TAX TIDBIT
Welcome back from the long weekend in remembrance of Dr. Martin Luther King, Jr., who once said “all labor that uplifts humanity has dignity and importance and should be undertaken with painstaking excellence.” So, we bring yet another edition of Taxation & Representation—this labor of love is for our readers, so let’s get into it.
Let Them Drink…Beer? With the House out for a district work period and the Senate focused on President Trump’s impeachment trial, the biggest tax story to watch this week will be happening in Davos, Switzerland. The annual World Economic Forum (WEF) is this week and world leaders will discuss everything from cybersecurity to the future of energy. Also on the agenda are how to revamp the current international tax regime and ongoing contentious negotiations between French and U.S. officials.
For a quick recap on where negotiations stand related to the Organization for Economic Cooperation and Development’s (OECD) Base Erosion and Profit Shifting (BEPS) project and the French-U.S. dispute over digital services taxes, click here and here.
French and U.S. officials are eager to reach a compromise on the new French digital tax that would hit American tech giants. In response to the tax, President Trump threatened in December to levy a retaliatory tax on some iconic French goods, including wine, cheese and certain luxury goods, such as handbags. Those threats seem to be on hold for now—on Jan. 20, French President Emmanuel Macron and President Trump reached a tentative agreement that neither country will impose tariffs this year, and France will refrain from collecting receipts for its digital services tax until November.
While the U.S. and France have reached an understanding, other European countries may still move ahead with plans to implement a digital tax. Earlier today, Treasury Secretary Steve Mnuchin warned Italy and Britain that if they proceed with similar digital taxes, the U.S. will respond in kind and impose tariffs. Mnuchin’s message resonated across the border as Canadian Heritage Minister Steven Guilbeault said earlier this week that Prime Minister Justin Trudeau’s administration is reconsidering the path forward on the digital tax. While he praised the French digital tax, Guilbeault said the Canadian approach “will be different” and that rather than unilaterally impose a similar tax, there should be a “concerted effort by many countries.”
With these latest developments in mind, what should you be watching this week? Well, outside of Davos, OECD finance ministers met today in Brussels, Belgium to discuss the group’s progress on its efforts to update global tax norms. During the meeting, France, Germany, Italy, the United Kingdom and the European Commission all opposed the voluntary option proposed by the U.S.
Tomorrow, Mnuchin will meet with his French counterpart, Bruno Le Maire, at the World Economic Forum, which President Trump is also attending. Mnuchin and Le Maire are expected to discuss the digital services tax. Le Maire published an op-ed in the Wall Street Journal last week explaining that France will not back down in light of tariff threats from the U.S. La Maire also spoke with National Economic Council Director Larry Kudlow on Thursday about how the two countries can avoid further escalation. According to Le Maire, he presented a number of potential solutions to Kudlow. Mnuchin and Le Maire are expected to discuss the proposals tomorrow during their meeting.
Next week, from Jan. 29-30, the OECD will meet in Paris to further discuss their BEPS project. According to two OECD officials, the bloc will not be able to meet its June deadline for proposing a global compromise.
The Brownstein Tax Policy Team will be keeping a close eye on the latest developments overseas. Stay tuned for updates!
LEGISLATIVE LOWDOWN
Giving Green Another Go. Since retaking the House, congressional Democrats have not been shy about their support for enacting green energy tax incentives. House Ways and Means Committee Democrats unveiled draft legislation last November—the Growing Renewable Energy and Efficiency Now (GREEN) Act—that contained provisions to incentivize the use and development of green energy. While the draft legislation was never formally marked up, congressional Democrats attempted to attach some if its provisions to the year-end tax package (P.L.116-94). However, many of their asks, including electric vehicle (EV) incentives and extensions of offshore wind facility credits and solar tax credit, were ultimately left out. Now, committee Chair Richard Neal (D-MA) wants the committee to revisit the draft legislation through a formal markup, sometime before April.
You Get a Tax Cut, and You Get a Tax Cut! In an attempt to expand the Tax Cuts and Jobs Act (TCJA, P.L.115-97), President Trump and congressional Republicans are working on another round of tax cuts, dubbed “Tax Cuts 2.0.” Last week, National Economic Council Director Larry Kudlow said although discussions are in early stages, the White House continues to have conversations with top tax writing committee Republicans, including House Ways and Means Committee Ranking Member Kevin Brady (R-TX). As former chair of the committee, Brady led passage of the TCJA in 2017. Details on the current Tax Cuts 2.0 effort are scarce, and Kudlow said it will be “many months” until a fully formed plan is ready, although President Trump signaled a plan would be unveiled before April 20. Kudlow hinted the package may include a reduction of the 22% individual tax bracket down to 15%. A full plan is expected in late summer, according to Kudlow, and will “create 1.5 million new jobs.” Treasury Secretary Steven Mnuchin said yesterday that the Trump administration’s budget proposal, which is expected in February, will include a middle-class tax cut as well.
REGWATCH
Crossing the TCJA Finish Line. Last week, the Treasury Department and the Internal Revenue Service (IRS) finally released the agency’s New Year’s resolution: complete all regulatory guidance related to the Tax Cuts and Jobs Act (TCJA, P.L.115-97) by the end of 2020. The ambitious goal would require the IRS to release guidance more expeditiously than it did following enactment of the Tax Reform Act of 1986 (P.L.99-514), but at least some Treasury Department officials are feeling optimistic. Since passage of the TCJA in December 2017, the IRS has fully completed about 60% of its work related to the landmark tax reform law. According to one agency official, taking all final and proposed regulations into consideration leaves the work “close to 90%” complete. To meet the self-imposed deadline, the IRS will have to issue guidance on some significant provisions yet to be fully addressed, such as carried interest and executive compensation.
