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July 19, 2020

Americas Tax Policy: This Week in Tax Policy News for July 17

This week (July 20-24)

Congress: The Senate is back in session and the House may hold votes after conducting business in committees the past two weeks.

Finance nominations hearing: On Tuesday, July 21 (at 10 a.m.), the Senate Finance Committee holds a hearing on the nominations of the deputy USTR and two Tax Court judges.

Ways & Means supply chain hearing: On Thursday, July 23 (at 2 p.m.), the House Ways and Means Committee holds a hearing, "Trade, Manufacturing, And Critical Supply Chains: Lessons From COVID-19."

Last week (July 13-17)

Coronavirus (COVID-19): The Administration and Congress are set to begin negotiating another coronavirus response bill next week, with Treasury Secretary Steven Mnuchin and White House Chief of Staff Mark Meadows expected to be on Capitol Hill for talks and Senate Majority Leader Mitch McConnell (R-KY) preparing to outline a package. Republican senators are set to be briefed on the plan during their Tuesday policy lunch July 21, after which talks are expected to begin in earnest. There are many different proposals put forward for inclusion, some common priorities but many differences between Republicans and Democrats, and not a lot of time to reach a deal. Pressures for lawmakers to act include the expiration of expanded unemployment benefits at the end of this month and the impending August Congressional recess, which House Speaker Nancy Pelosi (D-CA) said July 15 she would cancel if there is no deal on more relief: "We can't leave the House without it. We cannot leave Congress without it." She noted that the $3 trillion HEROES Act was approved by the House more than two months ago and has said the $1 trillion in relief under the package targeted by Republicans is not enough. Speaker Pelosi has drawn red lines over continued expanded unemployment benefits and direct payments, Senator McConnell has said "no bill will pass the Senate without liability protection for everyone related to the coronavirus," and President Trump has set a payroll tax cut as a must-have.

Deficit concerns: Some Republicans are wary of providing additional virus-related funding due to deficit concerns, while Speaker Pelosi warned July 13 that without additional investments "we're going to pay a big price" in terms of the economy. The Wall Street Journalreported on the 12-month budget deficit headed toward $3 trillion, saying the "gap could widen even further" with the enactment of a next relief bill and "unemployment and business shutdowns have pushed down tax revenue while also boosting spending on safety net measures." The Congressional Budget Office said in April the FY2020 budget deficit is projected to be $3.7 trillion. A Washington Post story that focused on expiring unemployment benefits noted that the White House and congressional Democrats are "far apart on the terms of any renewal" and cited the deficit, at $864 billion just for June, as weighing on the impending negotiations.

Specific proposals: With regard to specific tax proposals, Bloomberg Tax reported July 17 that Senator McConnell's proposal may include "tweaks to the employee retention tax credit, to make it easier to access and possibly to allow employers to claim the credit for employees who still are able to work but can't put in as many hours because of pandemic-related family reasons including child care." Law360 July 17 reported Senate Finance Committee Chairman Chuck Grassley (R-IA) as saying the Lankford-Shaheen proposal (S. 4032) to increase the CARES Act $300 charitable deduction, regardless of whether taxpayers itemize their deductions, to 1/3 of the standard deduction up to $4,000 for individuals and $8,000 for married couples for the rest of 2020 is a potential component of the Senate GOP package. "I think it's getting some legs," he said. Rep. Tom Rice (R-SC) July 16 proposed a Healthy Workplace Tax Credit, a refundable tax credit against payroll taxes for 50% of the costs incurred by the business for COVID-19 testing, personal protection equipment (PPE), disinfecting, extra cleaning, and reconfiguring workspaces, limited to $1,000 per employee for a business's first 500 employees, $750 per employee for the next 500 employees, and $500 for each employee thereafter. Politico July 13 reported on efforts to get an acceleration of general business credits in the next package, with one challenge being the cost of such a proposal in the context of the $1 trillion target that Republicans have set.

Biden plans: In Wilmington, DE July 14, presumptive Democratic presidential nominee Joe Biden outlined a $2 trillion plan to "create millions of high-quality, union jobs by building a modern infrastructure and a clean energy future," addressing areas like energy retrofitting for lighting and cash rebates and low-cost financing to upgrade energy inefficient appliances and windows and purchase electric vehicles. Campaign materials said Biden intends to "reform and extend the tax incentives we know generate energy efficiency and clean energy jobs," as well as "develop innovative financing mechanisms that leverage private sector dollars to maximize investment in the clean energy revolution." The materials also said, "Biden will double down on research investments and tax incentives for technology that captures carbon and then permanently sequesters or utilizes that captured carbon." Politico reported campaign aides as saying the plan would be paid for in part with tax increases on corporations and the "wealthiest Americans" though some may be treated as stimulus spending. The Trump campaign criticized the prospect of tax increases.

