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October 18, 2020

Americas Tax Policy: This Week in Tax Policy News for October 16

This Week (October 19-23)

Congress: The Senate is scheduled to return to session October 19. Senate Majority Leader Mitch McConnell (R-KY) said the targeted relief bill with new funding for the Paycheck Protection Program (PPP) that is to be brought up for a vote upon the Senate's return would cost around $500 billion, would also address school funding and liability protection, and will resemble the targeted bill blocked in the Senate by Democrats September 10. "We're going to try one more time," Senator McConnell said.

Last Week (October 12-16)

Campaign tax plans: President Trump added to his list of tax plans, saying on Fox Business October 15 that in a second term he'd lower the corporate tax rate further from 21% to 20% and cut income taxes for the middle class. "We're talking about income taxes for the middle-income people. May bring down the 21% down to 20, [an] even number, but the big tax for me is going to be the middle," he said. By contrast, Democratic presidential nominee and former VP "Biden wants to increase your taxes, including the middle class, and he wants to get rid of the tax cuts that we've given to the middle class … They're talking about quadrupling taxes." In an October 15 NBC town hall, President Trump was asked about concerns over corporations paying their fair share of tax:

  • "Our corporate taxes were the highest in the world and now they're among the lower taxes. They're not the lowest but they're among the lowest. And what that means is jobs, but, also, we're doing a very big, and we've done a very big middle-income tax package. So, if we get in, we're going to do the middle-income tax package but it's a great question. And if he comes along and raises rates all those companies that are coming in they will leave the U.S. so fast your head will spin. We can't let that happen."

In an October 15 ABC town hall, Democratic nominee Biden clarified his intentions regarding the Tax Cuts & Jobs Act (TCJA):

  • "When I said the Trump tax cuts, about $1.3 trillion of the $2 trillion in his tax cuts went to the top .1 of 1%. That's what I'm talking about eliminating, not all the tax cuts that are out there … we reduced the corporate tax rate from 35% and Democrats and Republicans who were in office thought it should come down to 28%. He reduced it to 21% … If you raise the corporate taxes back to 28%, which is a fair tax, you'd raise [$1.3 trillion] by that one act."
  • "So you could raise a lot of money to be able to invest in things that can make your life easier, make you change your standard of living by making sure you have affordable healthcare, by making sure you're in a situation where you're able to send your kid to school, and if you have a student debt, you can deal with it. Making sure that your home, that you can pay your mortgage."
  • On whether it's wise to raise taxes while the economy is challenged: "Absolutely … when you allow people to get back in the game and have a job, everything moves … we're going to invest a great deal of that money into infrastructure."
  • So, no delay on tax increases? "Well, I've got to get the votes."

Coronavirus relief: On coronavirus relief and stimulus, Treasury Secretary Steven Mnuchin agreed to House Speaker Nancy Pelosi's (D-CA) language for a national strategic testing plan, Fox Business reported, but differences remain, along with the question of Senate GOP support for any deal. After the two talked October 15, a Pelosi spokesman tweeted in part that, "The Speaker reminded the Secretary that the President has recently and repeatedly urged an agreement, and indicated his willingness to 'go big or go home'" and "raised Leader McConnell's comments today about not being willing to put a comprehensive package on the Senate floor. The Secretary indicated that the President would weigh in with Leader McConnell should an agreement be reached." In an October 13 Democratic letter, Ways & Means Chairman Richard Neal (D-MA) suggested tax issues were still part of the impasse, as the Administration won't back expansions of the Child Tax Credit and the Earned Income Tax Credit "while continuing tax benefits for some of the wealthiest in America," which may refer to CARES Act excess business loss and NOL provisions.

