United States: Tax Policy Update - June 30, 2015

NUMBER OF THE WEEK: 65 percent.

The top estate tax rate under Democratic presidential candidate Bernie Sanders' proposal to tax the wealthiest Americans and narrow income inequality in the U.S. The proposal splits the estate tax into four brackets:

Estate Value Proposed Tax Rate
>$3.5 million 45%
>$10 million 50%
>$50 million 55%
$1 billion or more 65%

This ambitious and aggressive proposal would receive little attention in the Republican-controlled Congress, however. Republicans in both chambers have made no secret of their desire to repeal the estate tax entirely. The House of Representatives has already passed legislation to repeal the tax back in April. Nevertheless, Sanders' proposal may push other presidential candidates to put forth their own ideas to address the income inequality problem—especially Democratic frontrunner Hillary Clinton. Among the Republican hopefuls, Senator Marco Rubio was the first to announce his support for repealing the estate tax. Read more here.


The Road Goes on Forever...But the Funding's About to End. Lawmakers will return from recess next week with just over three weeks left to come up with a funding solution for the Highway Trust Fund (HTF), which is set to run dry at the end of July. Finding the necessary offsets for a long-term bill has proved exceedingly difficult, with deep intra-party divides over options like raising the gas tax or incentivizing the repatriation of multinationals' foreign earnings via a one-time "tax holiday." The Senate Finance and House Ways and Means Committees held a total of four hearings this month to examine various aspects of the funding question, but none of those hearings appear to have moved the needle toward agreement on a solution.

In an ideal world, Senate Republicans would like to find enough offsets to pay for a two-year extension of the HTF, but that would require coming up with around $35 billion. House Republicans think a one-year extension with a price tag of roughly $19 billion is more feasible, but, even then, lawmakers are struggling to cobble together enough offsets. For now, Republicans have reportedly identified a broad assortment of tax compliance and administrative changes that raise some revenue, though not enough for even a one-year extension. Republicans are looking to Senate Democrats to come up with either revenue changes or spending cuts they could live with to get an agreement across the finish line.

Permanent Extension of Bonus Depreciation Introduced in Senate. Senator Pat Roberts (R-KS) introduced a bill (S.1660) last week that would permanently extend bonus depreciation, allowing businesses to deduct half the cost of new equipment and property expenses immediately. "This legislation will provide much needed certainty in the tax code so businesses can better plan investments that create more jobs and growth in our communities," Roberts said in a press release. Based on a 2014 Joint Committee on Taxation estimate of a similar proposal, Roberts' bill would cost more than $250 billion over 10 years. The permanent extension of bonus depreciation has attracted its fair share of supporters and detractors. Opponents argue that a permanent extension would eliminate its short-term incentive for investment, and therefore, weaken its effectiveness. Supporters, such as the Tax Foundation and Heritage Foundation, argue that permanent extension would actually boost economic output.

Roberts' bill is not expected to get far in the legislative process this year. A similar bill (H.R. 2510) was introduced in the House in May by Congressman Pat Tiberi (R-OH) but has not received any further action. Senate Finance Chairman Orrin Hatch (R-UT) is generally reluctant to address permanent extenders outside of tax reform.

Baldwin, Levin Introduce Legislation to Close "Carried Interest Loophole." Senator Tammy Baldwin (D-WI) and House Ways and Means Ranking Member Sandy Levin (D-MI) have teamed up to put an end to the capital gains treatment of carried interest. Baldwin and Levin introduced the Carried Interest Fairness Act of 2015 (H.R. 2889) which would treat carried interest compensation as ordinary income for tax purposes, rather than at the 20 percent capital gains rate. According to a fact sheet prepared by the Ways and Means Committee Democratic Staff, the legislation would not affect capital gains income earned from direct investments: "The capital gains rate will continue to apply to the extent that a manager's allocation of capital gain income represents a return on capital they have actually invested in the partnership." Read more here.

Proposed changes to carried interest treatment have popped up in the President's budgets and in the tax reform proposal released by former House Ways and Means Chairman Dave Camp (R-MI) last year. The Joint Committee on Taxation scored the President's proposal as raising more than $17 billion over the 10-year budget window, while Camp's pared-down proposal was projected to raise only $3.1 billion.


Update on the Forthcoming IRS and Treasury Guidance Projects. Officials at the IRS and Treasury Department recently discussed the agencies' priority guidance projects. The rules on qualifying income of publicly traded partnerships and rules on determining distributive shares when there are changes in a partner's interest are near completion, according to Curtis Wilson, IRS associate chief counsel of the Passthroughs & Special Industries division. Proposed rules on partnerships remain a continued interest for the IRS and Treasury, but disguised partnership sales and tax treatment of partnership liabilities remain in developmental stages. Gerson indicated that the New York State Bar comments on the latter project will be adopted "in one form or another." The letter from May 2014 can be found here.

European Parliament to Probe Further Into Tax Agreements. A special tax committee of the European Parliament will soon meet with executives of multinational companies on the tax benefits received from Luxembourg. Company executives from Airbus, BNP Paribas and Total, will discuss how they pay corporate taxes and whether base erosion and profit shifting restrictions are needed. Executives from many other well-known multinational corporations have declined to meet with the tax committee. The committee was initially established when it was uncovered that Luxembourg entered into over 300 tax agreements with multinational corporations. A final report is expected from the committee in conjunction with its plan, announced last week, to bring about a common, consolidated corporate tax base.

EU Study Indicates Patent Box Coupled with Modified Nexus is Best. As the U.S. considers intellectual property tax incentives, a study released by the European Union provides that a patent box "[does] not necessarily serve the goal of boosting R&D activity." The OECD expects to use a modified nexus approach in its recommendations, much like the agreement adopted between the U.K. and Germany. The modified nexus requires a certain level of R&D to be conducted with in the country to enjoy the tax benefits of a patent box regime. U.S. lawmakers have recently shown increasing interest in developing a patent or innovation box regime, and we expect to see some variation of the idea proposed in international tax legislation expected later this summer from Rep. Charles Boustany (R-LA).


  • Senate Finance Ranking Member Ron Wyden (D-OR) introduced the Offshore Reinsurance Tax Fairness Act aimed to prevent abuse of the passive foreign investment company rules. Read more here.
  • Congressman George Holding (R-NC) introduced the Tanning Tax Repeal Act of 2015, which would eliminate the 10 percent excise tax on indoor tanning services. Read more here.
  • The Senate Finance Committee's Tax Reform Working Groups are now expected to deliver their recommendations on July 7. Recommendations from the working groups were originally due at the end of May, but the deadline has been extended twice already. Of the five working groups, the international tax group reportedly will offer the most substantive policy offerings.


Wednesday, 7/1

International Tax Dialogue — Paris
The European Commission (EC), Inter-American Development Bank (IDB), International Monetary Fund (IMF), Organization for Economic Co-operation and Development (OECD), World Bank Group and Inter-American Center of Tax Administrations (CIAT) host the International Tax Dialogue initiative, July 1-3. The ITD aims to encourage and facilitate discussion of tax matters among national tax officials, regional tax organizations, international organizations and other key stakeholders. Read more here.

Have a Happy and Safe Fourth of July!

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.

Similar Articles
Relevancy Powered by MondaqAI
McGuireWoods LLP
McGuireWoods LLP
McGuireWoods LLP
McGuireWoods LLP
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
McGuireWoods LLP
McGuireWoods LLP
McGuireWoods LLP
McGuireWoods LLP
Related Articles
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
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.


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.


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