June 28, 2020
Americas Tax Policy: This Week in Tax Policy News for June 26
This week (June 29-July 3)
Congress: The Senate is adjourned until 3 pm on Monday June 29. The first vote of the week will take place at 5:30 pm on the motion to proceed to S. 4049, the National Defense Authorization Act.
Infrastructure: The House is set to vote as soon as June 30 on a $1.5 trillion infrastructure proposal (The Moving Forward Act, H.R. 2) that includes a Ways and Means portion that addresses financing issues like permanently reinstating Build America Bonds, reinstating advanced refunding, and increasing and expanding the issuance of Private Activity Bonds. The foundation of the package is the nearly $500 billion/5 years surface transportation portion approved by the House Transportation & Infrastructure Committee June 18. The bill does not include revenue-raising provisions and House Majority Leader Steny Hoyer (D-MD) June 22 confirmed suggestions from other Democrats that White House buy-in is needed on any revenue offsets. "We're going to pass it without one," he said.
Health care: The House is also set to vote next week on a bill to shore up the ACA, the Patient Protection and Affordable Care Enhancement Act (H.R. 1425), that seeks to lower health insurance premiums with strengthened and expanded affordability assistance, including expanding eligibility for premium tax credits beyond 400% of the federal poverty line and increasing the size of tax credits for all income brackets.
SFC filing season hearing: IRS Commissioner Chuck Rettig appears before the Senate Finance Committee June 30 (at 10:15 AM) on the "2020 Filing Season and IRS COVID-19 Recovery."
Las week (June 22-26)
Coronavirus (COVID-19): The Administration continued to look ahead to a next coronavirus response bill, with Bloomberg reporting Treasury Secretary Steven Mnuchin saying at an event June 23 that a stimulus package could be passed by the end of July; and National Economic Council Director Larry Kudlow as saying additional direct payments to individuals are "on the table" and that any tourism tax credit would likely target low-income individuals. President Trump said June 22 that stimulus checks will be included, and the next package overall will be "very generous." Secretary Mnuchin also said he won't rule out an extension of the July 15 filing deadline. "It's something I'm thinking about," he said. "As of now, we're not intending on doing that, but it is something we may consider," and "we'll look carefully as we approach this July date." The June 24 Washington Post reported Republicans are split on the issue of additional checks, "creating a rift in conservative circles that could have significant consequences for the stimulus package," and advocated in an editorial that "stimulus checks should take a back seat to help for the unemployed." The June 22 Wall Street Journal reported on tension between GOP senators who want more coronavirus response legislation and conservatives wary of further spending, noting that "Republicans have postponed deliberations until mid-July," just weeks before expanded unemployment benefits expire, and citing fourth-ranking Senate Republican Roy Blunt (R-MO) as saying "the White House's strong conviction" that there needs to be another bill could help things along. The story noted that Republican lawmakers are "looking at business tax breaks for retaining workers, a back-to-work bonus for employees and accelerated use of tax credits for corporations," and observed that the "next phase of the congressional negotiations will shape the final months of the election campaign." A CNN report on all aspects of the brewing next bill said, "If Congress doesn't enact another stimulus measure, as much as $1 trillion in spending will disappear from the economy in the third quarter," which could be devastating and, in the words of an unnamed Republican senator, "political malpractice."
New proposals keep coming out:
BEPS 2.0: The June 17 letter from French Finance Minister Bruno Le Maire and his counterparts from the UK, Italy, and Spain responding to Treasury Secretary Steven Mnuchin's call for a pause in OECD negotiations to develop a new regime for taxing local profits of global companies under Pillar 1 of the BEPS 2.0 project has come to light. The letter said nations have "worked in good faith and intensively" and US positions are "strongly reflected in the current Unified approach." The officials said the pandemic has "accelerated a fundamental transformation in consumption habits and increased the use of digital services," translating to revenue for digital-based businesses at the expense of others. They said it is "feasible to concretely deliver a solution to a 2020 timetable." OECD officials have noted the US wants to shift the project to 2021. "Building on the outcomes of technical work already advanced at the OECD, we believe that a phased approach, initially focused on automated digital services, would considerably ease the task of achieving a consensus-based solution and make a political agreement within reach this year," the letter said, adding that US retaliation "against national fiscal policy decisions" wouldn't be good for anyone, economically or otherwise. Among other things, Secretary Mnuchin's letter rejected the phased approach because it ring fences high tech companies, most of which are headquartered in the United States.