President Trump predicted during the NBC News town hall that Republicans would accept any bipartisan deal, but said he hadn't yet leaned on them to do so because Democrats have stood in the way of an agreement: "I haven't asked them to because I can't get through Nancy Pelosi." He tweeted October 15, "Pelosi is holding up STIMULUS, not the Republicans!" The President has at several points urged lawmakers to "go big" on a relief/stimulus package and said that he would be willing to agree to a larger dollar figure than the Administration's latest $1.8 trillion offer. Senate Majority Leader Mitch McConnell (R-KY), who plans a vote next week on a targeted $500 billion package, said in Kentucky October 15, "I think we need another rescue package. If we don't get it before the election, we'll get it after," Reuters reported. He said, however, that President Trump is talking about "a much larger amount (for coronavirus relief) than I can sell to my members" in the Senate. The Washington Post reported McConnell as nonetheless saying "we're in discussions with the secretary of the Treasury and the speaker about a higher amount," but, "That's not what I'm going to put on the floor."

BEPS 2.0: The OECD Inclusive Framework on BEPS October 12 published "blueprints" responding to tax challenges arising from the digitalization of the economy — on Pillar One, dealing with the reallocation of taxing rights in part through a formulary approach, and Pillar Two, introducing a model global minimum tax and backstops — and said work will continue into the middle of 2021. For the first time in 11 months, the OECD also requested stakeholder comments on the two initiatives, opening a public consultation with comments due by December 14 (to OECD officials repeated earlier comments that countries will increasingly view as good sources of revenue digital companies that have thrived during the pandemic. They also noted the pandemic as one reason the OECD has missed its deadline of completing the project by the end of 2020, saying the pandemic has distracted officials from the project and prevented the type of sideline conversations between officials that can facilitate agreement. A consultation document stated that "there are a number of open issues on key features of the solutions that can only be resolved through political decisions and discussions are ongoing within the membership of the Inclusive Framework to resolve these pending issues." Linked is an EY Alert, "OECD's Inclusive Framework releases BEPS 2.0 documents and agrees to continue work with target of conclusion by mid-2021."

Impact of the election: Of great interest regarding the BEPS 2.0 project is how it will proceed based on the result of the US presidential election. The current Administration this summer urged a pause in the OECD negotiations to develop a new regime for taxing local profits of global companies under Pillar One, while it endorsed and urged the work on Pillar Two to continue. Angel Gurría, OECD Secretary-General, said October 12 that regardless of the results of the November 3 election, the process will be able to move forward. He said the United States has been working with OECD officials and added technical comments and expertise to the work and are part of what was being presented. Politico Morning Tax considered how Biden would approach the OECD BEPS 2.0 project if he wins the presidency, noting: "Experts watching closely also believe that Biden's ideas for the 2017 tax law's levy on Global Low-Taxed Intangible Income — including hiking the rate and using a country-by-country basis — could mesh with how the OECD is hashing out a global minimum tax."

On a related note, Politico Playbook continued the speculation over who could serve in a Biden cabinet should he win, suggesting that Lael Brainard, a Fed governor and former Obama Treasury Undersecretary for International Affairs, could be Treasury Secretary.

French DST: On the heels of the OECD's announcement, the French finance minister said the nation will begin collecting its digital services tax (DST) in December, Politico reported. "We won't have a [OECD] deal in January, February, March or April," Bruno Le Maire told reporters October 14. "Do we accept that the big winners of the economic crisis, the digital giants, continue to be taxed less than other companies? My response: no. Three times no." Earlier this year, France agreed to suspend collections of its DST in exchange for the US backing off proposed tariffs on French goods.

Extenders: A major item before Congress is the fate of expiring tax provisions at year end, and while lapses and retroactive extensions have happened in the past, the excise tax nature of the craft beverage tax provisions makes it a more time sensitive issue that probably has constituent interest in almost every congressional district. There are also concerns regarding the Health Coverage Tax Credit, which is hard to address retroactively because people can lose their coverage and may not be able to reenroll if they were enrolled in COBRA coverage. An October 13 Roll Call story pointed out that CARES Act aviation tax suspensions through December are part of the extenders landscape, and those and the beverage tax provisions especially could compel action in a lame-duck session. Top tax-writers are cognizant of the issues. "The one that we most hear from Iowa is we've got a lot of craft beer industry in Iowa and so they enjoy a lower tax rate than beer generally," Senate Finance Committee Chairman Chuck Grassley (R-IA) said in the article, which noted that top Ways & Means members like Chairman Neal and Rep. Mike Thompson (D-CA) have major alcoholic beverage producers in their states. Rep. Ron Kind (D-WI) was quoted as saying extenders is "one of those must-do items when we get back."

