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Big news in the tax world as the United States walked away from OECD BEPS 2.0 project negotiations, with Treasury Secretary Steven Mnuchin having told other nations that the talks had reached an impasse that prevented US agreement on even any interim basis, and reportedly said nations were "much closer to an agreement" on the Pillar 2 minimum tax element of the plan than Pillar 1, which would require multinational corporations (MNCs) to allocate profits into market jurisdictions.

The issue has a trade angle because the US has wielded the threat of tariffs against nations that unilaterally pursue digital services taxes (DSTs). News of the letter broke during a Ways & Means trade hearing and, asked to comment, US Trade Representative Bob Lighthizer said in part, negotiations "were not making headway on pillar one, which is the most important pillar in there. The other people getting together and deciding they're going to take action against the United States without our acquiescence is something that's not acceptable." While there's still "room for a negotiated settlement," Lighthizer said "the Secretary made the decision that rather than having them go off on their own, he would just say we're no longer involved in the negotiations." He gave a similar statement at the Finance Committee saying the US must "show our strength;" Secretary Mnuchin said essentially 'If you all think you are going to get a consensus around taxing our companies unfairly, we are not going to be a part of it;' and it is not the end of the process of working out a solution.

Reuters reported European officials pushing back on the action and vowing to proceed with DSTs if an OECD agreement proves elusive, with French Finance Minister Bruno Le Maire saying he and officials from Britain, Italy and Spain had jointly responded to Mnuchin's letter, which he labeled "a provocation towards all the partners at the OECD when we were centimetres away from a deal on the taxation of digital giants

The OECD said nations "should remain engaged in the negotiation."

COVID-19

Second-ranking Senate Republican John Thune (R-SD) said in a Wall Street Journal op-ed posted June 17 that he will introduce an updated version of his mobile workforce bill to be called the Remote and Mobile Worker Relief Act and that adds a special 90-day provision governing health-care workers who voluntarily traveled to other states to work during the pandemic.

McClatchy newspapers reported regarding a next coronavirus bill, "Three White House officials told McClatchy the tax credit for travel, which has been sharply curtailed by the coronavirus pandemic, is among the economic recovery proposals under discussion. They plan to make a formal recommendation to Congress next month."

Today (June 18) at noon is the House Ways and Means Select Revenue Measures Subcommittee hearing on "Tax Relief to Support Workers and Families during the COVID-19 Recession," expected to focus on individual relief.

Police reform

Senator Tim Scott (R-SC) unveiled the JUSTICE Act, which calls in part for law enforcement reforms including the use of force reporting, no knock warrant reporting, incentivizing chokehold bans, and increased penalties for false police reports, as well as provisions for body-worn cameras and other issues. The bill would serve as an alternative to a Democratic bill, and while there seems to be comity on the issue — there were reports of Senators Scott and Cory Booker (D-NJ), sponsor of the Democratic bill, chatting amiably in a Senate doorway yesterday — Democrats are saying the bill is inadequate. It remains to be seen whether Democrats allow the Senate to proceed to the bill without assurances they can offer amendments or block it and await House action on a Democratic bill.

The Senate will turn to the JUSTICE Act after processing two circuit court judges, likely pushing consideration of the National Defense Authorization Act (NDAA) to the period beyond the July 4th recess. The Senate is at the half-way mark of a five-week work period, with two weeks left after this week before the recess.

Highway bill

The House Transportation & Infrastructure Committee markup of a nearly $500 billion/five years surface transportation bill, ahead of the current authorization expiring September 30, continues for a second day after a marathon session yesterday marked by contentious debate and technical problems.

Health care

The Centers for Medicare and Medicaid Services June 17 announced a rule, "Establishing Minimum Standards in Medicaid State Drug Utilization Review (DUR) and Supporting Value-Based Purchasing (VBP) for Drugs Covered in Medicaid, Revising Medicaid Drug Rebate and Third-Party Liability (TPL) Requirements (CMS 2482-P)."

Election

There are many political stories today on the forthcoming book by former National Security Adviser John Bolton, including on its discussion of the President's interactions with China.

The New York Times has an op-ed discussing Senate Majority Leader Mitch McConnell's re-election race.

EY COVID-19 Alerts and other resources are here.

The global EY Tax COVID-19 Response Tracker has been updated through June 17.

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