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September 20, 2020

Americas Tax Policy: This Week in Tax Policy News for September 18

This week (September 21-25)

Congress: The Senate and House are in session and the primary must-do item confronting Congress is a continuing resolution (CR) to extend government funding beyond September 30.

Senate Majority Leader McConnell set up votes on 6 nominations for next week, 3 judicial and 3 to the Equal Employment Opportunity Commission.

Ways & Means hearings: The House Ways and Means Select Revenue Measures Subcommittee will hold a hearing on "Restaurants in America During the COVID-19 Pandemic" on Friday, September 25, at 9:00 A.M.

The Social Security Subcommittee will hold a hearing, "Save Social Security Now," on Thursday, September 24 at 1 P.M.

This Week (September 14-18)

Biden 'Made in America:' Tax policy continues to be a big issue in the Presidential election campaign. Democratic Presidential nominee Joe Biden talked about his Made in America proposals in a CNN primetime town hall September 17: "As president of the United States, I'll have one of the largest fleets. We spend $600 billion a year, federal money, for federal contracts. I'm going to make sure that all those contracts are all products made in America, including the chain that provides for every one of those products. I'm going to do away with the tax break that the president gave people who send jobs abroad. To make sure that if you in fact have a contract, with taxpayers' money, you must use American products, you must buy American products, and you must not be in a position where you're exporting." He said President Trump's policies are "giving a tax break to companies that, in fact, go overseas and then import the product back into the United States of America, even though their headquarters is here … We have been talking about this policy for 100 years. We have never fully done it. We can and must do it now." Biden has announced proposals for a 10% surtax on a US company's overseas production profits from sales back to the US (which is paired with a 'Made in America' Tax Credit), and to double the global intangible low-taxed income (GILTI) rate to 21%, applied per country, while repealing the GILTI relief for foreign profits relating to qualified tangible property. A September 13 Washington Post editorial said the offshoring proposals would add additional "teeth" but also complexity to the US tax system. While it "makes sense to reduce artificial tax advantages in the 2017 tax bill for operating, or parking intellectual property, in tax havens abroad," the "proposed surtax on foreign manufacturing, however, seems to deny the reality of global supply chains … The surtax applies to U.S.-owned call centers or services overseas 'where jobs could have been located in the United States.' Meeting that amorphous standard will" be tough, the editorial said.

Tax contrasts: Biden's campaign released a document September 17 contrasting his tax proposals with the Tax Cuts & Jobs Act and President Trump's calling for a 15% capital gains rate. The document states Biden's commitment to requiring "corporations and the wealthiest Americans to finally pay their fair share;" to not asking "a single person making under $400,000 per year to pay a penny more in taxes;" and to enacting more than a dozen middle class tax cuts. The document also calls for emergency tax relief for middle class families as part of a new COVID-19 response package, and proposes the Child Tax Credit (CTC) expansions of the House-passed HEROES Act — increasing the CTC to $3,000 per child for children ages 6 to 17 and $3,600 for children under 6 and making the CTC fully refundable. Other proposed tax credits listed in the document include those for health care, childcare, elder care, and first-time homebuyers. Tax increases listed include the previously released proposals for:

  • Raising the corporate tax rate to 28%.
  • "Requiring a true minimum tax on ALL foreign earnings of United States companies located overseas so that we do our part to put an end to the global race to the bottom that rewards global tax havens. This will be 21% — TWICE the rate of the Trump offshoring tax rate and will apply to all income."
  • Imposing a tax penalty on corporations that ship jobs overseas in order to sell products back to America.
  • "Imposing a 15% minimum tax on book income so that no corporation gets away with paying no taxes."
  • Raising the top individual income rate back to 39.6%.
  • Asking those making more than $1 million to pay the same rate on investment income that they do on their wages.

Election notes: Presidential candidates were crisscrossing battleground states — Minnesota was a stop for both campaigns September 18 — and there was also a focus on when results would be known.

  • President Trump was in Philadelphia to participate in an ABC News town hall September 15 during which he said, "If Joe Biden ever got in, I think you'd have a depression the likes of which we have never seen in this country. If you look at his policies, where he wants to raise everybody's taxes … "
  • The Washington Post reported, "Investors have a new worry when it comes to the election: That the outcome may remain unknown for weeks. It's a departure from investors' usual handicapping of which candidate would better serve the stock market and broader economy. But the challenges of voting amid the pandemic — including the expectation that millions could rely on mail-in ballots, which President Trump has roundly bashed — are making the possibility Election Day might turn into election weeks or even months more likely."
  • New York City Mayor Michael Bloomberg pledged $100 million to help Biden win in Florida and the Wall Street Journal cited a Bloomberg press release in reporting the "spending, which will primarily go toward digital and television ads in both Spanish and English, will focus in part on communicating with Hispanic voters," as "some surveys have shown Mr. Biden underperforming among Latino voters compared with Hillary Clinton four years ago."
  • The New York Times tied President Trump's standing in battleground states to the fortunes of Senate candidates, saying Biden leads Trump "by wide margins in Arizona, where he was ahead by nine percentage points, and Maine, where he led by 17 points," while the North Carolina race is effectively tied. "In all three states, Democratic Senate candidates were leading Republican incumbents by five percentage points or more," the report said.