Senate Democrats Look Into Regulatory Process. Last week, Senate Finance Committee Ranking Member Ron Wyden (D-OR) and Democratic committee members Sens. Sherrod Brown (D-OR), Bob Casey (D-PA), Sheldon Whitehouse (D-RI) and Catherine Cortez Masto (D-NV) sent a letter to Treasury Secretary Steve Mnuchin and Office of Management and Budget (OMB) Acting Director Russell Vought about how the Trump administration is using the regulatory process, now governed by a Memorandum of Understanding between the bodies, to reshape tax law. Specifically, the group accused the Treasury Department and OMB of “using the new system’s complexity as a means to give even more tax cuts to corporations through the secretive regulatory process where corporations and their armies of lobbyists exercise undue influence.” The letter includes a request for a complete list of meetings that Office of Information and Regulatory Affairs chief Paul Ray, Mnuchin, and a handful of other Treasury Department officials attended in relation to international regulations that may have benefitted multinational corporations.
1111 CONSTITUTION AVENUE
IRS to Return Sequestered Funds. On Thursday, the IRS announced plans to return sequestered funds to businesses impacted by a December 2018 OMB determination regarding the Balanced Budget and Emergency Deficit Control Act of 1985, as amended. In its announcement, the IRS said funds claimed under Section 168(k)(4) of the code would no longer be considered subject to sequestration, expanding on the 2018 determination that exempted refunds taken under Section 53(e). The agency says fewer than 1,000 businesses qualify for this refund, and they do not need to do anything to get their money back.
GLOBAL GETDOWN
Hogan Visits Washington. In the lead up to this week’s World Economic Forum, European Union Trade Commissioner Phil Hogan was in Washington, D.C. participating in a number of meetings with Trump administration officials and congressional tax leaders. Hogan began with a Jan. 14 meeting with U.S. Trade Representatives (USTR) Robert Lighthizer and Japanese trade minister Hiroshi Kajiyama. After initial discussions, Hogan released a video explaining how the Europeans and the U.S. "have more in common than perhaps we realized and that we want to engage in cooperation and dialogue rather than confrontation."
On Jan. 16, Hogan sat down with House Ways and Means Committee Chair Richard Neal (D-MA) and Ranking Member Kevin Brady (R-TX)—all of whom reportedly left the meeting feeling optimistic. Neal later released a statement expressing his interest in avoiding additional tariffs, and Brady urged the French to reverse course on its digital services tax. Hogan also met with Senate Finance Committee Chair Chuck Grassley (R-IA), who previously urged the Treasury Department and the French government to provide additional time for negotiations, noting that the self-imposed deadline is unrealistic.
On Jan. 17, Hogan again met with Lighthizer and Treasury Secretary Steven Mnuchin. Though the officials did not outline definitive next steps, Hogan reportedly left town more confident in the prospects of a deal between the Americans and Europeans. In his first trip to Washington in his current role, Hogan said he "was very happy with the level of engagement, the very positive cooperative spirit we had with all our interlocutors in the administration." So far, so good.
Not so fast—after Hogan’s departure, Pascal Saitn-Amans, the Director of the OECD’s Center for Tax Policy and Administration, released a statement noting that the OECD has reached an impasse over the United States’ continued insistence that parts of the proposed framework be optional for multi-national corporations. “The optionality proposal is still on the table and it’s acting as a barrier to discussions,” he said.
The discussion over reorienting the global tax system will surely see developments this week as top finance officials from the U.S. and Europe meet in Davos.
AT A GLANCE
- NJ SALT Workaround. On Monday, New Jersey Gov. Phil Murphy (D) signed into law a bill that provides small businesses and partnerships a way to avoid the $10,000 federal cap on state and local tax deductions. The law allows some entities to pay state income tax as a business tax, rather than at the partner level. Proponents are confident it will withstand any federal scrutiny.
- Cha-Ching. New Treasury Department data unveiled last week revealed that corporate tax receipts have continued to increase in recent quarters. The data showed that corporations paid an additional 24.5% in taxes last quarter compared to the same time the previous year. The Treasury Department expects corporate receipts for the current fiscal year to rise to $253 billion, a 10% increase from the previous fiscal year.
BROWNSTEIN BOOKSHELF
- GAO Report. The U.S. Government Accountability Office (GAO) assesses the Internal Revenue Service’s (IRS) collaboration efforts with other agencies to communicate tax law changes, performance in providing customer service and areas of opportunity for the IRS to improve. Read the eight recommendations here.
- EITC Expensive Expansion. The Republican members of the House Budget Committee released a report on January 16, 2020, which highlights that an expansion of the Earned Income Tax Credit would cost the federal government $2.9 trillion over 10 years.
- Decade of Expiring Provisions. The Joint Committee on Taxation prepared a document listing federal tax provisions scheduled to expire in 2020—2029.
