United States: Tax Policy Update - February 10, 2015

NUMBER OF THE WEEK: 52 percent.

The likelihood that tax reform will happen in 2017 or earlier, according to the tax experts that participated in the Tax Council (TTC) and Ernst & Young (EY) Tax Reform Business Barometer in January 2015. Results from the survey will be available on the Tax Council's website later this week. A majority of the respondents also believe that tax reform would be business-only (59%) and revenue-neutral (61%). Regarding the likelihood of the tax-writing committees releasing specific plans in 2015, the respondents gave a median expectation of 50 percent.


Go Along to Get Along – Lew Plays Nice with Tax-Writing Chairmen. If the mood on Capitol Hill last week served as any indication of things to come, a divided government might not be so bad after all. Treasury Secretary Jack Lew's appearance before the House Ways and Means and Senate Finance Committees gave Republicans and Democrats a chance to explore possible areas of cooperation in the president's budget proposal for fiscal year 2016. Despite some clear differences over policy, Mr. Lew and leaders of the tax-writing committees agreed broadly on the need to reform the nation's tax code in a way that benefits everyone — not just corporations. All sides agreed that passthroughs and other closely-held businesses would pose a challenge to business-only tax reform. Of note, Mr. Lew remarked that passthroughs do have the option to switch to a corporate structure if that proves more advantageous. But he reiterated the administration's commitment to help small family businesses, citing the permanent extension of Section 179 expensing in the president's FY2016 proposal as an example. Regarding extenders, Mr. Lew along with Democratic committee members believe that they should be dealt with as part of comprehensive tax reform and, more importantly, that any permanent extension should be paid for.

House Ways and Means Approves Permanent Tax Extenders. The committee has approved seven bills that would make permanent a set of tax breaks related to certain charitable donations and business expensing. "It's about time we got around to making these permanent, instead of all these back-to-the-future extensions," Chairman Paul Ryan said at the markup. The votes during markup fell along partisan lines. Members disagreed over whether passing permanent extenders in a piecemeal fashion would help advance tax reform efforts. Republicans argued that making some provisions permanent would bring more certainty to the tax code, and it would also help provide a more accurate baseline for any tax reform plan. Democrats, however, were critical of the approach, expressing their disapproval of doing permanent extensions without offsets. The House is expected to take up some of the extenders (H.R. 636 and H.R. 644) for floor consideration on Thursday. The two bills would make permanent Section 179 expensing rules and several tax breaks related to charitable donations.

Light Reading: JCT Releases Tax Expenditures Report. In anticipation of the Senate Finance Committee's hearing entitled, "Getting to Yes on Tax Reform: What Lessons Can Congress Learn from the Tax Reform Act of 1986," the Joint Committee on Taxation released a report analyzing a number of tax expenditures. The report discusses the concept of these expenditures and how they are measured, weighing their "efficiency, equity, and administrability." The report also provides a list of tax expenditures since the Tax Reform Act of 1986. Read the complete report here.

Low Hanging Fruit Set for Markup. The Senate Finance Committee announced it will hold an executive session this Wednesday, Feb. 11 at 10 a.m. to mark up a slew of relatively noncontroversial tax bills—17 to be exact—including measures to expand the ability of foreign entities to invest in U.S. real estate and changes to taxes on liquefied natural gas. All of the currently posted bills have bipartisan support on the committee, but we expect members to file additional amendments prior to Wednesday's markup. We will update you as more information becomes available. Links to all related amendments can be found here.


Foreign Tax Credit Splitting Gets Final Rule. On Monday, the IRS issued final rules for the regulation of foreign tax credit splitting events. The final rule provides clarification to the definition of usable shared loss. According to the rule, a shared loss is defined as a shared loss of a U.S. combined income group that could be used under foreign law to offset the group's own income. The rules are effective after publication in the Federal Register, which is expected on Feb. 10.