Coronavirus relief: Members of Congress left Washington after another week of no measurable progress toward a bipartisan coronavirus relief bill despite calls from rank-and-file Democrats for a deal and suggestions by President Trump that Republicans embrace higher relief amounts. President Trump tweeted September 16: "Democrats are 'heartless'. They don't want to give STIMULUS PAYMENTS to people who desperately need the money, and whose fault it was NOT that the plague came in from China. Go for the much higher numbers, Republicans, it all comes back to the USA anyway (one way or another!)." President Trump later said during a news conference, "Some of the Republicans disagree, but I think I can convince them to go along with that because I like the larger number. I want to see people get money." The comments could be aimed at Senate Republicans, some of whom have advocated frugality in additional coronavirus relief, reflected in a whittling down of previous proposals in a targeted bill put up for an unsuccessful procedural vote September 10. The comments didn't appear to change much in the Senate, though, where top Republicans said the bigger the package, the tougher it will be to pass, and noted there is dwindling time before members are set to leave before the election. Democrats insist on $2.2 trillion, compared to the $1.5 trillion backed by the President. Politico reported the lack of progress cast "further doubt that Congress can muster the political will to adopt another massive economic stimulus measure before the November election," and cited Senator Mike Braun (R-IN) as saying he thinks "not much is going to happen between now and the election." The Washington Post said of House Speaker Nancy Pelosi (D-CA), "Now the California Democrat faces a crucial decision: Does she try to negotiate an agreement with a White House that suddenly seems ready to deal or continue to hold her ground and make Trump, facing his own election woes, swallow the sweeping $2.2 trillion bill she has long demanded?" Pelosi is said to have told Treasury Secretary Steven Mnuchin in a Wednesday call, "Call me when he's at $2.2 trillion." She told her members September 15 that they wouldn't leave before the election without a bipartisan agreement on additional coronavirus relief legislation. As a practical matter, members won't be required to be in Washington beyond October 2; rather, they will be on notice to return if a deal materializes, as was the case during other recesses. Still, the Speaker told members, "We have to stay here until we have a bill."

Disaster relief: Senate Finance Committee Chairman Chuck Grassley (R-IA) and Senator Joni Ernst (R-IA) introduced with Senators Dianne Feinstein (D-CA), Bill Cassidy (R-LA) and John Kennedy (R-LA) the Disaster Tax Relief Act of 2020 (S. 4596), to provide tax relief to the individuals, families and small businesses in Presidentially declared disaster areas, including those impacted by the Iowa derecho, the wildfires in California and Oregon and Hurricanes Laura and Isaias. The bill addresses: early withdrawals from retirement accounts; a tax credit for employee retention during business interruption; suspending deduction limits for charitable contributions; rules for qualified disaster-related personal casualty losses; and allowing low-income workers to use their previous year's income to claim certain tax credits. Ranking Member Ron Wyden (D-OR) has a competing disaster relief bill (S. 4621) that has some overlapping provisions and also increases the state credit ceiling for the Low-Income Housing Tax Credit (LIHTC) for 2021 to provide for additional projects within 2020 disaster areas.

House GOP plan: House Republican leader Kevin McCarthy (R-CA) September 15 debuted a new "Commitment to America" plan focused on GOP plans for the economy — including "extending the $2,000 child tax credit and making permanent Opportunity Zone credits" and "continuing proven pro-growth tax policies that increase take-home pay and encourage innovation" — and criticizing Democratic policy ideas. House Ways and Means Committee Ranking Member Kevin Brady (R-TX) said, "We'll make the GOP tax cuts permanent, because the proven way to rebuild local economies is to let families and businesses keep more of what they work so hard to earn. We'll guarantee moms can keep their $2,000 a child tax credit. We'll make sure Opportunity Zones keep driving hope and investment into America's poorest neighborhoods."

Richmond recommended to Ways & Means: Speaker Pelosi and House Ways and Means Committee Chairman Richard Neal (D-MA) September 16 announced that the House Democratic Steering and Policy Committee recommended to the Democratic Caucus the appointment of Congressman Cedric Richmond (D-LA) to the Ways and Means Committee, which was to be subject to a full vote by the Caucus. Richmond is a former Chairman of the Congressional Black Caucus and is a national co-chairman of the Biden campaign, and would replace the late Rep. John Lewis (D-GA). A former college baseball player, Richmond has been a starting Democratic pitcher in the Congressional Baseball Game; former GOP manager Joe Barton (R-TX) said in 2016, "They have the best player, in my opinion, who's ever played in the game: Cedric Richmond."

Payroll tax deferral: Revisiting President Trump's 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, the Government Accountability Office (GAO) confirmed that IRS Notice 2020-65 was submitted under the Congressional Review Act (CRA) and is automatically treated as a rule. Senate Democratic leader Chuck Schumer (D-NY) and Finance Committee Ranking Member Wyden had called on the GAO September 2 to determine whether the guidance is subject to the CRA, which could eventually compel a Senate vote of disapproval of the action.

State tax: The New York Times reported, "New Jersey officials agreed on Thursday to make the state one of the first to adopt a so-called millionaires tax to alleviate shortfalls caused by the pandemic, intensifying a national debate over whether to increase taxes on the rich to help address widening income gaps." The state may also consider a financial transactions tax, though it remains unclear whether it will be considered as part of the current budget discussions.

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; and a proposed rule on Guidance Related to the Foreign Tax Credit, Clarification of Foreign-Derived Intangible Income [TCJA]. OIRA completed its review of 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


"Taken together, Mr. Biden's plans would raise about $3.8 trillion over 10 years, with 72% of that coming from the top 1% of earners, according to an analysis by the Tax Foundation. Contrary to much Republican rhetoric, Mr. Biden's proposals represent not confiscatory socialism but an effort to undo the least defensible giveaways in the 2017 tax cuts passed by a GOP Congress and signed by President Trump, while preserving parts of that law that broadened the tax base. Last Wednesday, Mr. Biden added additional teeth — and complexity — to his corporate tax plans, targeting the perennial issue of 'offshoring' of U.S. jobs by multinationals." — September 13 Washington Post editorial


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