REGULATION STATION
INTERNATIONAL
|
Regulation
|
Latest Action
|
Regulation Link
|
Comment Countdown
|
|
Foreign Partner Transfer Rules
|
Jan. 23, 2020
Final Rules
Jan. 19, 2017
|
T.D.9891
REG-127203-15
|
N/A
Deadline Passed
April 19, 2017
|
|
Foreign Tax Credit
Sec. 965(g)
|
Dec. 17, 2019
Dec. 2, 2019
Final / Temporary Regulations
|
REG-105495-19
T.D.9882
|
28 days
N/A
|
|
Dividend Equivalent
Sec. 871(m)
|
Dec. 16, 2019
Final Regulations
Jan. 24, 2017
|
T.D. 9887
REG-135122-16
|
N/A
Deadline Passed
April 14, 2017
|
|
BEAT
Sec. 59A
|
Dec. 2, 2019
Final Regulations
Dec. 21, 2018
|
T.D. 9885
REG-104259-18
|
N/A
Deadline Passed
Feb. 19, 2019
|
|
BEAT
Sec. 59A
|
Dec. 2, 2019
|
REG-112607-19
|
14 days
|
|
Ownership Attribution
954(d)(3)
|
Nov. 19, 2019
Final Regulations
May 20, 2019
|
T.D. 9883
REG-125135-15
|
N/A
Deadline Passed
July 19, 2019
|
|
Transition From Interbank Offered Rates
Sec. 860G, 882, 1001, 1275
|
Oct. 9, 2019
|
REG-118784-18
|
Deadline Passed
Nov. 25, 2019
|
|
GILTI
Sec. 951A
|
Oct. 4, 2019
Correction
Aug. 23, 2019
Correction
June 21, 2019
Final Regulations
Oct. 10, 2018
|
C2-2019-12437
C1-2019-12437
T.D. 9866
REG-104390-18
|
N/A
N/A
N/A
Deadline Passed
Nov. 26, 2018
|
|
Ownership Attribution
Sec. 958(b)
|
Oct. 2, 2019
|
REG-104223-18
Rev. Proc. 2019-40
|
Deadline Passed
Dec. 2, 2019
N/A
|
|
Investors in Foreign Insurers (PFIC)
Sec. 1291, 1297, 1298
|
July 11, 2019
|
REG-105474-18
|
Deadline Passed
Sept. 9, 2019
|
|
GILTI
Sec. 958 and 951A
|
June 21, 2019
|
REG-101828-19
|
Deadline Passed
Sept. 19, 2019
|
|
Foreign Tax Credit
|
June 21, 2019
Final Regulations
Dec. 7, 2018
|
T.D. 9866
REG-105600-18
|
N/A
Deadline Passed
Feb. 5, 2019
|
|
Dividends Received Deduction
Sec. 954
|
June 18, 2019
June 18, 2019
Final Temporary Regulations
|
REG-106282-18
84 FR 28398
|
Deadline Passed
Sept. 16, 2019
N/A
|
|
Deemed Income Inclusion
Sec. 956
|
May 23, 2019
Final Regulations
Nov. 5, 2018
|
T.D. 9859
REG-114540-18
|
N/A
Deadline Passed
Dec. 5, 2019
|
|
FDII and GILTI
|
April 12, 2019
Correction
March 6, 2019
|
C1-2019-03848
REG-104464-18
|
N/A
Deadline Passed
May 6, 2019
|
|
Transition Tax
Sec. 965
|
April 10, 2019
Correction
Feb. 5, 2019
Final Regulations
Aug. 9, 2018
|
2019-07012
2019-07018
T.D. 9846
REG-104226-18
|
N/A
N/A
N/A
Deadline Passed
Oct. 9, 2018
|
|
Certain Hybrid Arrangements
Sec. 245A(e) 267A
|
Dec. 28, 2018
|
REG-104352-18
|
Deadline Passed
Feb. 26, 2019
|
|
GILTI
|
Sept. 13, 2018
|
Rev. Proc. 2018-48
|
N/A
|
199A
|
Regulation
|
Latest Action
|
Regulation Link
|
Comment Countdown
|
|
Qualified Business Income Deduction – Real Estate Safe Harbor
Sec. 199A
|
Sept. 24, 2019
|
Rev. Proc. 2019-38
|
N/A
|
|
Rules for Cooperatives and their Patrons
Sec. 199A
|
June 19, 2019
|
REG-118425-18
|
Deadline Passed
Aug. 19, 2019
|
|
Qualified Business Income Deduction Sec. 199A
|
April 17, 2019
Correction
|
84 FR 15953
|
N/A
|
|
Qualified Business Income Deduction Sec. 199A
|
Feb. 8, 2019
|
REG-134652-18
|
Deadline Passed
April 9, 2019
|
|
Qualified Business Income Deduction
Sec. 199A
|
Feb. 8, 2019
Final Regulations
Aug. 16, 2018
|
T.D. 9847
REG-107892-18
|
N/A
Deadline Passed
Oct. 1, 2018
|
|
W-2 Wages for Qualified Business Income Deduction
Sec. 199A
|
Jan. 18, 2019
|
Rev. Proc. 2019-11
|
N/A
|
|
Trade or Business Safe Harbor: Rental Real Estate
Sec. 199A
|
Jan. 18, 2019
|
Notice 2019-07
|
N/A
|
DOMESTIC BUSINESS
|
Regulation
|
Latest Action
|
Regulation Link
|
Comment Countdown
|
|
NOLs
Sec. 382(h)
|
Jan. 14, 2020
|
REG-125710-18
|
55 days
|
|
Opportunity Zones
|
Jan. 13, 2020
Final Regulations
May 1, 2019
Oct. 29, 2018
|
T.D.9889
REG-120186-18
REG-115420-18
|
N/A
Deadline Passed
July 1, 2019
Deadline Passed
Dec. 28, 2018
|
|
Executive Comp
Sec. 162(m)
|
Dec. 20, 2019
|
REG-122180-18
|
28 days
|
|
Spinoff Predecessor and Successor Rules
Sec. 355(e)
|
Dec. 16, 2019
Final Regulations
Dec. 19, 2016
Nov. 22, 2004
|
T.D. 9888
T.D. 9805
REG-140328-15
REG-145535-02
|
N/A
N/A
Deadline passed
March 20, 2017
Deadline passed
February 22, 2005
|
|
Eligible Terminated S Corporations
Sec. 481, 1377
|
Nov. 7, 2019
|
REG-131071-18
|
Deadline Passed
Dec. 23, 2019
|
|
Treatment of Certain Interests in Corporations as Stock or Indebtedness
Sec. 385
|
Nov. 4, 2019
|
REG-123112-19
|
13 days
|
|
Debt-Equity Documentation
Sec. 385
|
Nov. 4, 2019
Final Regulations
Sept. 24, 2018
|
TD 9880
REG-130244-17
|
N/A
Deadline Passed
Dec. 24, 2018
|
|
Partnership Liability
Sec. 707
|
Oct. 9, 2019
Final Regulations
June 19, 2018
|
TD 9876
REG-131186-17
|
N/A
Deadline Passed
July 19, 2018
|
|
Full Expensing
Sec. 168(k)
|
Sept. 24, 2019
|
REG-106808-19
|
Deadline Passed
Nov. 25, 2019
|
|
Full Expensing
Sec. 168(k)
|
Sept. 24, 2019
Final Regulations
Aug. 8, 2018
|
TD 9874
REG-104397-18
|
N/A
Deadline Passed
Oct. 9, 2018
|
|
Built-In Gains and Losses
Sec. 382
|
Sept. 10, 2019
|
REG-125710-18
|
Deadline Passed
Nov. 12, 2019
|
|
Certain Transfers of Property to RICs and REITs
|
June 7, 2019
Final Regulations
June 8, 2016
|
T.D. 9862
REG-126452-15
|
N/A
Deadline Passed
August 8, 2016
|
|
Certified Professional Employer Orgs.
