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July 12, 2020

Americas Tax Policy: This Week in Tax Policy News for July 10

This week (July 13-17)

Congress: The Senate is still out of session. The House is in a work period and committees will continue to hold virtual hearings.

Social Security: On Friday, July 17 at noon, the House Ways & Means Committee will hold a hearing on "The Impact of Covid-19 On Social Security and its Beneficiaries."

Infrastructure: Infrastructure will be a focus next week, as presumptive Democratic presidential nomineeBiden said, "I'll be laying out an updated blueprint of how we can build a modern, safe, sustainable infrastructure and the clean energy economy." The Atlanta Journal-Constitution reported that President Trump will visit Atlanta next week to tout his transportation agenda and announce a policy change designed to speed infrastructure projects.

Last week (July 6-10)

Coronavirus (COVID-19): The Administration and Congress continue to look ahead to the next coronavirus response bill but plans to pass it on a tight timeframe could be challenged by a lack of consensus over what should be included and at what cost. Treasury Secretary Steven Mnuchin said on CNBC July 9 it will be a priority to pass the next bill between July 20 and the end of the month — "as soon as the Senate gets back, we're going to sit down on a bipartisan basis" with Republicans and Democrats — and that the Administration supports another round of economic impact payments. The expiration of the unemployment benefit expansion on July 31 is seen as an action-forcing deadline. Earlier in the week, Majority Leader Mitch McConnell (R-KY) said that Senate Republicans are likely to put forward their own proposal for the next coronavirus response bill in coming weeks that would be "a starting place" for talks with the Administration and Democrats, and will include liability protections and otherwise focus on schools, health care, and jobs, Bloomberg reported. Additional payments to individuals "could well be a part of it" and state and local funding is being looked at, he said. "I would predict in the next couple of weeks if there's a new rescue package and I'm pretty sure there will be, I'll be unveiling another one," Senator McConnell said in Kentucky. With a resurgence of new COVID-19 cases in many states, "I think the country needs one last boost," he said, while cautioning that there may not be support in the Senate for a bill exceeding $2 trillion like the CARES Act. The July 7 Washington Post reported second-ranking Senate Republican John Thune (R-SD) as saying the key right now is to get the White House and congressional Republicans "in the same place," and suggested a next bill is "definitely going to be heavily focused on the health-care crisis and making sure that we can get the schools open in the fall." Marc Short, VP Pence's chief of staff and former White House head of legislative affairs, said on Bloomberg Radio July 7 the Administration wants the next bill to come in at under $1 trillion, saying "we want to take into consideration the fact the economy is bouncing back and want to try to contain the amount of spending." House Speaker Nancy Pelosi (D-CA) July 9 took issue with that target. "A trillion dollars is: okay, that is an interesting starting point, but it doesn't come anywhere near," she said. The House-passed HEROES Act would provide $3 trillion.

Specific proposals: A July 8 Washington Post story on the White House push for tax incentives for sporting events, tourism, and eating out said "there are growing signs that the tax breaks the White House wants to use could fall flat, because many of the venues it is eyeing — such as sporting events and certain restaurants — are either closed or operating in a much different manner than they were before the outbreak."

On July 9, Senators Kevin Cramer (R-ND) and Kyrsten Sinema (D-AZ) announced their bill (S. 4178) to provide a credit against payroll taxes for up to 50% of expenses for businesses and nonprofits to implement coronavirus infection prevention measures like symptom checks, FDA-approved testing, increased cleaning and sanitation, industry-appropriate PPE, and social distancing, limited to expenses of $500,000 per quarter in 2020 and $250,000 per quarter after 2020.

