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September 13, 2020

Americas Tax Policy: This Week in Tax Policy News for September 11

This week (September 14-18)

Congress: The Senate and House are in session and the primary must-do item confronting Congress is the extension of government funding beyond September 30, which will likely be done by continuing resolution (CR). Coronavirus relief/stimulus legislation is being kept separate from the expiration of government funding September 30, as Treasury Secretary Mnuchin and House Speaker Pelosi have agreed to not attach coronavirus relief items to a continuing resolution (CR). Secretary Mnuchin said during a Fox Business interview that aired September 6, "The Speaker and I have agreed, we don't want to see a government shutdown. So, we've agreed that we are going to do a clean CR. We'll do this separately from the CARES Act negotiations." The duration of the CR is not inconsequential. Mnuchin said he expects it to go through early December, while press reports have cited some Democrats as wanting the CR to last into early 2021.

Senate Majority Leader McConnell set up votes on 8 District Court Judge nominations for next week.

Last week (September 7-11)

Biden 'day one' corporate tax hike: Tax policy continues to be a big issue in the election. Democratic Presidential nominee Joe Biden said in a CNN interview that aired September 10, "I'd make the changes on the corporate taxes on day one. And the reason I'd make the changes on corporate taxes, it can raise $1.3 trillion, if they just start paying at 28%, instead of 21%." Biden dismissed the prospect of waiting until unemployment figures and the economy improve, saying companies are spending money on stock buybacks, not new hires. "They bought back over $1 trillion of their own stock, raising the price of the stock," he said. "That's it, not hiring anybody else, not expanding the business, not investing in new enterprises." Biden has proposed tax increases to pay for a variety of policy priorities, and while exactly how the 'day one' intention would play out is unclear, it suggests action early in his first term if he wins the presidency and Democrats take control of the Senate, and it will likely require utilizing the budget reconciliation process because the party will almost certainly not hold 60 Senate votes. "The idea that we take that money and put it into new investments in manufacturing, in education, in health care, I mean, these are things that matter to middle-class families," he said. Biden repeated that "no one making under $400,000 a year will pay a single increase in taxes" and said he had a list of tax changes to make sure that "everybody pays their fair share."

During a campaign trip to Michigan September 9, Biden proposed (without providing further details):

  • a 10% surtax on a US company's overseas production profits from sales back to the US;
  • a 10% advanceable 'Made in America' Tax Credit for investments like revitalizing facilities;
  • doubling the GILTI tax rate to 21%, applied per country, while repealing the GILTI relief for foreign profits relating to qualified tangible property; and
  • unspecified inversion curbs. (The Wall Street Journal noted, "Because many of these changes affect only U.S.-based companies, there would be a new premium on having a foreign headquarters.")

Biden described the surtax and credit during the CNN interview:

  • "[I]f you're going to offshore jobs with federal contracts, offshore jobs, you're going to get a 10% penalty for those jobs you send overseas, because what happens? You send it overseas, because there's a supplier that makes the product cheaper. You bring it back. You get a benefit, a tax break for it. And where does it go? It doesn't go to the employees, by the way, even when it occurs. It goes into the pockets of the CEOs and/or to buy back their stock, to raise the value of their stock."
  • "[I]f you invest in America, you refurbish a plant, you build a new plant here, we will provide you a 10% advance on the cost of doing that, encourage people to come back and build here in America."

Payroll tax deferral: President Trump continued to promote his August 8 memorandum allowing employers to defer the employee portion of payroll taxes from September 1 through the end of the year for those with under roughly $104,000 in annual income. He tweeted September 10, "When we win I, as your President, will totally forgive ALL deferred payroll taxes with money from the General Fund. I will ALWAYS protect Seniors and your Social Security! Sleepy Joe Biden will do the opposite, he will raise your taxes and DESTROY our Country!" House Ways & Means Committee Ranking Member Kevin Brady (R-TX) September 11 introduced the "Support for Workers, Families, and Social Security Act" to create a temporary payroll tax holiday from September 1 through December 31, 2020 for all workers during the period of the deferral and a General Revenue transfer to offset reduced tax revenue. The Washington Post reported that the White House is considering additional executive action addressing the airline industry and unemployment benefits as well as "more money for school vouchers and changing President Trump's recent payroll tax changes to make it more effective."