Sec. 7705 and 3511
|
May 28, 2019
Final Regulations
May 6, 2016
|
T.D. 9860
REG-127561-15
|
N/A
Deadline Passed
August 4, 2016
|
|
Interest Deduction Limitation
Sec. 163(j)
|
Dec. 28, 2018
|
REG-106089-18
|
Deadline Passed
Feb. 26, 2019
|
|
Sec. 162(m)
|
Aug. 21, 2018
|
Notice 2018-68
|
N/A
|
|
Carried Interest
Sec. 1061
|
March 1, 2018
|
Notice 2018-18
|
N/A
|
EXEMPT ORGANIZATIONS
|
Regulation
|
Latest Action
|
Regulation Link
|
Comment Countdown
|
|
UBIT
Sec. 512(a)
|
Dec. 9, 2019
Final Regulations
Feb. 06, 2014
|
T.D.9886
REG-143874-10
|
N/A
Deadline Passed
May 7, 2014
|
|
Time and manner for filing and paying excise taxes
Sec. 4960, 4966, 4967, and 4968
|
April 9, 2019
Final Regulations
Nov. 7, 2018
|
T.D. 9855
REG-107163-18
|
N/A
Deadline Passed
Dec. 7, 2018
|
|
Excise Tax on Executive Compensation
Sec. 4960
|
Dec. 31, 2018
|
Notice 2019-09
|
N/A
|
|
UBIT
Sec. 274 and 512
|
Dec. 10, 2018
|
Notice 2018-99
|
N/A
|
|
UBIT
Sec. 512(a)(6)
|
Aug. 21, 2018
|
Notice 2018-67
|
N/A
|
|
Higher Education Excise Tax
Sec. 4968
|
June 8, 2018
|
Notice 2018-55
|
Deadline Passed
Sept. 6, 2018
|
OTHER
|
Regulation
|
Latest Action
|
Regulation Link
|
Comment Countdown
|
|
SALT
Sec. 162, 164, 170
|
Dec. 13, 2019
Dec. 28, 2018
|
REG-107431-19
Rev. Proc. 2019-12
|
10 days
N/A
|
|
Estate and Gift Taxes
Sec. 2010(c)(3)
|
Nov. 26, 2019
Final Regulations
Nov. 23, 2018
|
T.D. 9884
REG-106706-18
|
N/A
Deadline Passed
Feb. 21, 2019
|
|
E-Filing of Health Insurance Information
Sec. 9010(a)
|
Nov. 13, 2019
Final Regulations
December 9, 2016
|
T.D. 9881
REG-123829-16
|
N/A
Deadline Passed
March 9, 2017
|
|
Life Insurance Reporting Rules
Sec. 101 and 6050Y
|
Oct. 25, 2019
Final Regulations
March 25, 2019
|
T.D. 9879
REG-103083-18
|
N/A
Deadline Passed
May 9, 2019
|
|
ABLE Accounts
Sec. 529A
|
Oct. 10, 2019
|
REG-128246-18
|
Deadline Passed
Jan. 8, 2020
|
|
HRA’s
Sec. 2711
|
Sept. 30, 2019
|
REG–136401–18
|
Deadline Passed
Dec. 30, 2019
|
|
Hardship Distributions
Sec. 401(k)
|
Sept. 23, 2019
Final Regulations
Nov. 14, 2018
|
TD 9875
REG-107813-18
|
N/A
Deadline Passed
Jan. 14, 2019
|
|
Accounting Methods
Sec. 451(b) and 451(c)
|
Sept. 9, 2019
|
REG-104870-1
REG-104554-18
|
Deadline Passed
Nov. 8, 2019
|
|
University Endowment Income
Sec. 4968
|
July 3, 2019
|
REG-106877-18
|
Deadline Passed
Oct. 1, 2019
|
|
HRA’s
Sec. 2711
|
June 20, 2019
Final Regulations
|
T.D. 9867
|
N/A
|
|
SALT
Sec. 170
|
June 13, 2019
Final Regulations
Aug. 27, 2018
|
T.D. 9864
REG-112176-18
|
N/A
Deadline Passed
Oct. 11, 2018
|
|
Interests Held by Foreign Pension Funds (PATH Act)
Sec. 897
|
June 7, 2019
|
REG-109826-17
|
Deadline Passed
Sept. 5, 2019
|
|
Market Discount Guidance
Sec. 451(b)
|
Sept. 27, 2018
|
Notice 2018-80
|
N/A
|
|
Safe Harbor of Eligible Rollover Distributions
|
Sept. 20, 2018
|
Notice 2018-74
|
N/A
|
|
Education Savings
|
July 30, 2018
|
Notice 2018-58
|
N/A
|
|
Health Savings Accounts
|
March 5, 2018
|
Rev. Proc. 2018-18
Rev. Proc. 2018-27
|
N/A
|
TAX TIDBIT
Welcome back from the long weekend in remembrance of Dr. Martin Luther King, Jr., who once said “all labor that uplifts humanity has dignity and importance and should be undertaken with painstaking excellence.” So, we bring yet another edition of Taxation & Representation—this labor of love is for our readers, so let’s get into it.