Biden plans: Presumptive Democratic presidential nominee Joe Biden July 9 announced a plan to invest $700 billion to boost U.S. manufacturers: $400 billion in procurement that is intended to spur new demand for American products, materials, and services; and $300 billion in R&D and breakthrough technologies, such as electric vehicles, lightweight materials, 5G and artificial intelligence. The campaign document on the plan said "Biden will end incentives in the Trump tax giveaway that allow multinationals to dramatically lower taxes on income earned overseas and allow the largest, most profitable companies to pay no tax at all" and will tighten "anti-inversion rules that Obama-Biden put in place and which Trump has sought to weaken." It additionally said Biden would provide a Manufacturing Communities Tax Credit for renovations and called for eliminating tax incentives for pharmaceutical and other companies to move production overseas and establish new incentives for companies to make products in the United States.

Unity recommendations: Separately, the Biden-Sanders Unity Task Force July 9 released recommendations on a range of issues including the climate crisis, criminal justice, the economy, trade, and health care, in an effort to unite the presumptive nominee's campaign with the progressive wing represented by Senator Bernie Sanders (I-VT) and influence the party's platform. The economic chapter said, "We will work to reform the tax code to be more progressive and equitable … the wealthiest Americans can shoulder more of the tax burden, including in particular by making investors pay the same tax rates as workers and bringing an end to expensive and unproductive tax loopholes. Corporate tax rates, which were cut sharply by the 2017 Republican tax cut, must be raised … Estate taxes should also be raised back to the historical norm." The recommendations also address manufacturing investments, calling for firms in the industrial sector to have access to revolving loan funds, grants, and tax incentives for efficiency upgrades, process changes, and facility retooling. They also call for more generous refundable tax credits to benefit low- and middle-income families, including more equitable access to provisions to build wealth and support working families. Under the 'economy unity' heading, the recommendations call for using taxes "as a tool to address extreme concentrations of income and wealth inequality" by increasing taxes on the wealthiest Americans and "taxing liabilities of ultralarge banks to promote financial stability and fund investments" in productivity.

FDII/GILTI deduction regulations: On July 9, the Treasury Department released final regulations (TD 9901) under IRC Section 250, which allows an annual deduction to a domestic corporation for its foreign-derived intangible income (FDII) and global intangible low-taxed income (GILTI) inclusion. The final regulations are scheduled for publication in the Federal Register on July 15. The final regulations retain the basic approach and structure of the proposed regulations published on March 6, 2019 but contain several significant, and mostly taxpayer-favorable, changes. For example, the final regulations:

  • Modify the documentation requirements for establishing foreign use to no longer require taxpayers to obtain specific documentation to establish (i) foreign person status; (ii) foreign use with respect to sales of certain property sold directly to end users; or (iii) the location of certain services provided to consumers
  • Provide that the following are presumed made to a foreign person: (1) foreign retail sales; (2) sales of general property delivered to an address outside the United States; (3) other sales of general property to recipients whose billing address is outside the United States; and (4) sales of intangible property to recipients whose billing address is outside the United States
  • Deem a sale of general property to be for a foreign use if (i) the property is subject to manufacturing, assembly or other processing outside the United States; or (ii) the property is, in specified cases, delivered to an end user (e.g., a foreign retail sale, property delivered to a location outside the United States, or an electronic transfer of digital content outside the United States)
  • Deem a sale of intangible property to be for a foreign use if the end user of the intangible is located outside the United States, including when the intangible is used to provide a service outside the United States
  • Relax certain provisions that apply to limit a deduction for related-party sales that are followed by unrelated-party sales

See EY Tax Alert 2020-9038 for details.

GILTI HTE regs out of OIRA: The Office of Management and Budget Office of Information and Regulatory Affairs (OIRA) has completed its review of Final Rules Regarding the Global Intangible Low-Taxed Income High Tax Exclusion [TCJA] and a related Proposed Rule Under Section 954(b)(4) (Rules for High-Taxed Subpart F Income) and Section 964 (Rules for Determining the Earnings and Profits of a Foreign Corporation) [TCJA] (received June 16 and completed July 6).

