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November 1, 2020

Americas Tax Policy: This Week in Tax Policy News for October 30

This week (November 2-6)

Election Day is November 3.

On Friday, November 6 (at 12:00 p.m. ET), is the EY Webcast, "Tax in the time of COVID-19: Post election outlook." The coronavirus (COVID-19) and the resulting economic crisis — all occurring in an election year — have made reacting to tax and trade developments more complicated and more difficult. After election day, what might be on the horizon for tax policy, tax legislation and any further economic stimulus? Panelists will provide updates on: (i) elections, US economy and tax policy; (ii) breaking developments; and (iii) what's happening at the IRS. Register for this Thought Center Webcast.

Last week (October 26-30)

Campaign tax plans: Major questions if Democratic presidential nominee and former VP Joe Biden wins the presidential election include: whether stimulus legislation will be the first bill taken up, when, what it will include, and how it will get done; and when and how Biden would seek to increase the statutory corporate income tax rate to 28% and act on other tax increase proposals discussed in his campaign documents, especially given his September comments that a corporate rate increase would be a 'day one' agenda item to provide revenue for spending priorities. Asked during an October 29 news conference about Biden's intention to increase corporate taxes early on in a potential presidency, House Speaker Nancy Pelosi (D-CA) said she would wait to let Biden set the agenda, but: "I always have thought that when we do major tax policy, we should try to do it in as most bipartisan way possible, contrary to the dark of night, speed of light passage of a bill that gave 83% of the benefits to the top one percent in our country, and then they reinforce that in the CARES Act in the dark of night as well. So, it's not a question of having that discussion here. I think there's a large - quite an agreement that we should have brought down the corporate rate, but we should not have given away the store at the expense of America's working families."

There has been some disparity in analyses of Biden and Trump tax plans given the greater level of detail on tax policy coming from Biden's campaign as compared to the Trump Administration, and the recognition that one of the President's signature first-term achievements was the Tax Cuts & Jobs Act (TCJA). He has called for a drop in the corporate rate to 20%; a drop in the capital gains rate to 15%; and unspecified middle-class tax relief. White House economic adviser Larry Kudlow said on Fox Business October 26 that "we are deep into discussions about possible second term details for tax cuts and regulations," but "I don't see any reason why we have to put out a detailed plan." He said the President's "tax and regulatory cuts went to the middle income and lower income people … That will continue because he is going to stay on this pro-growth track." A Tax Policy Center post co-authored by former Obama-era Assistant Treasury Secretary for Tax Policy Mark Mazur said while the Trump campaign has not released a detailed tax plan nor provided sufficient information to estimate the effects of its proposals, the FY2021 budget proposal to permanently extend the Tax Cuts and Jobs Act's (TCJA) individual income and estate tax provisions scheduled to expire at the end of 2025 would reduce federal revenues by about $1.1 trillion from 2021 through 2030.

Coronavirus relief: The focus has turned toward whether it will be possible to clinch a deal on coronavirus relief and stimulus legislation following the election, in a lame duck Congressional session, or at the start of 2021. President Trump said October 27, "After the election we'll get the best stimulus package you've ever seen." On the Hugh Hewitt show October 30, Senate Majority Leader Mitch McConnell (R- KY) said, "We probably need to do another package, certainly more modest than the $3 trillion Nancy Pelosi package. I think that'll be something we'll need to do right at the beginning of the year." Bloomberg Tax reported that "months of stalled talks have left those tracking relief efforts cynical about the prospects that a large agreement can happen in most lame-duck scenarios" and "pessimism now abounds for the prospect that a stimulus deal will happen before the end of the year."

Speaker Pelosi signaled some optimism for a lame-duck session deal, saying October 29 on Bloomberg TV of whether it's possible, "Well I think so." Asked during her news conference about the prospect for a smaller deal after the election in a lame duck session if Biden wins, she said she wants a deal both for the American people and to clear the decks for a Democratic agenda to move next year. "We want to have as clean a slate as possible going into January," the Speaker said. She and Treasury Secretary Steven Mnuchin traded blame for the pre-election impasse, and the Speaker continued to cite the expansion of low-income tax credits as a sticking point. She said on MSNBC October 26, "we cannot sell our souls, and just say, 'OK, well, let's just do it whatever way they want to do it. We will do it again.' No, we have got to crush the virus. We have got to have our children safely in schools. We have got to insist that, as people are going into poverty, we are asking … them for Earned Income Tax Credit, child tax credit, all these things that take people out of poverty. They're insisting on keeping their big tax cut, $150 billion, for the wealthiest people in the country." That is presumed to refer to CARES Act NOL and excess business loss provisions.

US Blocks Consensus WTO Director General Pick: World Trade Organization (WTO) leaders this week announced that Nigeria's Ngozi Okonjo-Iweala had the most support among WTO members to become the next Director General. Okonjo-Iweala would be the first woman and the first African to lead the trade organization. The United States, however, blocked the appointment by throwing its support behind Yoo Myung-hee, South Korea's candidate. Traditionally the Director General is picked by WTO member nations on a consensus basis. The WTO had been working to select the new WTO leader at the November 9th General Council meeting. The U.S. opposition to Okonjo-Iweala, however, makes that target much less likely and risks further hobbling the trade organization, which has seen its Appellate Body sidelined due to the U.S. blockade of new trade judges.

Regulations watch: Under review by the Office of Management and Budget's Office of Information and Regulatory Affairs (OIRA): a final rule, "Like-Kind Exchanges and Tax Reform [TCJA];" a final rule, "Exception From Passive Income Under Section 1297 for Certain Foreign Insurance Companies [TCJA];" and a proposed rule, "Exception to Passive Income Characterization of Certain Insurance Companies With Respect to Passive Foreign Investment Companies [TCJA]."

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, October 23, 2020


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

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



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