United States: Tax Policy Update - January 27, 2015

Last Updated: February 4 2015
Article by Russell W. Sullivan and Danielle R. Dellerson

NUMBER OF THE WEEK: $110 Billion

The amount expected to be raised over the next 10 years from the Obama Administration's plan to impose a 7 basis point fee on the liabilities of banks with more than $50 billion in assets. The proposed tax has already received criticism from the financial services industry. Additional details are expected to come with the release of the president's FY 2016 budget proposal on Feb. 2.

LEGISLATIVE LANDSCAPE

Hatch Plans to Reintroduce SAFE Retirement Act. Senate Finance Chairman Orrin Hatch is looking to reintroduce the 2013 legislation (S. 1270), which would overhaul the country's pension system with reforms to both private and public sector plans. In addition to the various provisions aiming to modify and simplify existing plans, the SAFE Act would also require the Treasury Department to consult with the Securities and Exchange Commission when working to formulate rules regarding fiduciary duty, giving the Treasury "sole jurisdiction for IRA prohibited transaction rules." Hatch said it makes sense to give Treasury the lead because the fiduciary rule for IRAs originates in the tax code.

Game On! Call of [Fiduciary] Duty: The White House Edition. While Hatch would like Treasury to lead on fiduciary duty rulemaking, the White House is ready to lend its support to the Department of Labor's ongoing efforts to re-propose a fiduciary rule that would impose stricter requirements on brokers and financial advisors that handle retirement accounts. In a working memo titled "Draft Conflict of Interest Rule for Retirement Savings," the White House outlines the administration's arguments for tougher oversight of certain broker practices that have been deemed as harmful and costly to investors. A copy of the memo can be read here.

Highway Trust Fund Bill & the Re-Patriots. With increases to the gas tax out of the question, Senator Rand Paul is working to introduce legislation that would use revenue from the repatriation of foreign corporate earnings to fund the HTF. The senator from Kentucky has been working with Senator Barbara Boxer on a proposal that would set a five-year window for corporations to bring their profits back to the United States. Paul introduced a similar measure back in 2013 (S. 911), which failed to attract co-sponsors. He believes he could get at least a dozen Democrats to co-sponsor the new measure this time around. According to Paul's projections, a 5 percent repatriation rate could generate $30 to $60 billion the first year.

Legislation to Strengthen 529 Plans Introduced. In response to President Obama's plans to get rid of the tax-free benefits under 529 college savings plans, Reps. Lynn Jenkins (R-KS) and Ron Kind (D-WI) introduced a bill strengthening 529 college savings plans (H.R. 529). The bill clarifies that computers are qualified expenses, removes the distribution aggregation rules, and permits refunds from colleges without taxes or penalties. The bill does not tackle Obama's tax plan head on; but it shows there is bipartisan support of tax-free 529 college-savings plans.

Try, Try Again: Democrats Introduce Anti-Inversion Bill. Senators Dick Durbin (D-IL) and Jack Reed (D-RI) along with Congressmen Sander Levin (D-MI) and Lloyd Doggett (D-TX) unveiled the Stop Corporate Inversions Act of 2015 to deter corporate inversions. Under the proposal – which would apply to inversions completed after May 8, 2014 – a combined foreign corporation would be treated as a domestic corporation for tax purposes if its shareholders own more than 50 percent of the combined foreign corporation, or if the affiliated group that includes the combined foreign corporation is managed and controlled in the U.S. and engages in significant business activities in the U.S. A short summary of the proposal can be read here.

REGULATORY WORLD

Anti-Inversion Regulations or Legislation? The Treasury and IRS are working hard to turn Notice 2014-52, which curbs inversion-related transactions, into Treasury regulations. As a follow-up to the notice, they are also considering earnings-stripping provisions. Chairman Hatch recently stated that tax reform would be the only appropriate measure to prohibit corporate inversions. Hatch noted that the wave of corporate inversions have ebbed and flowed depending on the government's reaction to them, but that ultimately tax reform would be the solution. It is likely that Treasury regulations will be released prior to any legislative changes concerning corporate inversions.

OECD Principal Purpose Test Portends Uncertainty. Given the subjective nature of the OECD's principal purpose test (PPT) regarding treaty benefits, practitioners asked for either a pre-clearance procedure or exemption from the PPT at a public consultation this past week. Many believed that such modifications to the PPT would permit funds to identify that their transactions are entitled to treaty benefits. Representatives of OECD feared that modifications may "use [it] as a safe harbor for aggressive tax planning." Marlies de Ruiter, head of the OECD's tax treaty division, stated that a revised discussion draft on preventing treaty abuse would be issued in June.

COURTS & LEISURE

Don't Count Your Eggs Before They've Been Taxed. Last week, the Tax Court ruled that a taxpayer's receipt of $20,000 for her egg donation was taxable income. The issue came down to whether the amount was received for compensation of services or on account of pain and suffering, i.e., "damages." The court shot down the "damages argument", reasoning that the compensation was similar to that received by professional boxers and hockey players in the sense that they are well aware of and accept the attending risks.

LOOKING AHEAD

Tuesday, 1/27

House Budget Committee

The committee holds a hearing on the Congressional Budget Office's 2015 Budget and Economic Outlook. CBO Director Douglas Elmendorf is set to testify in 210 Cannon.

Joint Committee on Taxation

The JCT holds an open organization meeting where members will name a chairman and vice chairman.

Wednesday, 1/28

Senate Budget Committee

The Senate Budget Committee holds a full committee hearing on the budget and economic outlook.

Thursday, 1/29

House Democratic Legislative Retreat

House Democrats will meet in Philadelphia for their two-day legislative retreat.

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