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December 6, 2020

Americas Tax Policy: This Week in Tax Policy News for December 4

This week (December 7-11)

Congress: The House and Senate are in session.

Retirement hearing: The Senate Finance Subcommittee on Social Security, Pensions, and Family Policy of the Committee will hold a hearing on Wednesday, December 9 (at 10:00 a.m.) on "Investigating Challenges to American Retirement Security."

Last week (November 30-December 4)

Year-end legislation: Senate Majority Leader Mitch McConnell (R-KY) and House Speaker Nancy Pelosi (D-CA) discussed additional coronavirus spending December 3 for the first time since the election and lawmakers expressed fresh optimism that a deal could come together in in the next week or so, potentially in time to be attached to a year-end omnibus appropriations measure. That government funding bill presents a deadline — currently December 11, though a stopgap could allow negotiations to go longer — that, combined with the severity of the pandemic and concern that adequate funding be provided for vaccine distribution, puts pressure on lawmakers to reach agreement. "I think we're both interested in getting an outcome, both on the [spending bill] and on a coronavirus package," Senator McConnell said in the Washington Post. "There is momentum with the action that the senators and House members in a bipartisan way have taken … I'm pleased that the tone of our conversations is one that is indicative of the decision to get the job done," Speaker Pelosi said December 4. There is still some dispute over the starting point for the negotiations, either:

  • a $908 billion package assembled by a group of moderate senators in the weeks since the election — basically the same group who will be a focus for deal-making in a closely divided Senate next year — that would fund key programs through March and provide $160 billion in state and local funding and Paycheck Protection Program (PPP) deductibility, among other things; or
  • a "targeted" proposal from Senator McConnell to extend pandemic unemployment programs for a month (but not provide a UI add-on), and provide a second round of the PPP, additional emergency health appropriations, and tax provisions seen as appealing to the President, including a 100% deduction for business meals.

The proposal by the bipartisan group led by Senator Joe Manchin (D-WV) and several moderate Republicans — crafted over several post-election dinner meetings, as the New York Times described — was quickly dismissed by Leader McConnell upon its rollout December 1. However, it quickly came back into focus as Speaker Pelosi and Senate Democratic leader Chuck Schumer (D-NY), who have long pushed for a much larger deal, declared that "the bipartisan framework introduced by Senators yesterday should be used as the basis for immediate bipartisan, bicameral negotiations." The plan — which would also provide a $300 UI add-on for 18 weeks and another $288 billion in support for small businesses including the PPP and for restaurants and performing arts venues — has also been advocated by President-elect Joe Biden and welcomed by an increasing number of Senate Republicans, including John Cornyn (R-TX), Joni Ernst (R-IA), and Finance Committee Chairman Chuck Grassley (R-IA).

Tax: If a year-end package does come together, it will include numerous tax provisions. Agreement on a broader coronavirus package will be required for any virus-related tax items to advance, and it's likely that such a package would need to materialize for any other tax provisions, like the extension of expiring provisions, to move this year. The still-fluid bipartisan Senate coronavirus plan doesn't yet identify tax provisions (aside from PPP deductibility) and it's unclear whether the provisions in McConnell's targeted bill, which also include a further expanded charitable deduction, will be agreed to. Other provisions discussed for a coronavirus bill include expansions of the Employee Retention Tax Credit and the Work Opportunity Tax Credit, and some state and local tax certainty for employers and employees relating to employees that have been working in 2020 in locations other than their normal place of work. Politico December 4 reported Senator Schumer is a "wild card" on the mobile workforce issue, as New York "is notoriously aggressive about taxing people coming to the Empire State even temporarily — and wary of what would be a rare bid by the federal government to dictate to states how their tax systems will work."

A Law360 article this week reported on Democrats being open to supporting TCJA technical corrections in a package that includes green-energy related tax extenders as "part of a final drive to try to attach extensions of expiring tax incentives" to a year-end spending bill. "House Ways and Means Chairman Richard Neal, D-Mass. said he would be open to combining GOP-backed proposals for technical corrections with extensions of incentives for renewable energy and other items in a possible post-election tax deal. 'One of the challenges of a lame-duck session is there has to be a lot of give and take. I'm open-minded about it. There's an opportunity there. We don't want to let that get away,' Neal told Law360." On a related note, both parties in the House chose committee chairmen and ranking members, with no change at the top on Ways & Means — Chairman Neal and Ranking Member Kevin Brady (R-TX).

Biden on tax increases: Speaking to the NYT in an interview reported December 2, President-elect Biden repeated his call for tax increases, saying enacting stimulus legislation now will generate economic growth without long-term fiscal harm if, in the future, "everybody pays their fair share … And by that fair share, I mean there's no reason why the top tax rate shouldn't be 39.6%, which it was in the beginning of the Bush administration. There's no reason why 91 Fortune 500 companies should be paying zero in taxes." He expressed confidence in negotiating with Senate Republicans, even if they retain control and reinvigorate deficit concerns. "There are a number of things that when McConnell controlled the Senate that people said couldn't get done, and I was able to get them done with [him]. I was able to get them to, you know, raise taxes on the wealthy." (Biden and McConnell negotiated a resolution to the 2012 "fiscal cliff" slate of tax increases.)