OECD Releases CBC Reporting Guidance. The OECD released guidance on the implementation of country-by-country (CBC) reporting, effective for fiscal years beginning on or after January 1, 2016. Multinationals with annual revenue of €750 million or more would be subject to CBC reporting. The OECD and G20 countries also reached agreement on two other items bringing the BEPS project closer to implementation: (1) A mandate urging negotiations on a multilateral instrument to implement BEPS measures; and (2) criteria for assessing patent box preferential treatment. A live webcast will be available here on Thursday, Feb. 12. Officials will discuss the country-by-country reporting guidance and provide a general BEPS progress report.

Treasury Working on Earnings Stripping Regulation . Last week, Treasury said that they are looking at various ways of addressing earnings stripping. Treasury Senior Counsel Douglas Poms said that they have been thinking about the issue and wondering if changes other than through section 163(j) may be appropriate. This issue is of the interest to the Treasury given the release of IRS Notice 2014-52 addressing corporate inversions and the OECD's recent publication on interest deductions. Notice 2014-52 reveals that Treasury and the IRS are "considering guidance to address strategies that avoid U.S. tax on U.S. operations by shifting or 'stripping' U.S.-source earnings to lower-tax jurisdictions, including through intercompany debt.


Super Tax Savvy. Following the Super Bowl, Chevy awarded Tom Brady with a $34,000 Colorado truck for winning the Super Bowl MVP. Brady announced later that week he wanted to give the truck to Malcolm Butler for making the game-saving interception. Tax pundits quickly assessed that Brady would have an $18,500 tax liability, arising from receiving the truck (39.6% x $34,000) and gifting it to his teammate (40% x $20,000 arising from the amount in excess of the annual gift tax exclusion of $14,000). Thanks to Tom's savvy tax advisers, Chevy is now awarding the truck directly to his teammate. Sure, Butler will owe taxes, but he shouldn't feel too deflated – it's a brand new truck!

Medtronic's $2 Billion Tax Case Begins. Though Medtronic, Inc. may avoid paying domestic corporate taxes following last month's inversion, the Tax Court heard opening statements from Medtronic and the IRS about a $2 billion income adjustment for tax years 2005 and 2006. The argument centers around transfer pricing issues on royalties between Medtronic and its offshore subsidiary. The IRS seeks to make the adjustments between Medtronic and its subsidiary pursuant to Section 482 of the tax code.


Tuesday, 2/10

Senate Finance Committee
The full committee holds a hearing on "Getting to Yes on Tax Reform." Witnesses include former SFC Chairman Bob Packwood and former Senator Bill Bradley. Hearing to be held in 215 Dirksen.

Senate Banking Committee
The full committee meets to conduct a hearing on the "Regulatory Relief for Community Banks and Credit Unions." Hearing to be held in 538 Dirksen.

Wednesday, 2/11

Senate Finance Committee
The full committee holds an open executive session to markup 17 original tax bills. Meeting to be held in 215 Dirksen. Live webcast can be viewed here.

Thursday, 2/12

Tax Council Policy Institute
The institute hosts its 16th annual Tax Policy and Practice Symposium entitled, "How Taxes Matter: The Globalization of Tax Policy and Implications for US Economic Growth and Investment." This event will focus on tax issues facing companies including the role of tax policy in driving global economic growth and job creation, insight into OECD and G20's BEPS efforts and strategies for the ever-changing legislative environment.

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 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
Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:
  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.
  • Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.
    If you do not want us to provide your name and email address you may opt out by clicking here
    If you do not wish to receive any future announcements of products and services offered by Mondaq you may opt out by clicking here

    Terms & Conditions and Privacy Statement

    Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

    Use of www.mondaq.com

    You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). 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 & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


    Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd 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 or performance of information available from this server.

    The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


    Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

    • To allow you to personalize the Mondaq websites you are visiting.
    • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
    • To produce demographic feedback for our information providers who provide information free for your use.

    Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

    Information Collection and Use

    We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

    We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

    Mondaq News Alerts

    In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


    A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

    Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

    Log Files

    We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


    This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

    Surveys & Contests

    From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


    If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


    From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

    *** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


    This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

    Correcting/Updating Personal Information

    If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

    Notification of Changes

    If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

    How to contact Mondaq

    You can contact us with comments or queries at enquiries@mondaq.com.

    If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.

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