United States: Tax Policy Update - April 21, 2015

NUMBER OF THE WEEK: 6.5 percent

The tax rate at which companies could voluntarily repatriate their foreign earnings under the Invest in Transportation Act of 2015 ( S. 981). Senators Barbara Boxer (D-CA) and Rand Paul (R-KY) introduced the bipartisan proposal, offering ways to save the Highway Trust Fund. Funding authority for surface transportation projects is due to expire May 31. Under the bill, all tax revenues collected through the repatriation program would be transferred into the Highway Trust Fund. "This bipartisan repatriation proposal will stimulate the economy by bringing back hundreds of billions of American dollars currently sitting offshore...and will provide much-needed revenue to the Highway Trust Fund," Boxer said. Some of Boxer's colleagues in the Senate have expressed doubts about a one-time, voluntary repatriation holiday as the Joint Committee on Taxation regards such measures as revenue losers over the long run. Earlier this year, Senate Finance Chairman Orrin Hatch (R-UT) has indicated that he would not support such a revenue-losing proposal to fund infrastructure, calling it "bad policy." Read a summary of the Boxer-Paul proposal here.

LEGISLATIVE LANDSCAPE

House Approves Estate Tax Repeal and Other Tax Measures. Following the passage of the IRS reform bills, House lawmakers moved quickly to approve the Death Tax Repeal Act (H.R. 1105) and the State and Local Tax Deduction Fairness Act (H.R. 622). The two bills would repeal the estate tax and the generation-skipping transfer (GST) tax for all future transfers and make permanent the deduction for state and local sales tax. Votes on the two bills fell largely along party lines. The estate tax repeal passed by a vote of 240-179 with only seven House Democrats crossing the aisle to support the legislation. The permanent state and local sales tax deduction was approved by a 272-152 vote.

The White House has issued veto threats for both measures. It remains unclear whether the Senate would take up either bill any time soon. Majority Leader Mitch McConnell (R-KY) has given no indication on timing for the two bills, which have been placed on the calendar. Senate Finance Chairman Orrin Hatch has previously told reporters that he would like to deal with tax extenders as part of comprehensive tax reform. The Obama Administration, along with House Democrats, has repeatedly voiced their opposition against making any tax extenders permanent without offsets. Permanent extension of the state and local sales tax deduction would cost approximately $42 billion over 10 years, and the estate tax repeal would cost $269 billion.

Business Coalition Rebuffs Tax Chairmen's Call for Help. Chairmen Orrin Hatch (R-UT) and Paul Ryan (R-WI) – leaders of the tax reform efforts in Congress – sent a letter to a coalition of business groups, asking for ideas on how to reduce effective tax rates and simplify the tax code for pass-through entities. The prospects of comprehensive tax reform – tackling both the business and individual sides of the tax code together – are growing dim according to the chairmen: "[I]t is likely that some aspects of tax reform will not be completed until the next administration takes office." Despite this, Hatch and Paul are looking for ways to enact some reforms that will lower the effective tax rate for pass-throughs without having to lower individual rates.

The Coalition for Fair Effective Tax Rates has rebuffed the chairmen's request and reiterated the need for comprehensive tax reform if all businesses are to be treated equally for tax purposes. "As a practical reality no combination of credits, deductions, or exclusions will bring about tax rate parity and produce a fair, simple, transparent and pro-growth tax code," the letter stated. The coalition also made clear that its members could not support any approach to tax reform that does not include help for pass-through entities.

Senator Warren: Tax Risky Financial Practices. "The amount of interest a financial firm can deduct annually should be based on the relative amount of capital that firm holds – and the risk it poses," Senator Elizabeth Warren said at a conference at the Levy Economics Institute. The Massachusetts senator argued for changes in the tax code to deter big banks and their executives from engaging in risky behavior. Warren also called for the introduction of a financial transaction tax to address high-frequency trading. A staunch supporter of financial regulatory reform, Warren would like Congress to eliminate a tax loophole that encourages companies to compensate their executives through "massive" performance-based bonuses. In Warren's view, such bonuses tend to exacerbate short-term risk-taking behavior. The full speech can be read here.

