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August 9, 2020

Americas Tax Policy: This Week in Tax Policy News for August 7

This week (August 10-14)

Congress: Negotiations over the next coronavirus bill may continue at the leadership level, but most members of both chambers have gone home and will receive 24 hours' notice prior to a vote related to coronavirus legislation.

Last week (August 3-7)

Coronavirus (COVID-19): Negotiations over a next coronavirus bill continued between Treasury Secretary Steven Mnuchin, White House Chief of Staff Mark Meadows, House Speaker Nancy Pelosi (D-CA), and Senate Democratic leader Chuck Schumer (D-NY). The Administration and Democratic leaders remained far apart on issues like an extension of expanded unemployment benefits and state and local funding, and whether tax and other proposals can advance will depend on those core issues being resolved. Democrats have rebuffed Administration offers for a narrower bill and Meadows and Mnuchin likewise rejected an offer by Democratic leaders to drop the roughly $3 trillion in relief they are seeking down to $2 trillion. Senate Republican leaders stayed out of the direct talks but were kept apprised of the situation, and as talks failed to make progress Speaker Pelosi and others pointed to the delay in getting started with the negotiations — Senate Republicans released a proposal on July 27 — as a key reason. Aside from Democratic efforts to suspend for 2 years the Tax Cuts & Jobs Act (TCJA) $10,000 State and local tax (SALT) deduction cap, most of the other tax issues in play are relatively bipartisan. The bipartisan 'mobile workforce' proposal from Senators John Thune (R-SD) and Sherrod Brown (D-OH) would create uniform rules for assessing state and local income taxes on employees working at home rather than their normal place of business due to government shutdown orders, while creating a federal preemption over state tax rules relating to employees traveling on business away from their normal taxing location, through 2024. The mobile workforce issue has been controversial on a regional basis, however, with New York lawmakers traditionally opposed. Direct payments and an expansion of the Employee Retention Tax Credit (ERTC) are in both the House and Senate proposals and a payroll tax credit for reopening costs — associated with cleaning, reconfiguring, PPE, etc. — that was proposed by Senate Republicans has bipartisan support. The House bill includes provisions on issues like the Child Tax Credit and Earned Income Tax Credit that are unlikely to be supported by Republicans in this context, and Speaker Pelosi said this week Democrats want to undo the CARES Act 'excess business losses' NOL relief to non-corporate taxpayers but probably can't in this package. The statement came during a PBS interview when, in response to Republican opposition to extending the unemployment add-on at $600, she again invoked the TCJA as an example of when Republicans were willing to spend without concern for the deficit. Asked whether rolling back TCJA provisions is part of the current legislative effort, Speaker Pelosi said no, but looking forward, "when we address the issue of taxation in the country, we will do that in a way that is bipartisan, has sustainability, fairness and transparency so the American people can see what is happening."

Payroll tax EO: The President said August 6 he may move forward with executive orders on issues like unemployment benefits, preventing evictions, and suspending payroll tax collections. "They're being drawn now," President Trump said of the orders. "We'll see what happens." Following another meeting without a deal August 7, the President tweeted: "Pelosi and Schumer only interested in Bailout Money for poorly run Democrat cities and states. Nothing to do with China Virus! Want one trillion dollars. No interest. We are going a different way!" Earlier in the week, he asserted that he can suspend the collection of payroll taxes through an executive order, "So we'll be talking about that," confirming reports that executive action to achieve a payroll tax cut pushed strongly by conservatives is being considered. The President is seen having the authority to delay collections in the case of disaster but there are doubts that such an approach could guarantee that the money would be passed onto employees or that the taxes would ultimately be forgiven, according to reports from CNBC and elsewhere. The Wall Street Journal (WSJ) cited Speaker Pelosi as expressing doubt over the President's authority to act by executive order on the issues in question. "The one thing the president can do is to extend the moratorium and that would be a good thing, if there is money to go with it," she said on providing assistance to landlords to cover missed rent. The Administration is reportedly considering using money unspent from the CARES Act to pay for unemployment benefits.

SALT cap: The WSJ August 5 reported on Democratic efforts to suspend for two years the SALT deduction cap in the next coronavirus bill, which "shows just how important the deduction is to a party that counts upper-middle-class residents of urban areas as a core part of its base." The House approved a two-year suspension, which would cost $137 billion, in December mostly along party lines — 16 Democrats were opposed, and five Republicans were in favor. Senator Schumer has kept the provision in the coronavirus talks but hasn't said he would block a bill that omits it. The issue is being looked at through the lens of the coronavirus pandemic, with state budgets strained and relocating to lower-tax states becoming more appealing as remote work is more common.

Sanders bill: Senator Bernie Sanders (I-VT) is reviving the wealth tax debate that seemed to fall away with the selection of Joe Biden as the presumptive Democratic presidential candidate, as Biden appears poised to take more of a loophole-closing approach to increasing taxes. Senators Sanders, Ed Markey (D-MA), and Kirsten Gillibrand (D-NY) August 6 introduced a bill (S. 4490) to impose a 60% tax on "the $731 billion in wealth accumulated by 467 billionaires" from March 18 until August 5 and use the revenue to cover all necessary healthcare expenses of the uninsured and underinsured, including prescription drugs, for one year. "At a time of enormous economic pain and suffering, we have a fundamental choice to make. We can continue to allow the very rich to get much richer while everyone else gets poorer and poorer. Or we can tax the winnings a handful of billionaires made during the pandemic to improve the health and well-being of tens of millions of Americans," Senator Sanders said.

SALT workaround regulations: On August 7, IRS released final regulations (TD 9907) on the Treatment of Payments to Charitable Entities in Return for Consideration, which address tax planning strategies to avoid or mitigate the effects of the $10,000 SALT deduction cap, including relying on State and local tax credit programs under which states provide tax credits in return for contributions by taxpayers to entities.

Regulations watch: Final Base Erosion and Anti-Abuse Tax (BEAT) regulations are now under review by the Office of Management and Budget Office of Information and Regulatory Affairs (OIRA). Still under OIRA review area 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 Sections 245A and 951A.

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


Guidance Under Sections 951A and 954 Regarding Income Subject to a High Rate of Foreign Tax (TD 9902)

Final rules, July 23, 2020


Limitation on Deduction for Business Interest Expense (TD 9905)

Final rules released July 28


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

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, 2020

August 3, 2020

Tax on Excess Tax-Exempt Organization Executive Compensation

Proposed rules, June 11, 2020

August 10, 2020

Statutory Limitations on Like-Kind Exchanges

Proposed rules, June 12, 2020

August 11, 2020

Qualified Transportation Fringe, Transportation and Commuting Expenses under Section 274

Proposed rules, June 23, 2020

August 24, 2020

Consolidated Net Operating Losses

Proposed rules, July 8, 2020

August 31, 2020

Guidance Under Section 954(b)(4) Regarding Income Subject to a High Rate of Foreign Tax (REG-127732-19)

Proposed rules, July 23, 2020

September 21, 2020

Limitation on Deduction for Business Interest Expense (REG-107911-18)

Proposed rules released July 28

60 days after date of filing for public

inspection with the Federal Register

Carried interest (REG-107213-18)

Proposed rules set to be published August 14

60 days after August 14


"Pushing the pause button meant seeing how what we have already done is working. This is not play money." - Senate Majority Leader Mitch McConnell (R-KY) on Republican reluctance to act sooner on a next coronavirus bill, as reported by the New York Times


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