Neal on education tweet: On July 15, House Ways & Means Committee Chairman Richard Neal (D-MA) called on both the Treasury Inspector General for Tax Administration (TIGTA) and Treasury's Office of the Inspector General (OIG) to conduct oversight of Treasury's response to President Trump's tweet asking the Department to examine the tax-exempt status of certain universities and school systems. The President tweeted on 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 … and/or Funding, which will be taken away if this Propaganda or Act Against Public Policy continues. Our children must be Educated, not Indoctrinated!"

Wealth tax: On the topic of tax increases being part of the economic response to the coronavirus, either sooner or later, the New York Times reported that Representative Alexandria Ocasio-Cortez (D-NY) is part of a campaign to push Gov. Andrew Cuomo (D) to "tax billionaires who live in New York State and use the money to assist people hurt by the pandemic-fueled economic crisis." The story said Gov. Cuomo "has argued that taxes that target high earners could drive them out of the state."

Global tax: Politico July 13 reported an official as saying the European Commission is ready to wait for an OECD global tax solution that would avoid unilateral implementation of DSTs before rolling out its own plans and accepts that a global deal might not happen in 2020. This is contrary to the Commission's "previous plans to propose an EU digital tax if the OECD fails to agree on a deal by end-2020." Tax Notes reported Pascal Saint-Amans, director of the OECD's Centre for Tax Policy and Administration, as saying during a July 13 European Parliament Committee on Economic and Monetary Affairs hearing that work on global tax reform has advanced to the point that blueprints may be ready by October, setting the stage for agreement after the U.S. election, possibly in 2021, but EU member states should not assume that the U.S. position on the issue would change under a Democratic administration.

Tax-exempt hospitals: On July 14, the IRS released Notice 2020-56, extending until December 31 the deadline for tax-exempt hospitals to conduct a Community Health Needs Assessments (CHNA) and adopt an implementation strategy to meet those needs. The IRS announced the extension "because of the burdens the COVID-19 pandemic has placed on hospitals."

PTIN fee: The IRS July 15 issued final regulations (TD 9903) that reduce the user fee amount to apply for or renew a preparer tax identification number (PTIN), effective August 17, 2020.

Interest deduction rules out of OIRA: The Office of Management and Budget Office of Information and Regulatory Affairs (OIRA) completed its review of 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].

Alert on FDII/GILTI deduction: EY has published a Tax Alert on final regulations on the deduction allowed to a domestic corporation for its foreign-derived intangible income (FDII) and global intangible low-taxed income (GILTI).

OIRA regulations: Newly posted as under review by OIRA are a Final Rule on Limitation on Deduction for Dividends Received From Certain Foreign Corporations and Amounts Eligible for Section 954 Look-Through Exception [TCJA] and a Proposed Rule Coordinating Application of Certain Regulations Under IRC Sections 245A and 951A [TCJA]. Still listed as under review by are carried interest proposed rules under IRC Section 1061.

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 (TD 9898)

Final rules, May 28, 2020


Deduction for Foreign-Derived Intangible Income (FDII) and GILTI (TD 9901)

Final rules, 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


"Our workers and small businesses through no fault of their own were forced to shut down and stay home in order to slow the spread of COVID-19 while we expanded hospital capacity, testing, and explored potential treatments. We've made progress and now we need to reopen responsibly, which requires careful planning by workers and employers alike to keep the workplace, and customers, safe. This means main street businesses may need to reconfigure their layouts to ensure proper social distancing, or to provide protective equipment to their employees who want to return to work. And it means government should make it as easy as possible to handle these unexpected costs — instead of raising taxes or adding new complicated policies that make it harder for our economy to thrive. I am a tax attorney; I am also a survivor of coronavirus. I think it's vital that every American has what they need to work and provide for their family while taking reasonable measures to stay healthy." — Rep. Tom Rice (R-SC), July 16 Op-Ed: A Tax Credit for Healthy Workplaces


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