Sanders Targets Corporate Profit Shifting. Senator Bernie Sanders (I-VT) has introduced legislation that would prevent U.S. corporations from keeping their profits abroad to avoid federal income taxes. The Corporate Tax Dodging Prevention Act (S.922) would specifically:

  • end rules that allow U.S. corporations to defer tax liability on active foreign earnings until repatriation;
  • close loopholes that allow corporations to accelerate their foreign tax credits;
  • prevent corporations from claiming to be foreign if their management and control operations are primarily based in the United States;
  • prevent American corporations from avoiding U.S. taxes through inversions;
  • prevent foreign-owned corporations from stripping earnings out of the U.S. by manipulating debt expenses; and
  • close a loophole that has allowed large U.S. oil companies to claim foreign tax credits for royalty payments to foreign governments.

"At a time when we have a $18.2 trillion national debt and an unsustainable federal deficit [...], it is past time for corporate America to pay their fair share in taxes so that we can create the millions of jobs this country needs," Sanders said at a news conference on Capitol Hill. The senator from Vermont introduced similar, but ultimately unsuccessful, proposals in the 113th Congress. With a Republican-controlled Congress, S. 922 is not expected to go far. Read a summary of the bill here.

REGULATORY WORLD

DOL's Fiduciary Rule in Primetime. The Department of Labor has issued its long-awaited re-proposal of the fiduciary rule for retirement advisers. Spanning 120 pages, the proposed rule expands the definition of "fiduciary" to cover brokers who provide retirement advice to investors. The rule would require retirement advisers to act in their clients' best interest. DOL is giving the public 75 days to submit comments on the proposed rulemaking. Public comments are due on July 6, 2015.

On a related note, in a recent court case concerning the scope of ERISA fiduciaries, the Supreme Court has decided not to weigh in, denying a writ of certiorari in Santomenno vs. John Hancock Life Insurance Company.

Self-Certification Required under FATCA. There has been some confusion as to whether or not self-certification was required in jurisdictions that have Model 1 intergovernmental agreements in place. Without self-certification, then new accounts could not be opened and existing accounts had to be closed. However, some countries like Canada and the U.K. merely required that the accounts be reportable accounts, bypassing any self-certification requirement. The Securities Industry and Financial Market Association (SIFMA) penned a letter stating that inconsistent guidance put some of its members across borders in untenable positions because other countries did not follow U.S. guidance regarding self-certification. A U.S. Treasury official has cleared up any confusion stating that self-certification was a key due diligence requirement.

BEPS Project Chugging Along, U.S. Not Fully on Track. While the base erosion and profit shifting (BEPS) project is nearing completion in the fall of 2015, it does not appear that the U.S. is fully on board with all of the Organization for Economic Cooperation and Development's forthcoming recommendations. Robert Stack, the Treasury Department's deputy assistant secretary for international tax affairs, noted that there was an "undeserved" focus on U.S. multinational companies. While the speculation is that the BEPS plan will be implemented by the EU immediately, it may not be so in the U.S., where new legislation and regulation will likely be needed for guidance in certain cases. BEPS may be successful in getting the implementation and recognition across the pond, but that will not necessarily be the case here.

LOOKING AHEAD

Wednesday 4/22

Senate Finance Committee

The full committee holds a markup of legislation to extend and modify the credit for health insurance costs of certain eligible individuals. The committee is also expected to markup the Trade Promotion Authority bill as well as other trade-related bills.

American Enterprise Institute and the Brookings Institution

AEI and Brookings hold a discussion on "Carbon Taxes: Practicalities and Prospects." Read more here.

Thursday, 4/23

Senate Finance Committee

The Subcommittee on Health Care holds a hearing on the medical device tax. Read more here.

The Tax Council

The Tax Council hosts a legislative luncheon with Congressman Devin Nunes, where he will discuss his idea for corporate tax reform. RSVP 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 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
Check to state you have read and
agree to our Terms and Conditions

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.

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 by clicking here .

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.