Senate control unknown: The outlook for the 2021 agenda will remain uncertain throughout the remainder of the year, hinging in part on whether another Covid stimulus bill will be enacted soon, but more so on control of the Senate in the next Congress, which won't be known until two January 5 Georgia runoffs are decided. The November 29 Washington Post reported that an organizing resolution for committee ratios and leadership could remain on hold until runoff results are known, leaving current committee makeups in place until then. Some committees will lack chairmen due to current leaders retiring, including the Health, Education, Labor & Pensions Committee. Also, "Even if Democrats win both Georgia seats, the Biden Cabinet confirmation process will begin with Republicans in charge. Tradition dictates that the Senate start processing Cabinet nominees in early January to tee up several to be confirmed in the afternoon a few hours after the new president is inaugurated."

Focus on moderate senators: A November 30 New York Times (NYT) story observed that if Democrats can win the two Georgia runoffs and control the Senate, progressive proposals would have to go through moderates like Senator Manchin. Alternatively, "If Republicans win at least one of the Georgia races, allowing them to maintain Senate control, they will need centrists in both parties to help block progressive items or pass compromise legislation. That is the situation that Mr. Manchin said he considered more likely. He is already preparing for a power dynamic that he asserted would give him and three moderate Republicans — Susan Collins of Maine, Lisa Murkowski of Alaska and Mitt Romney of Utah — a big role in determining what happens at the dawn of Mr. Biden's presidency." Another likely moderate Democrat, Mark Kelly (D-AZ), was sworn in this week, earlier than the other new senators because his predecessor was appointed, not elected, to replace the late Senator McCain until a special election was held. Kelly will serve the remainder of McCain's term, which ends in 2022. This reduced the margin of Republican control of the Senate to 52-48. Up for re-election in just two years, Kelly has made comments in favor of bipartisanship and compromise, saying in the Wall Street Journal last month, "What we've seen in the past on legislation when it's passed without a lot of support from the other side, it just creates problems down the road." As CBS reported, Arizona was once a longtime Republican stronghold and, until now, the last time two Democrats held both the state's Senate seats was in January 1953. The state's other seat is held by Senator Kyrsten Sinema (D-AZ), who is described as a moderate and even conservative Democrat.

Personnel: President-elect Biden November 30 formally announced economic team nominations, including: Janet Yellen as Secretary of the Treasury; Wally Adeyemo, an international economic adviser in the Obama administration, as deputy Treasury secretary; Neera Tanden of the Center for American Progress, a former Hillary Clinton and Obama adviser who contributed to the development of the Affordable Care Act, as Office of Management and Budget director. Each of these nominations requires Senate confirmation. Biden subsequently announced that Brian Deese will be appointed to serve as Director of the National Economic Council, a position that doesn't require confirmation.

BEPS 2.0: The OECD will hold a two-day virtual public consultation on the BEPS 2.0 Pillar 1 and Pillar 2 Blueprints on January 14-15, 2021, according to Pascal Saint Amans, director of the OECD's Centre for Tax Policy and Administration. The OECD director was quoted as saying that while the overall architecture of the Pillars has been agreed upon, certain aspects may be overly complicated and the public consultation may be an opportunity to simplify some of that complexity. Public comments on the blueprints are due by December 14, 2020. The Inclusive Framework on BEPS reportedly will meet at the end of January 2021 to move the project forward, although Saint Amans said further progress may not be possible if the new US delegation is not in place. The plan remains for agreement on the two pillars to be reached by mid-2021.

PFIC regulations: IRS December 4 released final regulations, "Guidance on Passive Foreign Investment Companies," and proposed regulations, "Guidance on Passive Foreign Investment Companies and the Treatment of Qualified Improvement Property under the Alternative Depreciation System for Purposes of Sections 250(b) and 951A(d)."

Regulations watch: Under review by the Office of Management and Budget's Office of Information and Regulatory Affairs (OIRA) is a final rule on "Section 451(b) Requirements [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, November 6


Additional First Year Depreciation Deduction (TD 9916)

Final rules, November 5, 2020


Ownership Attribution Under Section 958 (TD 9908)

Final rules, September 22, 2020


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

Final rules, November 12, 2020


Meals and Entertainment Expenses (TD 9925)

Final rules, October 9, 2020


Consolidated Net Operating Losses (TD 9927)

Final rules, October 23, 2020


Coordination of Extraordinary Disposition and Disqualified Basis Rules (TD 9934)

Final rules, December 1, 2020


Like-kind exchanges (TD 9935)

Final rules, December 2, 2020


Passive Foreign Investment Companies (TD 9936)

Final rules released December 4, 2020


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

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

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

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

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

Proposed rules, November 12, 2020

February 10, 2021

Passive Foreign Investment Companies and the Treatment of Qualified Improvement Property under the Alternative Depreciation System for Purposes of Sections 250(b) and 951A(d)

Proposed rules released December 4



Contact Information
For additional information concerning this Alert, please contact:
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Kurt Ritterpusch (