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July 21, 2020
2020-1850

What to expect in Washington (July 21)

President Trump and Treasury Secretary Steven Mnuchin met with Senate Majority Leader Mitch McConnell (R-KY) and House Republican leader Kevin McCarthy (R-CA) on a next coronavirus bill yesterday (July 20). Secretary Mnuchin said the package will address concerns that expanded unemployment benefits are a disincentive to return to work and include tax credits "that incentivize businesses to bring people back to work" and for personal protective equipment (PPE) and safe work environments. He also said, "We're going to have big incentives, money to the states for education, for schools that can open safely and do education." Both he and Rep. McCarthy said the emerging Republican proposal would include the payroll tax cut sought by the President, and press reports said deferring the taxes is also an option. McCarthy said the plan would call for more direct payments.

In his remarks following the meeting, President Trump said they had made a lot of progress and, on one of his key proposals, "We're discussing probably a total of 10 different elements. But payroll tax cut is a very important one … I think, hopefully, we'll get there, but we're talking about a lot of things, not just the payroll tax cut." The President also indicated the intention to resume coronavirus briefings, which some Republican lawmakers have urged, and said he is fairly certain drug companies are "going to have the vaccine, they're going to have therapeutics, and it's going to start taking place very shortly."

Senator McConnell is set to brief Republican senators during today's regular policy lunch, saying yesterday he would be "socializing what we've been discussing with the administration over the last two weeks with our members." He emphasized the need for liability protections, said "kids in school, jobs, and healthcare will be the theme of the proposal," and "you can't pass the bill in the Senate without the Democrats, and we'll begin to talk with them as well." Bloomberg reported Senator McConnell as saying that Republicans will present a plan as a "starting point" for talks with Democrats "hopefully as early as this week."

Also today, Treasury Secretary Steven Mnuchin and White House Chief of Staff Mark Meadows will meet with House Speaker Nancy Pelosi (D-CA) and Senate Democratic leader Chuck Schumer (D-NY). On the Senate floor yesterday, Senator Schumer said "it appears that the Republican proposal is unlikely to meet the moment" and called for bipartisanship to reach a deal with enhanced unemployment benefits set to expire at the end of the month.

The House today will complete consideration of the William M. (Mac) Thornberry National Defense Authorization Act for Fiscal Year 2021 (H.R. 6395).

Election

Presumptive Democratic presidential nominee Joe Biden is set to announce a plan to increase access to childcare, provide free preschool, and boost access to care for older Americans and those with disabilities. "Biden's campaign puts the price tag at $775 billion over 10 years and says it would be fully covered by rolling back tax breaks for real estate investors with incomes over $400,000 and taking steps to increase tax compliance for high-income earners," Politico reported. Bloomberg reported a campaign official as saying Biden would target like-kind exchanges and seek to "prevent investors from using real estate losses to lower their income tax bills." The like-kind issue has been raised by other Democrats, including former Treasury Secretary Larry Summers, who in a 2019 op-ed on alternatives to a wealth tax called for addressing IRC Section 1031 exchanges, which he said "allow real estate investors to sell property, take a profit, and defer paying taxes on those profits so long as they reinvest them in similar investments."

Tax

Yesterday, Treasury and the IRS issued final regulations permitting a taxpayer to elect to exclude from its inclusion of global intangible low-taxed income (GILTI) items of income subject to a high effective rate of foreign tax, along with proposed regulations that would conform the subpart F income "high-tax exception" to the finalized GILTI high-tax exclusion. The final regulations adopt the threshold rate of foreign tax of 18.9% to determine whether an item is subject to "high tax" and the consistency requirement that the election applies to all "related" CFCs. See EY Breaking Tax News.

The Office of Management and Budget Office of Information and Regulatory Affairs (OIRA) has completed its review of carried interest proposed rules under IRC Section 1061.

A CNBC article discusses how repeal of the Affordable Care Act could mean a tax cut for wealthy individuals.

Health

A Kaiser Health News article discusses the question of who pays for coronavirus testing.

The global EY Tax COVID-19 Response Tracker has been updated through July 9.

EY Webcasts this week include:

  • Today, July 21, US corporate income tax compliance,1:00 p.m. ET. Register
  • Friday, July 24, Tax in the time of COVID-19, 12:00 p.m. ET. Registration information is forthcoming.

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Contact Information
For additional information concerning this Alert, please contact:
 
Washington Council Ernst & Young
   • Ray Beeman (ray.beeman@ey.com)
   • Gary Gasper (gary.gasper@ey.com)
   • Heather Meade (heather.meade@ey.com)
   • Kurt Ritterpusch (kurt.ritterpusch@ey.com)