Senate Releases Draft Healthcare Bill

Thursday morning the Senate publicly released a discussion draft of its version of a healthcare bill to repeal the Affordable Care Act. The tax provisions in the bill are materially the same as those in the bill the House passed in May (which we covered here and here), the differences mainly relate to effective dates for the various provisions, which generally vary by only a year (we expect these effective dates to be the subject of negotiation between the House and Senate, especially depending on the CBO’s analysis of this Senate draft).

Notably, the Senate draft retains the House bill’s retroactive repeal (effective for taxable years starting after December 31, 2016) of the 3.8% tax on certain net investment income under Section 1411 of the Code. Continue Reading

Prospects for Tax Reform in 2017?

House Speaker Paul Ryan (R-WI) addressed the National Association of Manufacturers on Tuesday in an effort to build support for tax reform, emphasizing the unique, and diminishing, window of opportunity that exists to enact permanent tax reform ahead of next year’s primaries and midterm elections. According to his press office, this speech marks the beginning of his “sales pitch” for tax reform in 2017. Speaker Ryan’s prepared remarks are available here. You can also watch his speech here (starting at 1:41:34).

Here are the key takeaways:

  • Republicans Are Aiming for End of 2017:  Speaker Ryan said that lawmakers would “begin to turn” their plan into legislation to put in front of Congress, and promised to “get this done in 2017.” We have heard this line before, both from Speaker Ryan and from Treasury Secretary Steve Mnuchin during the press conference unveiling Trump’s tax principles.
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The Latest in the Online Sales Tax Saga

Earlier this month, Massachusetts became the latest state to more aggressively pursue sales tax on online purchases, going beyond other states to expand the definition of physical presence to include cookies, apps and server presence with a new directive effective July 1. While these changes may mean a significant revenue bump for Massachusetts, legislative and legal challenges have already begun.

What does the Directive Do?  Under the State’s existing sales tax rules, retailers that are engaged in making “taxable sales” in Massachusetts or that sell “taxable products” for use in Massachusetts are required to collect and remit sales tax if the retailer is engaged in a business in Massachusetts. Continue Reading

DBCFT Still Not Dead (to Brady)

At a WSJ conference yesterday, House Ways and Means Committee Chairman Kevin Brady (R-TX) gave a few tantalizing hints as to the content of the much anticipated house tax reform bill. Most notably, Brady suggested that the bill would include a DBCFT that is phased in over a five-year transition period. This is intended to respond to a number of concerns, including the fear that currencies may not adjust immediately (click here for the Tax Foundation’s summary of the concerns alleviated by, and new concerns raised by, a five-year transition).

Brady also reaffirmed that certain industries (financial services, communications, insurance and digitally-focused businesses) would be subject to “special treatment” under the DBCFT. Continue Reading

An Update on the DBCFT: A Hearing in the House and Trump’s Budget

In advance of yesterday’s House Ways and Means Committee hearing on tax reform, the Joint Committee on Taxation released its own comprehensive report on destination-based taxation and border adjustments. The report gives an overview of the current state of U.S. international taxation and then delves into the economics of border adjustments, including a summary of the academic literature on associated exchange rate (or other wage or price) adjustments such that exporters would not be advantaged and importers would not be disadvantaged (defined as “trade neutrality,” which we’ve previously explored here and here). Although the JCT ultimately does not take a view on whether the proposed destination-based cash flow tax would achieve this “trade neutrality,” the report does suggest that any currency adjustments would not happen quickly or, perhaps, evenly among importers and exporters, citing empirical studies that conclude that changes in consumer prices affected by exchange rate adjustments happen asymmetrically. Continue Reading

Back to Basics: Camp Plan Revisited

As the Trump administration and House and Senate leaders huddle to find a path to permanent tax reform, the detailed draft legislation released in 2014 by former Rep. Dave Camp will be among the ideas considered.

Relative to the Blueprint, the Camp proposal takes a traditional approach to tax reform, with a focus on broadening the tax base to achieve lower tax rates.  We will consider various elements of the Camp plan and begin today with a recap of certain of its international components.

Territoriality.  In a significant move toward a territorial system, U.S. corporations that receive dividends from 10%-owned non-U.S. Continue Reading

Updates on Tax Reform and the Tax-Exempt Sector

President Trump and Congress have recently undertaken measures to preserve the ability of tax-exempt organizations to engage in limited forms of political speech, and efforts in Congress may signal a willingness to provide further relief to tax-exempt organizations.

The Presidential Executive Order.  On May 4, 2017, President Trump signed an executive order entitled “Promoting Free Speech and Religious Liberty” that directs the executive branch “to vigorously enforce Federal law’s robust protections for religious freedom.”  The executive order further instructs the Treasury Department, to the extent permitted by law, not to “take any adverse action against any individual, house of worship, or other religious organization” that discusses moral or political issues from a religious perspective, but only where such speech has not ordinarily been treated by the Treasury Department as the endorsement of or opposition to political candidates.  Continue Reading

Transparency in Government Settlements and Deductions for “Fines or Penalties”

Last month, Senators Jack Reed (D-RI) and Chuck Grassley (R-IA) re-introduced bipartisan legislation intended to force government agencies to specify which payments made pursuant to out-of-court settlement agreements will be nondeductible under a newly expanded Section 162(f). Under the proposed new Section 162(f), amounts constituting restitution or paid to come into compliance with law (which generally are deductible under current law) would be deductible only if identified as such in the court order or settlement agreement. Amounts paid or incurred as reimbursement to the government for the costs of any investigation or litigation in relation to the violation or potential violation of law would not be deductible. Continue Reading

Update: House Passes Obamacare Repeal Bill

Yesterday, Republican members in the House of Representatives passed the American Health Care Act, H.R. 1628, by a 217-213 vote, with 20 Republicans and all Democrats voting against. Although the House made various health-policy and spending amendments to the bill since our March 21st post, the tax provisions described in that post survived with only one change – the repeal of the 0.9% Medicare surtax on wages above certain amounts was delayed to taxable years after December 31, 2022.  Notably, the tax provisions included in the AHCA passed by the House includes the retroactive repeal (starting on January 1 of this year) of the 3.8% tax on certain net investment income under Section 1411 of the Code. Continue Reading

Tax Items in the Budget Bill

Late Sunday night Congress reached a budget deal that will keep the Federal government funded through the end of the fiscal year in September. The House and Senate are expected to vote on the package today or tomorrow (the House vote is scheduled for this afternoon) to ready it for President Trump’s signature before the end of the day on Friday to avert a government shutdown. The bill totals 1,600 pages (you can read the whole thing here.)

Here is a summary of the tax-related items:

  • The bill allocates a total amount of $11.2 billion to the IRS to fund various activities and operations.
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