POTUS on college/universities tax-exempt status: President Trump tweeted July 10, "Too many Universities and School Systems are about Radical Left Indoctrination, not Education. Therefore, I am telling the Treasury Department to re-examine their Tax-Exempt Status … "

French DST: USTR Robert Lighthizer said regarding digital services taxes (DSTs) during an online event by a London-based think tank July 9, "We're going to announce that we're going to be taking certain sanctions against France, suspending them like they're suspending collection of the taxes right now." The US previously proposed tariffs on French goods before agreeing with France to a cooling-off period as OECD-led negotiations among 137 countries continued to seek to develop a global solution that would avoid unilateral implementation of DSTs.

OECD statistics: The OECD July 8 released new data in the annual Corporate Tax Statistics publication providing aggregated information on the global tax and economic activities of nearly 4,000 multinational enterprise (MNE) groups headquartered in 26 jurisdictions and operating across more than 100 jurisdictions worldwide, calling it "a major output based on the Country-by-Country Reporting requirements for MNEs under the OECD/G20 Base Erosion and Profit Shifting (BEPS) Project." In releasing the publication, OECD said, "Noting the limitations of the data and that these observations could also reflect some commercial considerations, they are indicative of the existence of BEPS behaviour and reinforce the need to continue to address remaining BEPS issues as part of the Inclusive Framework's work on Pillar 2 of the ongoing international efforts to address the tax challenges arising from digitalisation."

EU: The EU said it is committed to working with the OECD to address the issue of digital taxation in draft terms of reference for the July 18 G-20 meeting. "We need to give the highest priority to finding global solutions to address the taxation of the digital economy and the remaining BEPS issues," said text obtained and reported by Tax Notes. "We look forward to ambitious, fair, effective, nondiscriminatory and workable global solutions, and all should redouble efforts towards a consensus-based solution to deliver this goal in 2020." Additionally, European Council President Charles Michel said July 10 he "will propose to introduce a digital levy with the view of introducing it by the end of 2021, based on the Commission proposal."

Deficit: The Congressional Budget Office (CBO) July 8 said the federal budget deficit in June was $863 billion because of "the economic disruption caused by the 2020 coronavirus pandemic and from the federal government's response to it." By comparison, the entire fiscal year 2019 budget deficit was $984 billion.

Sick/family leave: The IRS has issued guidance (Notice 2020-54) addressing the requirement for employers to report the amount of qualified sick leave wages and qualified family leave wages paid to employees under the Family First Act. Form W-2, Box 14, or a separate statement must be used to report these amounts. This reporting requirement will provide self-employed workers who are also employees with the information they need to determine the amount of any sick and family leave equivalent credits that they may claim as self-employed individuals.

OIRA regulations: Still listed as under review by the Office of Management and Budget Office of Information and Regulatory Affairs (OIRA) are:

  • Final Rules Regarding the Business Interest Limitation Under Section 163(j) [TCJA] and Proposed Rules on the Limitation on Deduction for Business Interest Expense [TCJA] (received June 15); and
  • Carried interest proposed rules Under Section 1061 (received June 2).

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


Federal Register Publication

Comment period end

Section 965 transition tax (TD 9846)

Final rules, February 5, 2019


Section 199A pass-through deduction (TD 9847)

Final rules, February 8, 2019


Section 956 inclusions for corporate US shareholders (TD 9859)

Final rules, May 23, 2019


Contributions in exchange for state or local tax credits (TD 9864)

Final rules, June 13, 2019


Section 951A (Global Intangible Low-Taxed Income - GILTI) and Related to Foreign Tax Credits (TD 9866)

Final rules, June 21, 2019


Bonus depreciation (TD 9874)

Final rules, September 24, 2019


Removal of Section 385 Documentation Regulations (TD 9880)

Final rules, November 4, 2019


Ownership Attribution for Purposes of Determining Whether a Person Is Related to a Controlled Foreign Corporation under section 954(d)(3) (TD 9883)

