuchin, January 11

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