Let Them Drink…Beer? With the House out for a district work period and the Senate focused on President Trump’s impeachment trial, the biggest tax story to watch this week will be happening in Davos, Switzerland. The annual World Economic Forum (WEF) is this week and world leaders will discuss everything from cybersecurity to the future of energy. Also on the agenda are how to revamp the current international tax regime and ongoing contentious negotiations between French and U.S. officials.
For a quick recap on where negotiations stand related to the Organization for Economic Cooperation and Development’s (OECD) Base Erosion and Profit Shifting (BEPS) project and the French-U.S. dispute over digital services taxes, click here and here.
French and U.S. officials are eager to reach a compromise on the new French digital tax that would hit American tech giants. In response to the tax, President Trump threatened in December to levy a retaliatory tax on some iconic French goods, including wine, cheese and certain luxury goods, such as handbags. Those threats seem to be on hold for now—on Jan. 20, French President Emmanuel Macron and President Trump reached a tentative agreement that neither country will impose tariffs this year, and France will refrain from collecting receipts for its digital services tax until November.
While the U.S. and France have reached an understanding, other European countries may still move ahead with plans to implement a digital tax. Earlier today, Treasury Secretary Steve Mnuchin warned Italy and Britain that if they proceed with similar digital taxes, the U.S. will respond in kind and impose tariffs. Mnuchin’s message resonated across the border as Canadian Heritage Minister Steven Guilbeault said earlier this week that Prime Minister Justin Trudeau’s administration is reconsidering the path forward on the digital tax. While he praised the French digital tax, Guilbeault said the Canadian approach “will be different” and that rather than unilaterally impose a similar tax, there should be a “concerted effort by many countries.”
With these latest developments in mind, what should you be watching this week? Well, outside of Davos, OECD finance ministers met today in Brussels, Belgium to discuss the group’s progress on its efforts to update global tax norms. During the meeting, France, Germany, Italy, the United Kingdom and the European Commission all opposed the voluntary option proposed by the U.S.
Tomorrow, Mnuchin will meet with his French counterpart, Bruno Le Maire, at the World Economic Forum, which President Trump is also attending. Mnuchin and Le Maire are expected to discuss the digital services tax. Le Maire published an op-ed in the Wall Street Journal last week explaining that France will not back down in light of tariff threats from the U.S. La Maire also spoke with National Economic Council Director Larry Kudlow on Thursday about how the two countries can avoid further escalation. According to Le Maire, he presented a number of potential solutions to Kudlow. Mnuchin and Le Maire are expected to discuss the proposals tomorrow during their meeting.
Next week, from Jan. 29-30, the OECD will meet in Paris to further discuss their BEPS project. According to two OECD officials, the bloc will not be able to meet its June deadline for proposing a global compromise.
The Brownstein Tax Policy Team will be keeping a close eye on the latest developments overseas. Stay tuned for updates!
LEGISLATIVE LOWDOWN
Giving Green Another Go. Since retaking the House, congressional Democrats have not been shy about their support for enacting green energy tax incentives. House Ways and Means Committee Democrats unveiled draft legislation last November—the Growing Renewable Energy and Efficiency Now (GREEN) Act—that contained provisions to incentivize the use and development of green energy. While the draft legislation was never formally marked up, congressional Democrats attempted to attach some if its provisions to the year-end tax package (P.L.116-94). However, many of their asks, including electric vehicle (EV) incentives and extensions of offshore wind facility credits and solar tax credit, were ultimately left out. Now, committee Chair Richard Neal (D-MA) wants the committee to revisit the draft legislation through a formal markup, sometime before April.
You Get a Tax Cut, and You Get a Tax Cut! In an attempt to expand the Tax Cuts and Jobs Act (TCJA, P.L.115-97), President Trump and congressional Republicans are working on another round of tax cuts, dubbed “Tax Cuts 2.0.” Last week, National Economic Council Director Larry Kudlow said although discussions are in early stages, the White House continues to have conversations with top tax writing committee Republicans, including House Ways and Means Committee Ranking Member Kevin Brady (R-TX). As former chair of the committee, Brady led passage of the TCJA in 2017. Details on the current Tax Cuts 2.0 effort are scarce, and Kudlow said it will be “many months” until a fully formed plan is ready, although President Trump signaled a plan would be unveiled before April 20. Kudlow hinted the package may include a reduction of the 22% individual tax bracket down to 15%. A full plan is expected in late summer, according to Kudlow, and will “create 1.5 million new jobs.” Treasury Secretary Steven Mnuchin said yesterday that the Trump administration’s budget proposal, which is expected in February, will include a middle-class tax cut as well.
REGWATCH
Crossing the TCJA Finish Line. Last week, the Treasury Department and the Internal Revenue Service (IRS) finally released the agency’s New Year’s resolution: complete all regulatory guidance related to the Tax Cuts and Jobs Act (TCJA, P.L.115-97) by the end of 2020. The ambitious goal would require the IRS to release guidance more expeditiously than it did following enactment of the Tax Reform Act of 1986 (P.L.99-514), but at least some Treasury Department officials are feeling optimistic. Since passage of the TCJA in December 2017, the IRS has fully completed about 60% of its work related to the landmark tax reform law. According to one agency official, taking all final and proposed regulations into consideration leaves the work “close to 90%” complete. To meet the self-imposed deadline, the IRS will have to issue guidance on some significant provisions yet to be fully addressed, such as carried interest and executive compensation.