Taxpayer fairness hearing: The October 13 House Ways and Means Oversight Subcommittee hearing on "Taxpayer Fairness" focused on Democratic efforts to obtain President Trump's tax returns and suggestions from NYT reports that he benefited from policies not available to average Americans. Chairman Bill Pascrell (D-NJ) said, "I'm from North Jersey. We have teachers, police officers, firefighters, ambulance techs, and school bus drivers that pay more in taxes! How do they feel when they see their leader pays less than them? A tax system that lets a supposed billionaire pay less than teachers, secretaries and custodians is broken. That is why we are holding today's hearing." Ranking member Mike Kelly (R-PA) said "Democrats continue their relentless effort to weaponize the tax code for purely political purposes. Democrats have sought to publicize the President's tax returns since day one of his presidency — despite no evidence that he did anything wrong … The Times does not allege any illegal behavior by the President."

TPC on Biden plans: The Urban-Brookings Tax Policy Center revised its estimates of Biden's tax plans to say they would "increase federal revenues by $2.4 trillion over the next decade." The group in March estimated the proposals would raise about $4 trillion. "Our new revenue estimate is significantly lower than the March estimate for a number of reasons: several tax credit provisions the campaign has proposed since our initial analysis, our assumption that implementation of most proposals will be delayed until 2022, changes to previously proposed policies that are intended to hold harmless tax filers with incomes below $400,000, a revised economic forecast, and other technical changes," they said.

NOL regulations: Treasury and IRS October 13 released final regulations (TD 9927) implementing changes under the TCJA and CARES Act to IRC Section 172, which governs the carryover and carryback of consolidated net operating losses (CNOLs). The amended regulations under IRC Section 1502 affect affiliated groups of corporations that join in filing (or that are required to join in filing) a consolidated return. The final regulations implement the changes to IRC Section 172 as they apply to consolidated groups by:

  • Describing how to determine the 80% limitation on NOL usage for a "mixed" group (a consolidated group containing nonlife insurance companies and other members)
  • Addressing the calculation and allocation of farming losses
  • Implementing the 80% limitation to determine the CNOL deduction attributable to losses from a member arising during periods in which that member was not part of that group

The final regulations generally adopt, with few significant changes, proposed regulations published in July 2020 (temporary regulations published in July 2020, addressing "split waiver" elections, will be addressed as part of another package).

Faxing FAQs: The IRS added an additional FAQ on the timing for ending the temporary procedures put into place to allow the faxing of forms 1139 and 1045 due to Covid-19.

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 DRD from Certain Foreign Corporations, 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, October 9, 2020


Gain or Loss of Foreign Persons from Sale or Exchange of Certain Partnership Interests (TD 9919)

Final rules released September 21, 2020


Additional First Year Depreciation Deduction (TD 9916)

Final rules released September 21, 2020


Ownership Attribution Under Section 958 (TD 9908)

Final rules, September 22, 2020


Determining the foreign tax credit, etc. (TD 9922)

Final rules released September 29, 2020


Meals and Entertainment Expenses (TD 9925)

Final rules October 9, 2020


Consolidated Net Operating Losses (TD 9927)

Final rules released October 13, 2020


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

Proposed rules, December 28, 2018

February 26, 2019

Determination of Section 4968 Excise Tax, Colleges & 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

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 on Hybrid Arrangements, Allocation of Deductions Attributable to Disqualified Payments, 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

Ownership Attribution Under Section 958 (REG-110059-20)

Proposed rules, September 22, 2020

November 20, 2020

Guidance related to the Foreign Tax Credit (REG-101657-20)

Proposed rules released September 29, 2020



Contact Information
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