Final rules, November 19, 2019


Section 59A Base Erosion and Anti-Abuse Tax (TD 9885)

Final rules, December 6, 2019


Foreign Tax Credit (TD 9882)

Final rules, December 17, 2019


Investing in Qualified Opportunity Funds (TD 9889)

Final rules, January 13, 2020


Rules Regarding Certain Hybrid Arrangements (TD 9896)

Final rules, April 8, 2020


Treatment of Certain Interests in Corporations as Stock or Indebtedness (TD 9897)

Final rules, May 14, 2020


Guidance Under Section 6033 on Reporting Requirements of Exempt Organizations

Final rules, May 28, 2020


Deduction for Foreign-Derived Intangible Income (FDII) and GILTI

Final rules, to be published July 15, 2020


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

Proposed rules, December 28, 2018

February 26, 2019

Limitation on Deduction for Dividends Received from Certain Foreign Corporations and Amounts Eligible for Section 954 Look-Through Exception (REG-106282-18)

Proposed and temporary regulations, June 18, 2019

September 16, 2019

GILTI regulations regarding gross income that is subject to a high rate of foreign tax (REG-101828-19)

Proposed rules, June 21, 2019

September 19, 2019

Determination of the Section 4968 Excise Tax Applicable to Certain Private Colleges and Universities (REG-106877-18)

Proposed rules, July 3, 2019

October 1, 2019

Guidance on Passive Foreign Investment Companies (REG-105474-18)

Proposed rules, July 11, 2019

September 9, 2019

Revenue recognition under IRC Section 451 (REG-104870-18, REG-104554-18)

Two sets of proposed rules, September 9, 2019

November 8, 2019

Bonus depreciation (REG-106808-19)

Proposed rules, September 24, 2019

November 25, 2019

Ownership attribution under Section 958 Including for purposes of determining status as CFC or US shareholder (REG-104223-18)

Proposed rules, October 2, 2019

December 2, 2019

Additional Rules Regarding Base Erosion and Anti-Abuse Tax (REG-112607-19)

Proposed rules, December 6, 2019

February 4, 2020

Allocation and Apportionment of Deductions and Foreign Taxes, etc. (REG-105495-19)

Proposed rules, December 17, 2019

February 18, 2020

Certain employee remuneration in excess of $1 million under Section 162(m) (REG-122180-18)

Proposed rules, December 20, 2019

February 18, 2020

Guidance Involving Hybrid Arrangements and the Allocation of Deductions Attributable to Certain Disqualified Payments Under Section 951A (Global Intangible Low-Taxed Income) (REG-106013-19)

Proposed rules, April 8, 2020

June 8, 2020

Unrelated Business Taxable Income Separately Computed for Each Trade or Business (REG-106864-18)

Proposed rules, April 24, 2020

June 23, 2020

Denial of Deduction for Certain Fines, Penalties, and Other Amounts (REG-104591-18)

Proposed rules, May 13, 2020

July 13, 2020

Credit for carbon oxide sequestration under section 45Q (REG-112339-19)

Proposed rules, June 2

August 3, 2020

Tax on Excess Tax-Exempt Organization Executive Compensation

Proposed rules, June 11

August 10, 2020

Statutory Limitations on Like-Kind Exchanges

Proposed rules, June 12

August 11, 2020

Qualified Transportation Fringe, Transportation and Commuting Expenses under Section 274

Proposed rules, June 23

August 24, 2020

Consolidated Net Operating Losses

Proposed rules, July 8

August 31, 2020


"This is our moment to imagine and to build a new American economy for our families and for our communities — an economy where every American has the chance to get a fair return for the work they put in, an equal chance to get ahead." — Presumptive Democratic presidential nominee Joe Biden, July 9


Contact Information
For additional information concerning this Alert, please contact:
Michael Mundaca (
Cathy Koch (
Gary Gasper (
Ray Beeman (
Bob Carroll (
James Mackie (
Kurt Ritterpusch (