Legislative Activity

Brady May Be Open to “Significant Modifications” on BAT as the Trump Administration Takes More Active Role in the Tax Reform Debate

As the health care reform debate continues to unfold, congressional tax-writers are preparing to move forward swiftly with their tax reform efforts. Though House Ways and Means Committee Chairman Kevin Brady (R-TX) has continued to press forward with the efforts to complete Committee action by spring, the Chairman last week began to show signs of altering the House GOP tax reform “Blueprint.” Specifically, Chairman Brady suggested that he may be open to “significant modifications” to the border adjustable tax (BAT). Though specific details have not been released, these modifications could include a myriad of things, including carve-outs for certain sectors, a gradual imposition of the tax, etc.

On the other side of the Capitol, though the Senate has been less active (at least publicly) than the House, Senate Finance Committee Chairman Orrin Hatch (R-UT) last week noted that “Republicans in the Senate, the House, and the White House agree on about 80 percent of the major tax reform issues, and a number of key and fundamental questions are answered in that 80 percent.”  The BAT, however, does not appear to be one of those items, thus Chairman Brady’s seeming willingness to make changes to his proposal would seem to bode well for the prospects of tax reform.  Note too, the White House has similarly suggested that it would reject the BAT “as is.”  Relatedly, though the Administration originally suggested it would put out a “phenomenal” tax plan and recently indicated that it would take the lead on tax reform negotiations, White House press secretary Sean Spicer last week seemed to soften this position, noting only that President Trump “will put out principles” on tax reform.

More on the timing and substance of tax reform will likely come to light in the coming weeks, though with the upcoming two-week spring recess, these details may not surface until lawmakers return to Washington at the end of the month.

This Week’s Hearings:

• On Thursday, April 6, the Senate Finance Committee has scheduled a hearing titled “The 2017 Tax Filing Season: Internal Revenue Service Operations and the Taxpayer System.”

• On Thursday, April 6, the House Small Business Committee has scheduled a hearing titled “Scam Spotting: Can the IRS Effectively Protect Small Business Information?”

Regulatory Activity

Treasury Staffs Up, Coordinating with Congress on CRA Efforts

After announcing several high-profile Treasury appointments over the last several weeks, it is rumored that the Trump Administration is set to appoint David J. Kautter as Treasury Assistant Secretary for Tax Policy. Whoever is ultimately selected to fill this position will play an important role in helping Treasury Secretary Steven Mnuchin navigate the tax reform debate this Congress.

Relatedly, Treasury has been working with GOP tax-writers to determine which Treasury regulations should be undone using the Congressional Review Act (CRA). While it does not appear that a decision has been made at this time, there is a potential that such efforts could be used to make changes to the section 385 debt-equity regulations issued last year. That said, there is a feeling by some that the regulations could be better addressed as part of the tax reform process.