Senate Democrats Look Into Regulatory Process. Last week, Senate Finance Committee Ranking Member Ron Wyden (D-OR) and Democratic committee members Sens. Sherrod Brown (D-OR), Bob Casey (D-PA), Sheldon Whitehouse (D-RI) and Catherine Cortez Masto (D-NV) sent a letter to Treasury Secretary Steve Mnuchin and Office of Management and Budget (OMB) Acting Director Russell Vought about how the Trump administration is using the regulatory process, now governed by a Memorandum of Understanding between the bodies, to reshape tax law. Specifically, the group accused the Treasury Department and OMB of “using the new system’s complexity as a means to give even more tax cuts to corporations through the secretive regulatory process where corporations and their armies of lobbyists exercise undue influence.” The letter includes a request for a complete list of meetings that Office of Information and Regulatory Affairs chief Paul Ray, Mnuchin, and a handful of other Treasury Department officials attended in relation to international regulations that may have benefitted multinational corporations.
1111 CONSTITUTION AVENUE
IRS to Return Sequestered Funds. On Thursday, the IRS announced plans to return sequestered funds to businesses impacted by a December 2018 OMB determination regarding the Balanced Budget and Emergency Deficit Control Act of 1985, as amended. In its announcement, the IRS said funds claimed under Section 168(k)(4) of the code would no longer be considered subject to sequestration, expanding on the 2018 determination that exempted refunds taken under Section 53(e). The agency says fewer than 1,000 businesses qualify for this refund, and they do not need to do anything to get their money back.
GLOBAL GETDOWN
Hogan Visits Washington. In the lead up to this week’s World Economic Forum, European Union Trade Commissioner Phil Hogan was in Washington, D.C. participating in a number of meetings with Trump administration officials and congressional tax leaders. Hogan began with a Jan. 14 meeting with U.S. Trade Representatives (USTR) Robert Lighthizer and Japanese trade minister Hiroshi Kajiyama. After initial discussions, Hogan released a video explaining how the Europeans and the U.S. "have more in common than perhaps we realized and that we want to engage in cooperation and dialogue rather than confrontation."
On Jan. 16, Hogan sat down with House Ways and Means Committee Chair Richard Neal (D-MA) and Ranking Member Kevin Brady (R-TX)—all of whom reportedly left the meeting feeling optimistic. Neal later released a statement expressing his interest in avoiding additional tariffs, and Brady urged the French to reverse course on its digital services tax. Hogan also met with Senate Finance Committee Chair Chuck Grassley (R-IA), who previously urged the Treasury Department and the French government to provide additional time for negotiations, noting that the self-imposed deadline is unrealistic.
On Jan. 17, Hogan again met with Lighthizer and Treasury Secretary Steven Mnuchin. Though the officials did not outline definitive next steps, Hogan reportedly left town more confident in the prospects of a deal between the Americans and Europeans. In his first trip to Washington in his current role, Hogan said he "was very happy with the level of engagement, the very positive cooperative spirit we had with all our interlocutors in the administration." So far, so good.
Not so fast—after Hogan’s departure, Pascal Saitn-Amans, the Director of the OECD’s Center for Tax Policy and Administration, released a statement noting that the OECD has reached an impasse over the United States’ continued insistence that parts of the proposed framework be optional for multi-national corporations. “The optionality proposal is still on the table and it’s acting as a barrier to discussions,” he said.
The discussion over reorienting the global tax system will surely see developments this week as top finance officials from the U.S. and Europe meet in Davos.
AT A GLANCE
- NJ SALT Workaround. On Monday, New Jersey Gov. Phil Murphy (D) signed into law a bill that provides small businesses and partnerships a way to avoid the $10,000 federal cap on state and local tax deductions. The law allows some entities to pay state income tax as a business tax, rather than at the partner level. Proponents are confident it will withstand any federal scrutiny.
- Cha-Ching. New Treasury Department data unveiled last week revealed that corporate tax receipts have continued to increase in recent quarters. The data showed that corporations paid an additional 24.5% in taxes last quarter compared to the same time the previous year. The Treasury Department expects corporate receipts for the current fiscal year to rise to $253 billion, a 10% increase from the previous fiscal year.
BROWNSTEIN BOOKSHELF
- GAO Report. The U.S. Government Accountability Office (GAO) assesses the Internal Revenue Service’s (IRS) collaboration efforts with other agencies to communicate tax law changes, performance in providing customer service and areas of opportunity for the IRS to improve. Read the eight recommendations here.
- EITC Expensive Expansion. The Republican members of the House Budget Committee released a report on January 16, 2020, which highlights that an expansion of the Earned Income Tax Credit would cost the federal government $2.9 trillion over 10 years.
- Decade of Expiring Provisions. The Joint Committee on Taxation prepared a document listing federal tax provisions scheduled to expire in 2020—2029.
