United States: Tax Policy Update - March 10, 2015

NUMBER OF THE WEEK: 8 percent. The increase in the total amount of corporate profits kept abroad, according to the latest analysis of securities filings by Bloomberg News. The report confirms what U.S. companies have as much as $2.1 trillion in profits held offshore, with U.S. tech giants accounting for $420 billion of the total. The Obama Administration and several lawmakers have proposed various repatriation plans to bring at least some of the money back home to fund transportation and infrastructure projects. Such proposals have stalled, however. Read more here.

LEGISLATIVE LANDSCAPE

Senate Tax Reform Working Groups to Solicit Comment from Outside Stakeholders. According to a senior staffer with the Senate Finance Committee, the tax reform working groups will soon be ready to take comments from outside stakeholders. Though various industry groups have already met with members and staff, the committee is preparing to announce instructions for interested parties to formally share their input with the working groups. Chairman Orrin Hatch (R-UT) has set a late May deadline for the five working groups to report recommendations for their respective issue areas.

With the deadline fast approaching, Ranking Member Ron Wyden (D-OR) said he would like the committee to hold off on marking up additional tax bills so that the working groups can focus on finishing their work.

Democrats Introduce Tax Cut Package for Middle Class. A group of House and Senate Democrats last week unveiled a package of tax bills geared towards the middle class, including the expansion and permanent extension of the following tax credits: the Earned Income Tax Credit (EITC), the Child Tax Credit (CTC), and the American Opportunity Tax Credit (AOTC). The package also introduces a new second-earner tax credit worth up to $1,000 for households where both parents are working, and it increases the Child and Dependent Care Tax Credit.

Death & Taxes: Brady Unveils Legislation to Repeal the Estate Tax. Congressman Kevin Brady (R-TX) has introduced the "Death Tax Repeal Act of 2015" (H.R. 1105). This marks the fifth bill introduced this Congress aiming to repeal the estate tax. Congressman Sanford Bishop (D-GA) is the lone Democratic co-sponsor, but Brady is hoping to get additional support from members across the aisle. Brady introduced a similar bill in the 113th Congress, which the Joint Committee on Taxation estimated would cost approximately $200 billion over a decade. An offset has not been provided for the legislation. Brady's bill is a response to the president's proposal in his FY 2016 budget, which calls for the return of the estate tax to a top rate of 45 percent with the exclusion amount reduced to $3.5 million.

Rubio Wants to be President, Talks Tax Reform. The tax reform framework floated by Senators Marco Rubio (R-FL) and Mike Lee (R-UT) last week would also eliminate the estate tax, along with most deductions except for those related to charitable giving and mortgage interest. Although scarce on details, the plan marks the first foray into tax reform for a potential 2016 presidential contender. Here is what we do know—the proposal would:

  • Lower the tax rate for corporations and passthroughs to 25 percent
  • Shift the U.S. to a territorial system of taxation for corporate earnings
  • Allow businesses to immediately expense the cost of investments – 100% expensing
  • Simplify the individual tax code by reducing the number of tax brackets from seven to two – with rates at 15 percent and 35 percent
  • Eliminate most business tax credits and deductions
  • Eliminate the standard deduction, replacing it with a refundable personal credit
  • CCreate a $2500 Child Tax Credit

The Tax Foundation released an analysis of the plan this week, using both dynamic and static scoring methods. Using dynamic scoring, the Tax Foundation estimates that the Rubio-Lee plan would lead to a $1.7 trillion revenue loss in the first 10 years, but would produce $94 billion in annual revenue growth in the long run. Based on the traditional scoring method, however, the plan would cost $414 billion per year. The Tax Foundation concludes that under the plan, the economy would grow by 15 percent, wages by 12.5 percent, and investment by 29 percent. Food for presidential election thought...

REGULATORY WORLD

IRS Guidance on Qualifying Income for PTPs Forthcoming. The Internal Revenue Service is expected to issue guidance on master limited partnership (MLP) eligibility for oil and gas companies. Caroline Hay, an attorney with the IRS Office of Associate Chief, told an audience at the Federal Bar Association Conference that the guidance would provide clarification on the definition of "qualifying income" for those looking to qualify for MLP treatment. Specifically, the upcoming guidance would address "qualifying income from the exploration, development, mining and production, processing, refining, transportation, and marketing of minerals and natural resources." The IRS would also resume the agency's review of private letter ruling (PLR) requests regarding oil and gas publicly-traded partnerships. The issuance of PLRs on the subject was suspended early last year.

Proposed Regulations Clarify Next Day Rule for Consolidated Groups. The IRS has issued proposed regulations limiting the flexibility of reporting tax items when a corporation leaves a consolidated group. The regulations state that credits, losses, and other tax items are reported on the consolidated return, provided the transactions giving rise to these tax items occurred while the corporation was a part of the consolidated group. The proposed regulations indicate, however, that the next day rule is often misinterpreted as "providing flexibility when it shouldn't because the allocation doesn't clearly reflect taxable income." The next day rule is generally applicable when corporations make changes to their entity type at the time of joining or leaving a consolidated group. The IRS is asking that comments be submitted by June 4.

Revisions to U.S. Model Tax Treaty. A Treasury official announced last week that they are working on revising the model tax treaty and plan on releasing it for public comment, although an exact timeline is not clear. The review of the model tax treaty comes as the Treasury Department continues its work with the Organization for Economic Co-operation and Development (OECD) and its Base Erosion and Profit Shifting (BEPS) project. The OECD plans to publish a revised discussion draft in June, which will implicate certain provisions in the model tax treaty.

COURTS & LEISURE

Alabama Rail Diesel Sales Tax Saga Continues. The U.S. Supreme Court in a 7-2 opinion ruled that Alabama's sales tax on diesel for rail carriers is not necessarily discriminatory as CSX Transportation claims in Alabama Department of Revenue v. CSX Transportation, Inc. The Supreme Court overturned a decision by the U.S. Court of Appeals for the Eleventh Circuit, which had ruled that the sales tax discriminated against rail carriers given that motor carriers are exempted from the sales tax without "sufficient justification." The high court found that the Eleventh Circuit erred by not considering whether the state of Alabama could justify the differential tax treatment. The Supreme Court remanded the case to the Eleventh Circuit, giving Alabama another chance to defend the state's diesel sales tax on rail carriers.

LOOKING AHEAD

Tuesday, 3/10

Senate Banking Committee
The Subcommittee on Securities, Insurance, and Investment holds a hearing on "Venture Exchanges and Small-Cap Companies" in 538 Dirksen. For more information, click here.

Senate Finance Committee
The full committee holds a hearing on "Tax Complexity, Compliance, and Administration: The Merits of Simplification in Tax Reform" in 215 Dirksen.

Wednesday, 3/11

Senate Budget Committee
The full committee holds a hearing on the benefits of a balanced budget. Details will be posted here when available.

Thursday, 3/12

Senate Special Committee on Aging
The full committee holds a hearing on "Bridging the Gap How Prepared are Americans for Retirement?" in 562 Dirksen.

Senate Finance Committee
The full committee holds a hearing on "Protecting Taxpayers from Schemes and Scams during the 2015 Tax Filing Season" in 215 Dirksen.

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 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
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.

    Disclaimer

    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.

    Registration

    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.

    Cookies

    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.

    Links

    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.

    Mail-A-Friend

    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.

    Emails

    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 .

    Security

    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