29 January 2019 Observations on former Chairman Brady's technical corrections draft legislation On January 2, 2019, then-outgoing Ways and Means Committee Chairman Kevin Brady (R-TX) released draft legislation of technical corrections for the Tax Cuts and Jobs Act (TCJA) of 2017. The Joint Committee on Taxation (JCT) released a technical explanation and revenue estimate the same day. The release has created concerns and questions on the future of the package. While no formal definition exists, a "technical correction" is generally thought to be a provision that is non-controversial, does not affect revenue, applies broadly and reflects the true original intent of the law, as enacted. As such, a technical correction, once enacted, normally (but not always) takes effect as if it were originally part of the enacted provision that it is correcting. Indeed, JCT Chief of Staff Tom Barthold has previously stated that "technical corrections are not something that benefit one taxpayer." Rather, "technical corrections from our perspective are: what is the member's intent in the legislation? If the member's intent was clear, and it's not clearly reflected or clearly effectuated in the legislation, then perhaps a technical correction is required.1 Technical corrections legislation is no different in substance than other tax legislation that does change tax policy (rather than merely conforming statutory language to the intended policy) — technical corrections legislation is afforded no procedural protections that is not afforded other tax legislation. Examples of technical corrections in the recently released package include changes to the cost recovery period for Qualified Improvement Property, and changes to the effective date for certain NOL deduction limitations. Typically, all six tax policy functions — JCT, the Treasury Department, House Ways & Means (Majority and Minority staffs), and Senate Finance (Majority and Minority staffs) — sign off on changes that are deemed "technical corrections" so that the package is a consensus product. For the Brady TCJA technical corrections draft, though, it is unclear whether the functions other than the Majority staff of the Ways & Means Committee and JCT have agreed on any or all of the technical package. Indeed, it appears that the Democratic staffs of neither tax writing committee have signed off on the technical merits of provisions in the discussion draft, since they were not involved in the original drafting of the TCJA. All these functions, however, are not actually or formally required to approve a technical corrections bill before it can move forward — again, no different than any other tax legislation. Also, typically, a technical corrections bill is introduced as companion legislation in both the House and the Senate. Former Chairman Brady's package was not officially introduced as legislation, and there was no companion draft in the Senate. Following the package's release, Former Chairman Brady made clear in a statement that he is looking forward to working with "colleagues in the House and Senate on both sides of the aisle" on the technical corrections package.2 At this point, there are no further developments regarding movement of the Brady draft through Congress. As a threshold matter, the technical corrections would need to be formally introduced as a bill to be considered legislation. With the start of a new Congress and change of control of the House of Representatives, this may not happen for some time. This view is buttressed by the general sense that House Democrats — who now occupy the majority in the House — will want to hold hearings on all provisions of the TCJA before moving forward on any TCJA-related legislation, including any technical corrections. To date, such hearings have not been scheduled and are not expected to take place until March at the earliest. As it lingers in the public domain, the Brady draft inevitably will attract scrutiny and debate as to whether certain provisions in the draft truly are technical in nature and, even if they are, whether, it is equitable for them to take effect retroactively, so long after the enactment of the TCJA. The technical corrections package is not final, and is only a discussion draft. If left unchecked, however, this package could be a starting point for future legislation. Like any other piece of legislation, interested parties can and should advocate for any appropriate changes or modifications to the provisions in the discussion draft with members of Congress, including members of the Senate Finance Committee and the House Ways and Means Committee.
Document ID: 2019-0247 | |||||
