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October 14, 2018

EY Center for Tax Policy: This Week in Tax Policy News for October 12

This week (October 15-19)

Congress: The Senate and House are out of session until November 13.

Last week (October 8-12)

IRS sets hearing on deemed repatriation regulations: The IRS on October 12 provided a notice of public hearing on proposed regulations relating to section 965 of the Internal Revenue Code as amended by the Tax Cuts and Jobs Act (TCJA). The public hearing is being held on Monday, October 22 at 10 a.m.

GILTI proposed regulations published, finally: Treasury/IRS Global Intangible Low-Taxed Income (GILTI) proposed regulations were published in the Federal Register on October 10. The comment period ends on November 26, meaning the IRS has changed the length of the comment period to 47 days from 60. A Law360 article published this week cited Gary Scanlon, an attorney-adviser with the Treasury Office of International Tax Counsel, as saying the Department is aware that language in the regulations to negate transactions with the principal purpose of reducing Subpart F income could be overly broad and potentially capture transactions that should not be of concern. "We are going to revisit this in the final regs, at the very least clarify the scope of the rule," Scanlon said October 5 at the American Bar Association (ABA) conference, according to the report.

FDII: The United States plans to defend the TCJA's foreign-derived intangibles income (FDII) provision before the OECD's Harmful Tax Practices Forum the week of October 15, Chip Harter, Treasury deputy assistant secretary of international tax affairs, said October 6 at the ABA meeting, Bloomberg Tax reported. He said the argument will be that, taken together, FDII and GILTI lead to tax neutrality for business decisions on whether to conduct foreign activities through a controlled foreign corporation or a domestic corporation. "We believe that tax neutrality is the opposite of a harmful tax practice," Harter said. The European Union in March asked the OECD's Harmful Tax Practices Forum for an expedited review of TCJA changes including FDII, which some have suggested may not comply with BEPS Action 5 on preferential tax regimes.

Opportunity Zones: Senator Tim Scott (R-SC) told reporters October 10 that IRS regulations on Opportunity Zones could be released by the end of October. Bloomberg Tax reported Senator Scott, a member of the Senate Finance Committee who helped get the Opportunity Zone provisions added to the TCJA, as saying investments in the program could be $50 to $80 billion or even, as some have suggested, "a $100 billion investment in the next couple of years." Scott's comments follow Treasury Secretary Steven Mnuchin's comments on September 27 that he expects the regulations out shortly and that the Opportunity Zone program could draw more than $100 billion of private capital to economically distressed communities. Proposed regulations on "Capital Gains Invested in Opportunity Zones" remain listed as under review by the Office of Management and Budget, along with Final Section 263A regulations on "Allocation of Costs under the Simplified Methods."

TCJA business highlights: IRS October 9 issued a news release, "IRS to highlight tax reform changes affecting small businesses; Small business owners, self-employed should plan now for new changes," (IR-2018-197), and fact sheet, "The Highlights of Tax Reform for Businesses" (FS-2018-17).

Trump tax returns: Plans to compel the release of President Trump's tax returns were backed by the top Democrats in the House and Senate this week, after the ranking members of the tax-writing committees last week said they would pursue the issue. In a San Francisco Chronicle article published October 10, House Democratic Leader Nancy Pelosi (D-CA) said demanding the President's tax returns "is one of the first things we'd do — that's the easiest thing in the world. That's nothing." Senate Democratic Leader Chuck Schumer (D-NY) said during his regular weekly press availability October 9, "I believe the President should've made his tax returns public when he ran, and any legal effort to make those public should be accomplished."

Taxes and the election: News articles have been noting the role the TCJA is playing in the elections. The October 8 New York Times said some Republicans cite residual anger from the TCJA's $10,000 annual limit on the state and local tax (SALT) deduction as contributing to the level of Wall Street donations to Democratic congressional candidates. A story in the October 10 Wall Street Journal said that while tax is the top issue in Republican advertising related to the midterm elections, "it is not a dominant one," with about 30% of GOP ads mentioning taxes and just under 12% of ads explicitly mentioning the TCJA.

Regulations watch: Major guidance projects released by IRS are currently in comment period under the following timeline.



Comment period

IRS hearing

Section 965 transition tax (REG-104226-18)

Released August 1, published in Federal Register August 9

60 days, ending October 9

October 22

Additional First Year Depreciation Deduction, Section 168(K) (REG-104397-18)

Released August 3, published in Federal Register August 8

60 days, ending October 9


Section 199A pass-through deduction (REG-107892-18)

Released August 8, published in Federal Register August 16

45 days, ending October 1

October 16

Section 162(m) deduction limit for remuneration paid to certain employees (Notice 2018-68)

Released August 21

Ends November 9


Contributions in Exchange for State or Local Tax Credits (REG-112176-18)

Released August 23, published in Federal Register August 27

45 days, ending October 11

November 5

Section 951A, Global Intangible Low-Taxed Income (REG-104390-18)

Released September 13, published in Federal Register October 10

47 days, ending November 26


Proposed Removal of Section 385 Documentation Regulations (REG-130244-17)

Released September 21; published in Federal Register September 24

90 days, ending December 24


Quote of the Week

"The truth is that the centrist Democratic Party is dead. The new Democrats are radical socialists who want to model America's economy after Venezuela. If Democrats win control of Congress this November, we will come dangerously closer to socialism in America. Government-run health care is just the beginning. Democrats are also pushing massive government control of education, private-sector businesses and other major sectors of the U.S. economy. Every single citizen will be harmed by such a radical shift in American culture and life. Virtually everywhere it has been tried, socialism has brought suffering, misery and decay." - President Trump, October 10 USA Today op-ed, "Democrats' 'Medicare for All' plan will demolish promises to seniors"


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