United States: Tax Policy Update - October 27, 2015

NUMBER OF THE WEEK: $80 billion

The total cost of raising the current sequestration caps under a new two-year budget deal released by bipartisan budget negotiators on the evening of Oct. 26. For the FY2016 budget, the caps will be raised by $50 billion, and the FY2017 budget will see an increase of $30 billion. The budget cap increases will be divided evenly between defense and non-defense spending. With the Nov. 3 debt-ceiling deadline just around the corner, the newly-proposed budget deal would also temporarily suspend the debt limit until Mar. 15, 2017. Offsets for the $80 billion include the sale of oil from the Strategic Petroleum Reserve, partnership tax compliance changes, public auction of spectrum, pension smoothing, surplus from the Crime Victims Fund and Asset Forfeiture Fund, and the repeal of automatic enrollment under the Affordable Care Act.

H.R. 1314 will be the legislative vehicle for the two-year budget deal, which would help expedite consideration of the deal in both the House and Senate.

LEGISLATIVE LANDSCAPE

House Speaker Election Set for Oct. 28. House Republicans breathed a sigh of relief last week when Ways and Means Chairman Paul Ryan officially announced his bid for the House speakership. Ryan's election is set for Oct. 28 — a floor vote on the following day will make it official. Barring any last minute surprises, Ryan is set to...

Ryan's Choice: Tiberi vs. Brady. With Paul Ryan's imminent departure as head of the House Ways and Means Committee, Reps. Pat Tiberi and Kevin Brady are set to go head-to-head in the battle for the gavel over one of the most powerful committees in Congress. Both lawmakers have reached out to members of the House Republican Steering Committee to make their case. Brady's seniority on the tax-writing panel and his close relationship with the House leadership makes him a logical first choice. But there's hope yet for Tiberi. It's not impossible for a junior member to...

REGULATORY WORLD

EU Fiat, Starbucks Decisions Up the Ante for Amazon, Apple. On Oct. 21, the EU Commission declared that the tax rulings on transfer pricing granted by the Netherlands to Starbucks and by Luxembourg to Fiat were illegal under the EU state aid rules. As a result, both companies may have to shell out...

IRS May Release Anti-Inversion Guidance by Year-End. In September 2014, the Treasury Department introduced tougher rules to block the use of intracompany loans, spin-offs, and asset transfers to foreign subsidiaries. Almost a year late, the IRS is ready to issue further guidance. Taxpayers may see rules on anti-inversions Notice 2014-52 by the end...

Sequestration Will Affect Refund Payments Issued to Corporations. Due to sequestration measures, corporations that currently elect to accelerate the alternative minimum tax credit in lieu of bonus depreciation will see a portion of their refundable tax credit for prior years reduced, pursuant to the Balanced Budget and Emergency Deficit Reduction Act of 1985, according to guidance issued by the IRS. This means that refund payments processed on or after Oct. 1, 2015 and on or before Sept. 30, 2016 must be...

IRS Releases Draft of 2015 Form 8966. The IRS has released a draft version of the 2015 Form 8966, used to report information with respect to U.S. accounts under the Foreign Account Tax Compliance Act (FATCA). However, the draft instructions for Form 8966 still have not been released.

FATCA generally requires withholding agents to deduct 30 percent on certain payments made to foreign financial institutions, unless the institution has entered...

LINE ITEMS

  • Congress will pass another short-term highway reauthorization to give lawmakers more time to figure out how to pay for a multiyear bill. Current authorization for surface transportation programs is set to expire Oct. 29. The three-week patch was introduced on Oct. 23 and can be found here. No additional offsets will be necessary for this short-term extension.
  • In a 240 to 189 vote, the House passed its reconciliation bill, repealing major provisions under the Affordable Care Act and defunding Planned Parenthood for one year. Under reconciliation, the Cadillac tax, medical device tax, as well as the employer and individual mandates would be repealed.

LOOKING AHEAD

Relevant Congressional Activity

Tuesday, 10/27

Senate Finance Committee

The full committee holds a hearing on "The Internal Revenue Service's Response to the Committee Recommendations Contained in its August 5, 2015 Report." IRS Commissioner John Koskinen will testify. Read more here.

Wednesday, 10/28

Senate HELP Committee

The Subcommittee on Primary Health and Retirement Security holds a hearing on "Retirement Plan Options for Small Businesses." Read more here.

Thursday, 10/29

Senate Finance Committee

The full committee holds a hearing on "Welfare and Poverty in America." Read more here.

Relevant Agency Activity

Tuesday, 10/27

Department of the Treasury

The IRS holds a meeting on proposed regulations relating to qualifying income from activities of PTPs with respect to minerals or natural resources. Read more here.

Wednesday, 10/28

Department of the Treasury

The IRS holds a meeting on proposed rulemaking related to the revised definition of issue price for purposes of arbitrage restrictions as it affects issuers of tax-exempt and other tax-advantaged bonds. Read more here.

Department of the Treasury

The IRS holds a meeting of the Information Reporting Program Advisory Committee.

Other Activity

Monday, 10/26

Macroprudential Policy: Effectiveness and Implementation Challenges

Jointly organized by the Central Bank of the Republic of Turkey, International Monetary Fund and the Bank for International Settlements, this two-day conference aims to provide a forum for policy makers and academics to share their experiences and knowledge on the effectiveness of macroprudential policies, their interaction with other policies such as monetary and fiscal as well as the challenges implementing them. In that regard, the conference will discuss the latest research findings and policy recommendations to better understand and effectively calibrate macroprudential policies.

Wednesday, 10/28

Bipartisan Policy Center

U.S. Treasury Secretary Jacob J. Lew will discuss the pressing need for Congress to extend the nation's borrowing authority at the Bipartisan Policy Center. Participants include: Representative Vin Weber (R-MN) and Senator Kent Conrad (D-ND), former chair of the Senate Budget Committee. Read more here.

Economic Club of Washington

The Economic Club of Washington holds a discussion on the role of banks in supporting the business community and the economy.

Thursday, 10/29

OECD

The OECD holds the 8th Global Forum on Transparency and Exchange of Information for Tax Purposes. The forum will address the risks of tax compliance posed by tax havens. Read more here.

2015 OECD/IOPS Global Forum on Private Pensions – Berlin, Germany

The Global Forum will explore current trends in global private pension systems and the ways in which pension regulatory and supervisory authorities are managing and reacting to the evolution of these systems. Some of the trends that will be considered include the increased interest in long-term investments and the prolonged period of low-interest rates in the financial services markets. Read more 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.

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