Pascal Saint-Amans, the head of the tax policy center at the OECD, reiterated June 24 the talks are still alive: "The US has said … they are engaged, they want a solution, but we should shift it to 2021, or at least [until] after the election." Tax Notes reported the comments from a webinar and suggested more details might emerge after G-20 finance ministers meet in July. "What is for sure is that … we keep working, we're alive, we are not on life support," Saint-Amans said. "COVID has not done too much harm yet on this, but we recognize the difficulties."
A June 23 Politico article cited European Commission Executive Vice President Margrethe Vestager, from Denmark, as saying the EU would "really, really prefer a global consensus" on digital tax, but will push ahead with a regional tax, "if we need to." The new tax is necessary, Vestager argued, due to the ease with which many large tech companies minimize their European taxes. That makes it "so difficult to defend the many, many, many businesses all over the world who pay their taxes," she said.
GREEN Act: On June 25, House Ways and Means Select Revenue Measures Subcommittee Chairman Mike Thompson (D-CA) and 47 co-sponsors introduced the Growing Renewable Energy and Efficiency Now (GREEN) Act (released as a draft in November 2019) aiming to tackle climate change through the tax code:
A similar package is in the $1.5 trillion Moving Forward Act (H.R. 2) infrastructure bill set for a House vote.
Tax gap: A June 22 Washington Post op-ed by former Treasury Secretary Larry Summers on the tax gap, or the difference between the amount of tax taxpayers should pay and the amount paid voluntarily and on time, said that increased IRS funding could help the agency crack down on underreporting of income, which accounts for 80% of the tax gap. The op-ed links to a Treasury Inspector General for Tax Administration report on the issue.
QBI rules: IRS final rules concerning the deduction for qualified business income (QBI) under IRC Section 199A released June 24 finalized proposed regulations issued in January 2019 (REG-134652-18) and provide guidance on (1) the treatment of previously suspended losses included in QBI; and (2) determining the IRC Section 199A deduction for taxpayers holding interests in regulated investment companies (RICs), split-interest trusts and charitable remainder trusts.
Altera: On June 22, the Supreme Court issued an order declining the petition for certiorari in Altera v. Commissioner, 926 F.3d. 1061 (2019). Altera's petition asked the Supreme Court to review the Ninth Circuit Court of Appeals decision upholding a 2003 regulation that requires participants to include stock-based compensation costs in a cost-sharing arrangement. EY Tax Alert 2020-1626 has details.
Conservation easements: In News Release 2020-130 June 25, IRS announced a time-limited settlement offer to certain taxpayers with pending docketed Tax Court cases involving syndicated conservation easement transactions.
Fishing & archery: On June 23, IRS issued Notice 2020-48, which provides expanded disaster relief, in the form of postponing until October 31, 2020, certain Federal excise tax filing and payment deadlines, and associated interest, penalties, and additions to tax, for taxpayers who owe a federal excise tax for sales of sport fishing or archery equipment for the second quarter of 2020.
RMDs: Also June 23, in Notice N-20-51, IRS announced that anyone who already took a required minimum distribution (RMD) in 2020 from certain retirement accounts now has the opportunity to roll those funds back into a retirement account following the CARES Act RMD waiver for 2020.
ERTC FAQs: IRS updated Employer Retention Tax Credit FAQs #s 28, 30, 33-35, 46, 58, 88, 90, and 92.
OIRA regulations: Listed as under review by the Office of Management and Budget Office of Information and Regulatory Affairs (OIRA) are:
Regulations watch: Below is a timeline for guidance projects released by the IRS related to the TCJA.
"Digital giants, no matter where they are headquartered, will emerge from the current crisis more powerful and more profitable. These companies benefit from free access to the European market. It is fair and legitimate to expect that they pay their fair share of tax within countries where they create value and profit. Therefore, we believe that postponing our work and not addressing these challenges would constitute a collective failure. A political agreement on a multilateral stable solution would also alleviate the need for Governments to take action, in Europe, as well as in many other countries around the world." — June 17 letter from French Finance Minister Bruno Le Maire and his counterparts from the UK, Italy, and Spain