Blog Posts Tagged With Interest Deductibility

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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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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

Reactions to the Trump Tax Plan

As noted in yesterday’s summary, the basic outline of the Trump Administration’s tax plan is largely similar to the Trump campaign proposals, with fewer details and with one notable shift toward the House Blueprint’s approach – the move toward territoriality. The table below shows how this latest plan compares to the House Blueprint and the Trump 2016 campaign plan.

In the press conference to announce the “broad-strokes” plan, both Treasury Secretary Mnuchin and National Economic Council Director Cohn said that they were in agreement with members of Congress over the four driving goals of tax reform – grow the economy and create millions of jobs, simplify the tax code, provide tax relief to American families, especially middle-income families and lower the business tax rate from one of the highest in the world to one of the lowest. Continue Reading

Tax Reform and Revenue Raisers

One of the biggest challenges facing lawmakers in the current tax reform process is finding a way to reduce headline tax rates in a revenue neutral way. Some revenue raisers (like eliminating itemized deductions) would raise significant revenue and simplify the tax code. Other revenue raisers come at the cost of increased complexity, at least in the short term (e.g., implementing a federal VAT or a new carbon tax). Closer inspection of ideas on the table reveals that politically popular reforms are not necessarily the largest revenue raisers. For example, there seems to be bipartisan support for taxing carried interest as ordinary income (more on that here), a relatively small revenue raiser. Continue Reading

Sanders/Schatz Tax Reform Bill: A Recent Data Point from the Democrats

While House Republicans could use the budget reconciliation process to pass tax reform without the need for Democratic support, leaders in the Senate have indicated a desire for bipartisan reform. White House press secretary Sean Spicer’s statement earlier this week on the tax reform process also suggests that input from the Democrats may be relevant.

With that in mind, we thought it would be useful to highlight a bill introduced in the Senate by Senators Bernie Sanders (I-VT) and Brian Schatz (D-HI) – the “Corporate Tax Dodging Prevention Act of 2017.” A companion bill was introduced in the House of Representatives by Representative Jan Schakowsky (D-IL). Continue Reading

Existing “Tax Calls” and Corporate Tax Reform

Last week, we wrote about whether, in anticipation of tax reform, issuers would begin to include “tax calls” in newly-issued debt, allowing the issuer to redeem the debt (at par or a nominal premium to par plus accrued interest) if legislation limits the ability to deduct interest on the debt. Read last week’s post here. In this follow-on post, we give more color on “typical” tax call language, with a few additional observations as to the effect that tax reform may have on existing tax calls.

Tax Calls Related to Interest Deductibility.  As we noted last week, certain types of outstanding debt, such as “hybrid” debt and long-dated debt (including junior subordinated debt), already typically include tax calls. Continue Reading

Drafting “Tax Calls” In Anticipation of Tax Reform

Elimination (in whole or in part) of the deduction for net interest expense is a common element of recent tax reform proposals.  Many observers predict that, if we do get corporate tax reform, this feature will be part of the package in one form or another.  As a result, debt issuers and bankers have been considering the pros and cons of including a “tax call” in newly-issued debt, in the form of a right on the part of the issuer to redeem the debt at par plus accrued interest if the law changes such that the issuer cannot claim a deduction for interest paid on the debt. Continue Reading

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