June 9, 2023 What to expect in Washington (June 9) House GOP economic package — As soon as today, House Ways and Means Committee Republicans are expected to release their economic growth package, addressing (among other things) TCJA tax provisions including restoring R&D expensing in place of the IRC Section 174 R&D five-year amortization requirement, the prior-law calculation for the IRC Section 163(j) interest deduction limitation, and the bonus depreciation phasedown. While Ways and Means Chairman Jason Smith (R-MO) reportedly was considering dropping the bill today (June 9), a revolt by Freedom Caucus Republicans this week brought business on the House floor to a halt, and Speaker Kevin McCarthy (R-CA) sent members home early on Wednesday (June 7). That means Smith and other sponsors may have to wait until the House returns into session next week to formally release the bill. A markup in the Ways and Means Committee could occur next Tuesday or Wednesday (June 13-14). In addition to the TCJA provisions, the package is believed to potentially include items related to rural opportunity zones, LIFO recapture, raising the Form 1099-K reporting threshold, raising the standard deduction, and foreign tax credits, among other provisions. Legislation introduced by Chairman Smith (with all Republican members of the committee joining as cosponsors) retaliating against countries implementing a 15% global minimum tax reportedly will be marked up separately from the economic package. Taiwan tax agreement - At a markup on June 8, Senate Foreign Relations Committee Chairman Robert Menendez (D-NJ) had scheduled action on the Taiwan Tax Agreement Act (S. 1457), which is not a treaty but would authorize the Biden administration to negotiate and conclude a tax agreement with Taiwan. Objections from Sen. Rand Paul (R-KY), however, led the chairman to remove the bill from the agenda. Sen. Paul told The Hill that he had concerns the agreement would not protect American taxpayers' privacy: "We've had problems with the bulk exchange of data without individualizing … We don't want them collecting everybody's tax records. We've been opposed to all the tax treaties." Menendez said he would bring up the bill at the committee's June 21 markup. In his prepared statement before the bill was pulled, Menendez said S. 1457 would "authorize a tax agreement with Taiwan that will facilitate investment in key strategic industries such as semiconductors, support U.S. businesses active in Taiwan, and deepen our economic engagement with Taiwan … It is something that U.S. businesses support." Senate Finance Committee Chairman Ron Wyden (D-OR) has also claimed jurisdiction over the Taiwan tax issue, saying last month that addressing the "urgent" cross-border economic burdens faced by U.S. and Taiwanese businesses "requires the expertise of the tax-writing committees in Congress." IRS corporate AMT notice - Treasury and the IRS on June 7 issued Notice 2023-42, which will grant penalty relief for corporations that did not pay estimated tax in connection with the new corporate alternative minimum tax (CAMT). "Considering the challenges associated with determining the amount of a corporation's CAMT liability and whether a corporation is an applicable corporation subject to the CAMT, the IRS will waive the penalty for a corporation's failure to pay estimated income tax with respect to its CAMT for a taxable year that begins after Dec. 31, 2022, and before Jan. 1, 2024," the Notice said. The CAMT, which relies on financial-market accounting rules, has proved complex for Treasury and the IRS to implement and write guidance for. Digital Services Tax — Bloomberg reported that the Biden administration is proposing to trade allies that they extend a coordinated freeze on new digital services taxes beyond its planned expiration on December 31. Under the "standstill agreement," countries considering new digital taxes would only move forward if the broader agreement is not in force by Jan. 1, 2024. The freeze was included in the OECD's October 2021 global tax agreement, which has not yet been implemented with regard to Pillar 1. A Treasury official told Bloomberg that the administration is seeking the extension because it expects ratification and implementation of Pillar 1 of the global tax deal will go beyond the year-end deadline. ———————————————
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