United States: Tax Policy Update: January 28, 2014

Last Updated: February 3 2014
Article by Russell W. Sullivan and Danielle R. Dellerson

Number of the Week: 35 The percentage of Americans who watched last year's State of the Union address. The percentage may be slightly higher this year as scores of new drinking games have popped up based on how many times the president uses phrases like "inequality" or "let me be clear." More on that here.


Happy SOTU Day! President Obama will deliver his annual State of the Union address tonight at 9 p.m. EST, outlining his legislative priorities for 2014. Tax policy won't likely get top billing, but listen closely and you may hear the president call for the renewal of expired tax provisions, including the research and development credit, and other corporate tax reforms.

According to the Wall Street Journal, the president may also resurrect a proposal to do corporate-only tax reform -- lowering the rate and getting rid of some tax breaks -- in order to fund infrastructure projects.

The House: No Tax Breaks for Abortion. After hosting President Obama's State of the Union speech tonight, the House will turn its attention Wednesday morning to consideration of H.R. 7, the "No Taxpayer Funding for Abortion Act," which would prohibit the use of Obamacare tax credits for the purchase of healthcare plans that cover abortion services (most currently do). It would also disallow deductions for abortion-related medical expenses, except in cases of rape, incest or when the mother's life is endangered. The bill will pass in the House, but is dead on arrival in the Senate. The complete text of the bill can be viewed here.

Later on Wednesday, GOP House members will pack their bags and head to Maryland's Eastern Shore for their annual members' retreat. The focus is anticipated to be on the debit limit, attacks on Obamacare, immigration and NSA reforms, but count on House Ways & Means Chairman Dave Camp, R-Mich., to corral his colleagues into talking tax reform before all attention turns to the 2014 midterm elections.

The Senate: Repeal & Replace. Three Republican senators introduced a proposal Jan. 27 to repeal and replace Obamacare. Senators Tom Coburn, R-Okla., and Richard Burr, R-NC, joined Finance Committee ranking member Sen. Orrin Hatch, R-Utah, in unveiling a plan that would scrap the Affordable Care Act's individual and employer mandates, the minimum coverage requirements for healthcare plans and most of the law's taxes and fees.

The plan would retain the use of refundable tax credits for the purchase of health insurance, but only for those earning up to three times the federal poverty level and below ($34,470 in 2013). A 65 percent cap on the exclusion of employer-provided healthcare would be used to fund the law, meaning an average employee would be taxed on 35 percent of their currently untaxed health insurance benefits. The full text of the proposal is here.

Baucus Poised For Confirmation. Sen. Max Baucus, D-Mont., faced his Senate colleagues on the Foreign Relations Committee today on his nomination to become the next ambassador to China. Chances are good that he will be confirmed by the full Senate within the next two weeks, leaving Sen. Ron Wyden, D-Ore., to assume top tax-writing duties as the presumed new chairman of the Senate Finance Committee.


R&D Rules Being Finalized. The Internal Revenue Service is finalizing new rules that would lift restrictions on the types of activities that qualify for tax breaks for business research and development -- which, according to a Washington Post report, could translate to "hundreds of millions of dollars in fresh savings" for large and small businesses. The R&D tax credit expired at the end of 2013, but is widely expected to be renewed retroactively with bipartisan support in both houses of Congress and the administration. Read the full article here.

Comments Abound. The Internal Revenue Service has received more than 19,000 comments so far on proposed rules governing the political activity of "social welfare groups" that claim tax-exempt status under Section 501(c)(4) of the Internal Revenue Code. The rules are an attempt to limit the kinds of political activity a group can engage in without jeopardizing its tax-exempt status, but opponents say the rules are an attack on free speech and will provoke court challenges if finalized as is. Comments must be received by Feb. 27. The proposed rules and comments are here.


Severance Pay Subject to FICA Taxes? Last Tuesday, the U.S. Supreme Court heard oral arguments in a case between a bankrupt retail chain and the federal government over whether severance payments the chain paid to its terminated employees are taxable under the Federal Insurance Contributions Act (FICA), commonly referred to as "payroll taxes."

The justices appeared to side with the government in United States v. Quality Stores, Inc., and many court watchers expect the Court to reverse the 6th Circuit's ruling, which held that severance payments are not "wages" subject to FICA taxes.

A Bad Case of 'Jock Tax.' New Jersey is gearing up to host this year's Super Bowl ... and add a nice chunk of change to its state coffers. According to the Washington Post, "New Jersey is one of a handful of states that levies a so-called 'jock tax' -- a tax on any out-of-state athlete who plays a game in the Garden State. The tax hits every member of a professional sports team's roster, regardless of whether they actually take the field, as well as the broadcasters who call the games. Players will be taxed at a rate of 8.97 percent of the salaries they earn for each day in the state. Bonuses for winning championships are subject to taxes too." Read the full article here.


The Debt Limit. Expect to see Washington's focus shift to the impending debt limit. House Republicans will use their retreat this week to build consensus on what they will seek from Democrats in return for a hike on the nation's borrowing limit. Possibilities include repeal of certain Obamacare provisions relating to insurance companies and green-lighting the Keystone XL pipeline.

Treasury Secretary Jack Lew recently told congressional leaders that they will need to pass a debt limit increase by late February in order to avoid a potential default on the nation's bills -- a few weeks earlier than was previously projected. Lew urged lawmakers to address the limit by Feb. 7 to avoid disruptions to the economy and financial markets. Another short-term extension is possible to allow further negotiations. Stay tuned.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

In association with
Related Topics
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions