United States: Tax Policy Update - September 8, 2014

Last Updated: September 15 2014
Article by Russell W. Sullivan and Danielle R. Dellerson

NUMBER OF THE WEEK: 0

The number of seats available at the start of this morning's Tax Policy Center panel discussion about corporate tax inversions. Treasury Secretary Jack Lew spoke briefly before a group of panelists parsed out the causes of and solutions to the growing number of U.S. multinational corporations that are reincorporating abroad. The packed room — early on a Monday morning, no less — reflects the growing public and political interest in the tax strategy.

LEGISLATIVE LANDSCAPE

House and Senate. The House and Senate are returning to Capitol Hill this week after a five-week recess with a few "must-do" items on the agenda. However, both chambers and both parties share a common desire to keep the September session short so they can get back home to campaign for the Nov. 4 midterm elections.

Tax policy will be among the top issues at hand. Several lawmakers continued to press for action aimed at curbing corporate inversions over the break, and Sen. Chuck Schumer (D-NY) may introduce an anti-inversion bill focused on "earnings stripping" as early as this week.

The House plans to hold floor votes this month on several tax "extender" bills as part of an omnibus jobs package. Tax bills in the package include permanent extensions of the R&D tax credit, the Section 179 expensing measure, the S corporation conversion bill and bonus depreciation.

To avoid a repetition of last year's politically costly government shutdown, lawmakers are motivated to negotiate a short-term continuing resolution (CR) to fund the government after the current fiscal year ends Sept. 30. The House is expected to introduce its version of the stopgap funding bill tomorrow, and many expect it would postpone budget and spending fights at least until December. A short-term extension of the moratorium on internet access fees may also hitch a ride on the CR, leaving bigger negotiations for lawmakers to confront during the lame-duck session. For more on what to expect on the Hill, check out "Looking Ahead" below.

REGULATORY WORLD

Lew Says Anti-Inversion Measures Coming in "Very Near Future." Treasury Secretary Jack Lew told a standing-room-only crowd on Monday, Sept. 8, that the administration is readying options for curbing the growing spate of corporate inversions. Lew's brief comments preceded a panel discussion hosted by the nonpartisan Tax Policy Center that focused on inversions, the reasons for their recent growth and potential options the administration and Congress could employ to deter them. As expected, Lew did not elaborate on what options the administration might be considering, but he did reiterate that any administrative response would be only part of the equation. "Any action we take will have a strong legal and policy basis, but will not be a substitute for meaningful legislation — it can only address part of the economics. Only a change in the law can shut the door, and only tax reform can solve the problems in our tax code that leads to inversions," Lew said, keeping the pressure on congressional lawmakers to act.

Lew also expressed support for retroactive application of any new anti-inversion laws — a deal-breaker for key Republicans — in order to "prevent a rush of corporate inversions to get in under the wire before a change in the law."

Panelists Offer Views, Options For Inversions. Following Lew's comments, John Samuels, vice president and senior counsel for tax policy at General Electric Co., offered some possible explanations for the rise in inversions. First, he said most other developed countries have reformed their tax systems to be more business friendly — embracing lower corporate rates and a territorial regime, which does not tax a domestic company's foreign-earned profits. In addition to favorable tax treatment, Samuels said many countries offer other attractive incentives for U.S. multinationals to relocate, like an educated workforce, stable government and rule of law.

In some cases, Samuels said, U.S. companies may have lost hope in tax reform and they've "resorted to self-help." In some cases, it may be that companies have had a glimpse of what tax reform might look like and decided they don't like it, Samuels said, referring to recent proposals. "Might as well get out of Dodge now before the new sheriff comes to town," Samuels added.

Meanwhile, fellow panelist and former Treasury official Stephen Shay described how the Treasury Department could discourage inversions within the scope of its authority. One approach within the Treasury Department's authority under Internal Revenue Code Section 385, Shay argued, is to reclassify debt as equity, thus turning a once-deductible interest payment into a nondeductible dividend. Another panelist, Tax Policy Center senior fellow Steven Rosenthal, supported this approach, which also mirrors a recent legislative proposal floated by Sen. Chuck Schumer (D-NY).

COURTS & LEISURE

Latest Development: Lawsuit Over Tax Preparer Voluntary Certification Program. The IRS last week filed a motion to dismiss the American Institute of Certified Public Accountants' lawsuit against the agency's new voluntary certification of tax return preparers program, saying the AICPA "lacks standing to maintain the instant suit." In its call to dismiss the lawsuit, the IRS argues that the program won't harm AICPA and its members because it targets uncredentialed tax preparers, not CPAs. AICPA plans to oppose the motion.

LOOKING AHEAD

Wednesday, September 10: House Ways and Means Chairman Dave Camp (R-MI) and Chairman of the President's Council of Economic Advisers Jason Furman will discuss tax reform at the Business Roundtable.

Senate Finance Committee to Hold Hearing on Retirement Tax Provisions. Chairman Ron Wyden (D-OR) announced last week that the Senate Finance Committee will begin "later this month" taking "a close look at pension and retirement rules in the tax code to make improvements wherever they're needed." The exact date of the hearing is not yet known, but it may take place as early as next week. The announcement came in conjunction with the 40th anniversary of the passage of the Employee Retirement Income Security Act (ERISA). The full statement is available 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.

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.

Authors
 
In association with
Related Topics
 
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
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
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
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.

Disclaimer

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.

General

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