United States: Tax Policy Update 4 Feb 2014

Last Updated: February 10 2014
Article by Russell W. Sullivan, Giles B. Sutton and Danielle R. Dellerson

Number of the Week: 12 As in the 12th Man - also known as the die-hard fans who helped propel the Seattle Seahawks to their first-ever Super Bowl victory last Sunday. This number has nothing to do with taxes, except that even the 12th Man (collectively) must pay theirs, and the 2014 filing season is now officially underway.


The House: GOP Returns From Retreat. Republican members of the House reportedly focused on immigration policy during their annual retreat to Maryland's Eastern Shore last week. But Ways & Means Committee Chairman Dave Camp, R-Mich., made sure tax reform made an appearance on the docket as well. The topic reportedly generated one of the most positive responses from the group in a meeting largely dominated by more contentious issues, but there are no visible signs that the House leadership will support an overhaul bill anytime soon. Meanwhile, tax extenders continue tapping their fingers on the legislative table.

Full-time Focus on Obamacare. The Ways & Means Committee held its first markup of the year on Tuesday, Feb. 4, with two similar bills taking aim at Obamacare's definition of a "full-time employee" under the law's employer mandate. The mandate requires employers with 50 or more full-time workers to offer health insurance or pay a penalty. H.R. 2575 would repeal the 30-hours-worked-per-week threshold and replace it with 40-hours-per-week.

The other bill, H.R. 3979, would clarify that volunteer first-responders could not be counted as "full-time equivalent" employees for purposes of triggering the mandate  --  an issue the Internal Revenue Service addressed in a January announcement, indicating that forthcoming final regulations would clear up the issue. Read more on the markup here.

The Senate: Baucus Packing Up Office. Outgoing Senate Finance Chair Max Baucus, D-Mont., testified before the Senate Foreign Relations Committee last Tuesday on his nomination to become the next ambassador to China, and the committee will vote in favor of his confirmation today. The full Senate could confirm him as early as this Thursday, Feb. 6. Incoming Senate Finance Chairman Ron Wyden, D-Ore., and the long list of expired tax extenders, are tapping their fingers in unison.


SOTU Lean on Tax Policy. President Obama's State of the Union address last week included familiar repetitions of calls for "closing loopholes" to pay for a reduced corporate rate and some infrastructure spending. But calls for broad reform or a "grand bargain" were notably absent.

Obama did, however, push for an expansion of the Earned Income Tax Credit to apply to more low-wage workers without children, and he called on Congress to establish an automatic-IRA savings program for the millions of Americans without employer-sponsored retirement plans.

MyRA Debuts. President Obama also used the State of the Union pulpit to announce a newcomer to the retirement savings scene: MyRA. Besides being an Aquarius who enjoys long, financially secure walks on the beach, MyRA would make government-backed retirement savings accounts available to workers making less than $191,000 per year whose employers don't offer retirement savings plans and agree to participate in the program. The accounts would be structured like Roth IRAs with modest returns and principal protection. More on MyRA and the administration's efforts to get Congress to enact payroll-based auto-IRA legislation can be found here

FATCA Train's a Comin'. John Koskinen, the recently confirmed commissioner of the Internal Revenue Service, told reporters last week that the agency's enforcement of the Foreign Account Tax Compliance Act, set to go into effect July 1, 2014, will not be delayed, despite calls from banks for more time and guidance. The law aims to combat tax evasion by Americans using overseas accounts, and it requires foreign financial institutions to report information on their U.S. account holders to the IRS beginning this summer or face steep penalties. The Republican National Committee and some individual lawmakers have called for a repeal of the law, calling it overly burdensome on banks and a threat to privacy. FATCA regulations can be viewed here.


This is our newest addition to the McGuireWoods Tax Policy Update and an attempt to add some regional flavor with national implications to our tax policy stew.

SALT Shaker: States Split on Best Practices. Kentucky has adopted the Streamlined Sales Tax Governing Board (SSTGB) § 328 Best Practices Matrix, effective Jan. 1, 2014, while Georgia officials have declined to follow the recommendations. Section 328 provides three best practices regarding the sales tax treatment of transactions involving third-party vouchers, like Groupon and Living Social deals. The intent of the matrix, and Kentucky's adoption of it, is to make sales tax determinations more consistent and certain with often-complex transactions.

The Georgia Department of Revenue said it will perform a detailed review of the tax issues related to voucher transactions and will issue additional guidance.


Timing is Everything. According to BloombergBNA's Daily Tax Report, New York Life Insurance Co. is seeking the U.S. Supreme Court's review of a Second Circuit ruling that the company could not deduct its future liability to pay policyholder dividends in the subsequent tax year. The company's petition for certiorari argues that the "all events test" was met under Section 461 of the Internal Revenue Code, rendering the liability deductible in the preceding tax year. Accrual-method taxpayers will want to pay attention to the outcome of this one.

Tax Jams Time. Tax Filing Season is here! Why wait until April when you can file right now? Here are some songs to get you in the tax-filing mood: Try The Robert Cray Band's "1040 Blues" (seriously, that's a song) or Johnny Cash's classic "After Taxes," which you can watch him perform here.


Koskinen in the Hot Seat. IRS Commissioner John Koskinen will face a variety of heated issues when he appears before a House Ways & Means subcommittee Feb. 5. Republicans will certainly air ongoing concerns about the alleged IRS targeting scandal and opposition to proposed IRS regulations reining in the type of political activity allowed for social welfare groups that want to keep their tax-exempt status under Section 501(c)(4) of the Internal Revenue Code. Other issues will include IRS responsibilities under the Affordable Care Act and improper payments. Koskinen likely is not tapping his fingers in anticipation of this event.

Speaking of Anticipation, The Debt Limit is Closing In. Its short-term suspension ends this Friday, but Treasury Secretary Jack Lew has said the use of "extraordinary measures" will give the country until the end of the month before it will be unable to pay its bills. CQ Roll Call reported today that House Speaker John Boehner, R-Ohio, told his members at a private conference that "there's no sense picking a fight we can't win," referring to attaching Republican demands to a debt limit hike. Congressional Democrats have been calling for a clean debt limit bill.

Speaking of Debt ... The Congressional Budget Office released its Budget and Economic Outlook Report Feb. 4. The deficit for Fiscal Year 2014 is projected to be around $514 billion, or 3 percent of GDP -- a reduction from last year's $680 billion shortfall. The full report can be viewed here.

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.

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