EY has published survey results relating to the following question: "Are employers participating in the employee Social Security tax deferral program?" Close to 50% of survey respondents "stated they will continue to withhold the Social Security tax from employees' wages and close to 50% indicated they are waiting on more IRS guidance before deciding. A slim margin, just 2%, are planning on making the deferral available to employees, but not by the September 1 effective date."

Election: The Presidential race is focused on the rust-belt battleground states of Pennsylvania, Wisconsin, and Michigan, and Biden's newly detailed Made in America plan is meant to appeal to voters who may feel their economic fortunes have not improved under President Trump. The Washington Post reported, "The president won Michigan by three-tenths of a percentage point in 2016, part of a shocking Upper Midwestern sweep that propelled him into the White House. Four years later, Michigan, along with Wisconsin and Pennsylvania, where both candidates will be on Friday, have captured the attention of the two campaigns." The article said "while Trump promised to bring back manufacturing jobs and crack down on the practices of some multinational companies," the number of manufacturing jobs is below past levels, "critics have argued his tax law encouraged firms to move abroad," and trade actions hurt farmers. A Wall Street Journal story this week observed, as in 2016, "the president is again traveling to these blue-collar counties to appeal to workers in manufacturing, energy production and other blue-collar jobs," while Biden is "trying to build on Democratic margins in recent elections in and around Philadelphia and in the state's smaller cities, pointing to trade wars under the Trump administration and the job losses during the pandemic to make the case that Mr. Trump's promises to blue-collar workers have gone unfulfilled." CNBC polls released this week show Biden ahead of Trump by 6 percentage points in Michigan and Wisconsin, 4 points in Pennsylvania, and leading in other battlegrounds (Florida, Arizona, North Carolina.) An NBC News/Marist poll released this week showed Trump and Biden tied at 48% in Florida.

Coronavirus relief: Prospects for near-term action on additional coronavirus relief/stimulus legislation remain uncertain. The Senate September 10 failed to advance a "targeted" Republican bill providing economic stimulus and relief, including tax provisions to further increase the above-the-line charitable deduction for 2020 and provide two years of tax credits for contributions to organizations granting scholarships towards private schooling. The vote was 52-47 along party lines except for Senator Rand Paul (R-KY), who voted no, to block further consideration of the legislation. Senator Kamala Harris (D-CA) was campaigning in Florida and didn't vote. Senate Majority Leader Mitch McConnell (R-KY) advocated debate on a bill that includes necessary relief, while Senate Minority Leader Chuck Schumer (D-NY) continued to balk at the omission of housing and food assistance and state and local funding. The Senate GOP effort was not expected to materially affect bipartisan negotiations mostly between the Administration and House Democrats that have not budged in the past month. Schumer and House Speaker Nancy Pelosi (D-CA) released a statement saying "this emaciated bill is only intended to help vulnerable Republican Senators by giving them a 'check the box' vote to maintain the appearance that they're not held hostage by their extreme right-wing that doesn't want to spend a nickel to help people." Democrats insist on a coronavirus relief/stimulus package of at least $2.2 trillion and the Administration has signaled support for up to $1.5 trillion in relief.

Speaker Pelosi continued to face resistance from her ranks over the lack of progress in the negotiations that threatens to send members home to campaign for re-election empty-handed in terms of further relief, and told members on a call, "We don't want to go home without a bill, but don't be a cheap date," and, "When you are in a negotiation, the last place to get weak knees is at the end," Politico reported. Senator Schumer said of Republicans, "We have to wait for them to come to us, if they don't come to us — we will not get something your caucus can support," and House Majority Leader Steny Hoyer (D-MD) raised the idea of passing another coronavirus relief bill in the House. As counterpoint to Schumer, White House Chief of Staff Mark Meadows said on Fox Business September 8, "I'm optimistic in the next two weeks that the pressure and the voice of the American people will start to have an impact on members of Congress." Budget Committee Chairman John Yarmuth (R-KY) is among members who want to pursue a smaller bill to counter perceptions that Congress "can't come together when people are suffering and they can't come together on a reasonable package." Senator Marco Rubio (R-FL) tweeted September 10, "Congress isn't going to pass more #Covid_19 relief before the election[.] And the biggest reason why is Speaker Pelosi & Senator Schumer believe Trump & the GOP will be blamed for the pain doing nothing will cause & that will help them win the White House & Senate in November[.]" President Trump dismissed suggestions that his participation in the talks could make a difference, saying during his Labor Day news conference, "I don't have to meet them in order to be turned down" and "they don't want to make a deal because they think that if the country does as badly as possible, even though a lot of people are being hurt, that's good for the Democrats."

Hearing on COVID relief inaction: The September 11 House Ways & Means Select Revenue Measures Subcommittee hearing, "Consequences of Inaction on COVID Tax Legislation," included Democratic and Republican members blaming one another for the impasse over a next round of coronavirus relief, which is mostly attributable to broader issues like the overall size of the package, unemployment benefits, state and local funding. Food and rental assistance, which are called for under the House-passed HEROES Act but not Senate Republican proposals and are part of the broader stalemate, were discussed, in addition to provisions like full refundability of and increased amounts for the Child Tax Credit and Earned Income Tax Credit that Democratic leaders acknowledge are unlikely to make it into the next bipartisan coronavirus relief bill. In an opening statement, Chairman Mike Thompson (D-CA) said, "29 million adults sometimes or often didn't have enough to eat over the past week. And one in three kids did not get enough to eat because the household couldn't afford it." Under questioning from Rep. Jimmy Panetta (D-CA), "Top Chef" judge and restaurateur Tom Colicchio said additional direct payments could allow some to get out of the lines at food banks and into supermarkets to spend money and stimulate the economy.

Regulations watch: Under review by the Office of Management and Budget Office of Information and Regulatory Affairs (OIRA) are: a final rule on Allocation & Apportionment of Deductions & Foreign Taxes, Foreign Tax Redeterminations, FTC Disallowance Under 965(g), Consolidated Groups, Hybrid Arrangements & Certain Payments under 951A; a proposed rule on Guidance Related to the Foreign Tax Credit, Clarification of Foreign-Derived Intangible Income [TCJA]; and Revisions to the Section 168(k) Final Regulations [TCJA] (bonus depreciation).

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, September 14, 2020


Limitation on Deduction for Dividends Received from Certain Foreign Corporations and

Amounts Eligible for Section 954 Look-Through Exception (TD 9909)

Final rules, August 27, 2020


Additional Rules Regarding Base Erosion and Anti-Abuse Tax (TD 9910)

Final rules released September 1


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

Proposed rules, December 28, 2018

February 26, 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

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, September 14, 2020

November 2, 2020

Carried interest (REG-107213-18)

Proposed rules, August 14, 2020

October 5, 2020

Coordination of Extraordinary Disposition and Disqualified Basis Rules (REG-124737-19)

Proposed rules, August 27, 2020

October 26, 2020


"If your big corporate strategy is to boost your shareholders' profits and your CEO's bonuses by moving jobs out of America, we're going to make sure you not only pay full U.S. taxes on those profits, we're going to add an extra 10% Offshoring Penalty Surtax to your bill. And no more deductions or writing off expenses for the cost of sending jobs overseas that could be done here at home by qualified American workers. I'm not looking to punish American businesses but there's a better way. Make it in Michigan. Make it in America." - Democratic Presidential nominee Joe Biden in Michigan September 9


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