REGULATION STATION
INTERNATIONAL
|
Regulation
|
Latest Action
|
Regulation Link
|
Comment Countdown
|
|
Foreign Partner Transfer Rules
|
Jan. 23, 2020
Final Rules
Jan. 19, 2017
|
T.D.9891
REG-127203-15
|
N/A
Deadline Passed
April 19, 2017
|
|
Foreign Tax Credit
Sec. 965(g)
|
Dec. 17, 2019
Dec. 2, 2019
Final / Temporary Regulations
|
REG-105495-19
T.D.9882
|
28 days
N/A
|
|
Dividend Equivalent
Sec. 871(m)
|
Dec. 16, 2019
Final Regulations
Jan. 24, 2017
|
T.D. 9887
REG-135122-16
|
N/A
Deadline Passed
April 14, 2017
|
|
BEAT
Sec. 59A
|
Dec. 2, 2019
Final Regulations
Dec. 21, 2018
|
T.D. 9885
REG-104259-18
|
N/A
Deadline Passed
Feb. 19, 2019
|
|
BEAT
Sec. 59A
|
Dec. 2, 2019
|
REG-112607-19
|
14 days
|
|
Ownership Attribution
954(d)(3)
|
Nov. 19, 2019
Final Regulations
May 20, 2019
|
T.D. 9883
REG-125135-15
|
N/A
Deadline Passed
July 19, 2019
|
|
Transition From Interbank Offered Rates
Sec. 860G, 882, 1001, 1275
|
Oct. 9, 2019
|
REG-118784-18
|
Deadline Passed
Nov. 25, 2019
|
|
GILTI
Sec. 951A
|
Oct. 4, 2019
Correction
Aug. 23, 2019
Correction
June 21, 2019
Final Regulations
Oct. 10, 2018
|
C2-2019-12437
C1-2019-12437
T.D. 9866
REG-104390-18
|
N/A
N/A
N/A
Deadline Passed
Nov. 26, 2018
|
|
Ownership Attribution
Sec. 958(b)
|
Oct. 2, 2019
|
REG-104223-18
Rev. Proc. 2019-40
|
Deadline Passed
Dec. 2, 2019
N/A
|
|
Investors in Foreign Insurers (PFIC)
Sec. 1291, 1297, 1298
|
July 11, 2019
|
REG-105474-18
|
Deadline Passed
Sept. 9, 2019
|
|
GILTI
Sec. 958 and 951A
|
June 21, 2019
|
REG-101828-19
|
Deadline Passed
Sept. 19, 2019
|
|
Foreign Tax Credit
|
June 21, 2019
Final Regulations
Dec. 7, 2018
|
T.D. 9866
REG-105600-18
|
N/A
Deadline Passed
Feb. 5, 2019
|
|
Dividends Received Deduction
Sec. 954
|
June 18, 2019
June 18, 2019
Final Temporary Regulations
|
REG-106282-18
84 FR 28398
|
Deadline Passed
Sept. 16, 2019
N/A
|
|
Deemed Income Inclusion
Sec. 956
|
May 23, 2019
Final Regulations
Nov. 5, 2018
|
T.D. 9859
REG-114540-18
|
N/A
Deadline Passed
Dec. 5, 2019
|
|
FDII and GILTI
|
April 12, 2019
Correction
March 6, 2019
|
C1-2019-03848
REG-104464-18
|
N/A
Deadline Passed
May 6, 2019
|
|
Transition Tax
Sec. 965
|
April 10, 2019
Correction
Feb. 5, 2019
Final Regulations
Aug. 9, 2018
|
2019-07012
2019-07018
T.D. 9846
REG-104226-18
|
N/A
N/A
N/A
Deadline Passed
Oct. 9, 2018
|
|
Certain Hybrid Arrangements
Sec. 245A(e) 267A
|
Dec. 28, 2018
|
REG-104352-18
|
Deadline Passed
Feb. 26, 2019
|
|
GILTI
|
Sept. 13, 2018
|
Rev. Proc. 2018-48
|
N/A
|
199A
|
Regulation
|
Latest Action
|
Regulation Link
|
Comment Countdown
|
|
Qualified Business Income Deduction – Real Estate Safe Harbor
Sec. 199A
|
Sept. 24, 2019
|
Rev. Proc. 2019-38
|
N/A
|
|
Rules for Cooperatives and their Patrons
Sec. 199A
|
June 19, 2019
|
REG-118425-18
|
Deadline Passed
Aug. 19, 2019
|
|
Qualified Business Income Deduction Sec. 199A
|
April 17, 2019
Correction
|
84 FR 15953
|
N/A
|
|
Qualified Business Income Deduction Sec. 199A
|
Feb. 8, 2019
|
REG-134652-18
|
Deadline Passed
April 9, 2019
|
|
Qualified Business Income Deduction
Sec. 199A
|
Feb. 8, 2019
Final Regulations
Aug. 16, 2018
|
T.D. 9847
REG-107892-18
|
N/A
Deadline Passed
Oct. 1, 2018
|
|
W-2 Wages for Qualified Business Income Deduction
Sec. 199A
|
Jan. 18, 2019
|
Rev. Proc. 2019-11
|
N/A
|
|
Trade or Business Safe Harbor: Rental Real Estate
Sec. 199A
|
Jan. 18, 2019
|
Notice 2019-07
|
N/A
|
DOMESTIC BUSINESS
|
Regulation
|
Latest Action
|
Regulation Link
|
Comment Countdown
|
|
NOLs
Sec. 382(h)
|
Jan. 14, 2020
|
REG-125710-18
|
55 days
|
|
Opportunity Zones
|
Jan. 13, 2020
Final Regulations
May 1, 2019
Oct. 29, 2018
|
T.D.9889
REG-120186-18
REG-115420-18
|
N/A
Deadline Passed
July 1, 2019
Deadline Passed
Dec. 28, 2018
|
|
Executive Comp
Sec. 162(m)
|
Dec. 20, 2019
|
REG-122180-18
|
28 days
|
|
Spinoff Predecessor and Successor Rules
Sec. 355(e)
|
Dec. 16, 2019
Final Regulations
Dec. 19, 2016
Nov. 22, 2004
|
T.D. 9888
T.D. 9805
REG-140328-15
REG-145535-02
|
N/A
N/A
Deadline passed
March 20, 2017
Deadline passed
February 22, 2005
|
|
Eligible Terminated S Corporations
Sec. 481, 1377
|
Nov. 7, 2019
|
REG-131071-18
|
Deadline Passed
Dec. 23, 2019
|
|
Treatment of Certain Interests in Corporations as Stock or Indebtedness
Sec. 385
|
Nov. 4, 2019
|
REG-123112-19
|
13 days
|
|
Debt-Equity Documentation
Sec. 385
|
Nov. 4, 2019
Final Regulations
Sept. 24, 2018
|
TD 9880
REG-130244-17
|
N/A
Deadline Passed
Dec. 24, 2018
|
|
Partnership Liability
Sec. 707
|
Oct. 9, 2019
Final Regulations
June 19, 2018
|
TD 9876
REG-131186-17
|
N/A
Deadline Passed
July 19, 2018
|
|
Full Expensing
Sec. 168(k)
|
Sept. 24, 2019
|
REG-106808-19
|
Deadline Passed
Nov. 25, 2019
|
|
Full Expensing
Sec. 168(k)
|
Sept. 24, 2019
Final Regulations
Aug. 8, 2018
|
TD 9874
REG-104397-18
|
N/A
Deadline Passed
Oct. 9, 2018
|
|
Built-In Gains and Losses
Sec. 382
|
Sept. 10, 2019
|
REG-125710-18
|
Deadline Passed
Nov. 12, 2019
|
|
Certain Transfers of Property to RICs and REITs
|
June 7, 2019
Final Regulations
June 8, 2016
|
T.D. 9862
REG-126452-15
|
N/A
Deadline Passed
August 8, 2016
|
|
Certified Professional Employer Orgs.
