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February 24, 2019
2019-0407

EY Center for Tax Policy: This Week in Tax Policy News for February 22

This week (February 25 - March 1)

Congress: The Senate and House are back in session. The House may take up a resolution intended to revoke President Trump's emergency declaration on the border wall.

Desmond nomination: A Senate vote may be held on the nomination of Michael Desmond to be Chief Counsel for the Internal Revenue Service and an Assistant General Counsel in the Department of the Treasury.

House Budget Committee: On February 27, the House Budget Committee will hold a hearing,"2017 Tax Law: Impact on the Budget and American Families." A publication announcing the hearing said, "We need fair, progressive, fiscally responsible revenue policy — One year after enactment of the GOP tax law, evidence is mounting that it increased inequality, worsened the U.S. fiscal outlook, and did not supercharge the economy as promised." The hearing follows a February 13 Ways and Means subcommittee hearing on how middle-class families are faring in the economy, and precedes the release of the forthcoming House budget resolution that could propose tax increases and rolling back TCJA provisions to pay for other priorities. While a fourth witness has not been announced, the Committee is slated to hear testimony from:

  • Caroline Bruckner (Professor, American University's Kogod School of Business)
  • William G. Gale (Chair in Federal Economic Policy in the Economic Studies Program, Brookings Institution; Co-Director, Tax Policy Center)
  • Chye-Ching Huang (Director of Federal Fiscal Policy, Center on Budget and Policy Priorities)

Last week (February 18 - 22)

Congress out, tax debates continue: Congress was out this week for the President's Day recess, free for the first time since late last year from the threat of another partial government shutdown. A bill enacted at the end of last week completed the FY2019 appropriations process and funded the government through September 30. Despite the relatively quiet week in Washington, tax debates continued in the background, including over proposed wealth taxes and what would be done with the revenue they raise, and whether lower reported tax refunds mean that the Tax Cuts and Jobs Act (TCJA) was not as a beneficial to average Americans as advertised.

Warren child care proposal: On February 18, Senator Elizabeth Warren (D-MA) unveiled a universal child care and early learning proposal that is intended to be paid for using roughly a quarter of the revenue from her previously announced wealth tax proposal. The January 24 tax proposal would require households to pay an annual 2% tax on every dollar of net worth above $50 million, and a 3% tax on every dollar of net worth above $1 billion — no matter where a taxpayer's assets are located around the globe — potentially raising $2.75 trillion in revenue over 10 years. The proposal announced this week would provide federal funding to establish and support a locally-run network of Child Care and Early Learning Centers and Family Child Care Homes, at no cost to families below 200% of the federal poverty line. Senator Warren's proposed federal investment in universal child care and early learning would cost $700 billion over 10 years, according to a press release.

Grassley, Brady on refunds: In response to Democratic suggestions that lower reported tax refunds mean the TCJA was a tax cut for the wealthy at the expense of the middle class, Senate Finance Committee Chairman Chuck Grassley (R-IA) and House Ways and Means Committee Ranking Member Kevin Brady (R-TX) published a USA Today op-ed titled, "Lower tax refunds show how the Republican tax cut is keeping money in your hands all year." The op-ed stated: "The size of your tax refund has nothing to do with your overall tax bill. It merely reflects what you overpaid the IRS in your paychecks last year. For most Americans, the Tax Cuts and Jobs Act delivered larger paychecks starting last February, even if many workers didn't notice." The issue was debated during a Ways and Means subcommittee hearing February 13, and significant attention was paid to a February 11 tweet by Senator Kamala Harris (D-CA), saying: "The average tax refund is down about $170 compared to last year. Let's call the President's tax cut what it is: a middle-class tax hike to line the pockets of already wealthy corporations and the 1%." Grassley and Brady noted that a Washington Post article declared the tweet misleading and that "the size of a refund tells you nothing about a person's tax bill." On CNBC this week, Rep. Brady said "people can go at work and fine-tune how much they want in their weekly or monthly paycheck, what they want for their refunds. And maybe this conversation will spur more people to do that."

Opportunity Zones: In Columbia, South Carolina, February 21, Vice President Pence highlighted the TCJA's Opportunity Zones provisions to incentivize investment in distressed areas. Appearing with Senate Finance Committee member Tim Scott (R-SC), who helped sponsor the Opportunity Zones provisions, Pence said the "program encourages private new investment in areas that start business, rebuild infrastructure, unlock hidden potential." He said the program helps "address unique needs by forming partnerships between the federal government with regard to tax benefits, state and local leaders, and local investors to create that incentive that makes it even more possible for people to invest at the point of the need."

Budget rollout details: The release of the President's FY2020 Budget was delayed by the government shutdown. The Wall Street Journal February 16 reported, regarding the Budget's release, "The administration expects to release an overview March 11 followed by a more detailed document March 18."

JCT on RMDs: A Joint Committee on Taxation report released this week describes research JCT staff has undertaken to study the effects of required minimum distribution rules on the asset decumulation behavior of retirees with traditional IRAs.

Foreign-sourced income regulations: Bloomberg Tax reported that OMB completed its review of proposed Section 250 regulations providing guidance regarding the deductions for foreign derived intangible income and global intangible low-taxed income February 21, and that Chip Harter, deputy assistant secretary of international tax affairs at Treasury, said the regulations could be released by the middle of next week.

Regulations watch: Below is a timeline for guidance projects released by the IRS related to the TCJA.

Guidance

Federal Register Publication*

Comment period

Section 965 transition tax (REG-104226-18)

final rules published February 5

 

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

final rules published February 1

 

Bonus depreciation (REG-104397-18)

August 8"

Ended October 9

Contributions in exchange for state or local tax credits (REG-112176-18)

August 27

Ended October 11

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

October 10

Ended November 26

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

September 24

Ended December 24

Investing in Qualified Opportunity Funds (REG-115420-18)

October 29

Ended December 28

Section 956 inclusions for corporate US shareholders (REG-114540-18)

November 5

Ended December 5

Foreign Tax Credit (REG-105600-18)

December 7

Ended February 5

Section 163(j) Limitation on Deduction for Business Interest Expense (REG-106089-18)

December 28

Ends February 26, public hearing February 27

Section 59A Base Erosion and Anti-Abuse Tax (REG-104259-18)

December 21

Ended February 19

Rules Regarding Certain Hybrid Arrangements (REG-104352-18)

December 28

Ends February 26

*Unless otherwise indicated, dates are when proposed regulations were published in the Federal Register.

Quotable

"To see the progress that we've been making in our economy, broadly, but also in this transformational idea of Opportunity Zones, it's all about making sure that, as the American economy expands, it's going to expand for every American. And that's exactly what we've done here." — Vice President Pence, February 21

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