Sec. 7705 and 3511
|
May 28, 2019
Final Regulations
May 6, 2016
|
T.D. 9860
REG-127561-15
|
N/A
Deadline Passed
August 4, 2016
|
|
Interest Deduction Limitation
Sec. 163(j)
|
Dec. 28, 2018
|
REG-106089-18
|
Deadline Passed
Feb. 26, 2019
|
|
Sec. 162(m)
|
Aug. 21, 2018
|
Notice 2018-68
|
N/A
|
|
Carried Interest
Sec. 1061
|
March 1, 2018
|
Notice 2018-18
|
N/A
|
EXEMPT ORGANIZATIONS
|
Regulation
|
Latest Action
|
Regulation Link
|
Comment Countdown
|
|
UBIT
Sec. 512(a)
|
Dec. 9, 2019
Final Regulations
Feb. 06, 2014
|
T.D.9886
REG-143874-10
|
N/A
Deadline Passed
May 7, 2014
|
|
Time and manner for filing and paying excise taxes
Sec. 4960, 4966, 4967, and 4968
|
April 9, 2019
Final Regulations
Nov. 7, 2018
|
T.D. 9855
REG-107163-18
|
N/A
Deadline Passed
Dec. 7, 2018
|
|
Excise Tax on Executive Compensation
Sec. 4960
|
Dec. 31, 2018
|
Notice 2019-09
|
N/A
|
|
UBIT
Sec. 274 and 512
|
Dec. 10, 2018
|
Notice 2018-99
|
N/A
|
|
UBIT
Sec. 512(a)(6)
|
Aug. 21, 2018
|
Notice 2018-67
|
N/A
|
|
Higher Education Excise Tax
Sec. 4968
|
June 8, 2018
|
Notice 2018-55
|
Deadline Passed
Sept. 6, 2018
|
OTHER
|
Regulation
|
Latest Action
|
Regulation Link
|
Comment Countdown
|
|
SALT
Sec. 162, 164, 170
|
Dec. 13, 2019
Dec. 28, 2018
|
REG-107431-19
Rev. Proc. 2019-12
|
10 days
N/A
|
|
Estate and Gift Taxes
Sec. 2010(c)(3)
|
Nov. 26, 2019
Final Regulations
Nov. 23, 2018
|
T.D. 9884
REG-106706-18
|
N/A
Deadline Passed
Feb. 21, 2019
|
|
E-Filing of Health Insurance Information
Sec. 9010(a)
|
Nov. 13, 2019
Final Regulations
December 9, 2016
|
T.D. 9881
REG-123829-16
|
N/A
Deadline Passed
March 9, 2017
|
|
Life Insurance Reporting Rules
Sec. 101 and 6050Y
|
Oct. 25, 2019
Final Regulations
March 25, 2019
|
T.D. 9879
REG-103083-18
|
N/A
Deadline Passed
May 9, 2019
|
|
ABLE Accounts
Sec. 529A
|
Oct. 10, 2019
|
REG-128246-18
|
Deadline Passed
Jan. 8, 2020
|
|
HRA’s
Sec. 2711
|
Sept. 30, 2019
|
REG–136401–18
|
Deadline Passed
Dec. 30, 2019
|
|
Hardship Distributions
Sec. 401(k)
|
Sept. 23, 2019
Final Regulations
Nov. 14, 2018
|
TD 9875
REG-107813-18
|
N/A
Deadline Passed
Jan. 14, 2019
|
|
Accounting Methods
Sec. 451(b) and 451(c)
|
Sept. 9, 2019
|
REG-104870-1
REG-104554-18
|
Deadline Passed
Nov. 8, 2019
|
|
University Endowment Income
Sec. 4968
|
July 3, 2019
|
REG-106877-18
|
Deadline Passed
Oct. 1, 2019
|
|
HRA’s
Sec. 2711
|
June 20, 2019
Final Regulations
|
T.D. 9867
|
N/A
|
|
SALT
Sec. 170
|
June 13, 2019
Final Regulations
Aug. 27, 2018
|
T.D. 9864
REG-112176-18
|
N/A
Deadline Passed
Oct. 11, 2018
|
|
Interests Held by Foreign Pension Funds (PATH Act)
Sec. 897
|
June 7, 2019
|
REG-109826-17
|
Deadline Passed
Sept. 5, 2019
|
|
Market Discount Guidance
Sec. 451(b)
|
Sept. 27, 2018
|
Notice 2018-80
|
N/A
|
|
Safe Harbor of Eligible Rollover Distributions
|
Sept. 20, 2018
|
Notice 2018-74
|
N/A
|
|
Education Savings
|
July 30, 2018
|
Notice 2018-58
|
N/A
|
|
Health Savings Accounts
|
March 5, 2018
|
Rev. Proc. 2018-18
Rev. Proc. 2018-27
|
N/A
|