Tax-Writers Focused on 2017 Efforts; Treasury, IRS Work to Wrap-Up Outstanding Work as BEPS Implementation Continues
Brady and Hatch Look Ahead to 2017 Tax Policy Priorities
As the Trump Administration continues the transition process and prepares to work with a Republican-controlled Congress in 2017, House Ways and Means Committee Chairman Kevin Brady (R-TX) is continuing to argue that tax reform is likely to get done next year and will be designed to be deficit-neutral, though he has not yet identified specific timing for Committee or House action. He also continues to underscore his desire to wait to act on expiring tax extenders as tax reform discussions move forward, as he does not believe they will be necessary if tax-writers are successful in their efforts. Notably, to increase the likelihood of success, Chairman Brady, as well as the Trump Administration, are emphasizing the importance of doing tax reform on a bipartisan basis to get buy-in from both sides.
Outside of more comprehensive reform discussions, Senate Finance Committee Chairman Orrin Hatch (R-UT) has nearly completed work on his “corporate integration” proposal, which will be deficit-neutral, and keep the same income distribution as under current law. According to Mark Prater, Senate Finance Committee Chief Tax Counsel, while Chairman Hatch has not yet signed off on the final product, staff “will meet with him and he will make the final call on whether the draft goes out.” According to Mr. Prater, when the proposal is released, it will include legislative language, dynamic and conventional budget scores, and a technical explanation.
Treasury, IRS Work to Finalize Priorities as Trump Administration Looms
According to Holly Porter, Branch 3 Chief, Internal Revenue Services (IRS) Office of Associate Chief Counsel (Pass-throughs and Special Industries), “[t]here has been no direction to put pens down…We are still moving forward. We are operating absolutely as we normally operate.” Treasury Deputy Tax Legislative Counsel Krishna Vallabhaneni agreed, noting that “[f]or a lot of [guidance] projects…it is probably business as usual,” though the Trump Administration could clearly alter the priority guidance plan. As such, while it is unlikely that Treasury and the IRS will propose new regulations during the Trump Administration’s transition, they are likely to act so that there is no lapse in the law for expiring regulations and issue guidance on projects that are nearly complete.
Among the priorities likely to be addressed are two temporary regulation international tax packages set to expire before President-Elect Trump is sworn in: the passive foreign investment company rules (which sunset December 30) and the inversion regulations pertaining to surrogates (which expire January 13, 2017). According to John Sweeney, Branch 8 Chief, IRS Office of Associate Chief Counsel (International), the IRS also expects to release Foreign Account Tax Compliance Act (FATCA) withholding and reporting regulations that include provisions previewed in earlier guidance. Additionally, on Thursday, December 1, the IRS will hold a hearing on its proposed estate tax valuation rules, which are expected to be finalized as early as January 2017.
With regard to President-Elect Trump’s transition, note that his transition team has announced the appointment of four people to serve as its Treasury Department “landing team”: Bill Walton of Rappahannock Ventures; Curtis Dubay, a tax expert at Heritage Foundation; Judy Shelton, an economist; and Mauricio Claver-Carone of Cuba Democracy Advocates.
BEPS MLI Negotiations Conclude
More than 100 jurisdictions recently concluded negotiations on the multilateral instrument (MLI), which is part of the Organisation for Economic Co-operation and Development’s (OECD) Base Erosion and Profit Shifting (BEPS) Project. The MLI will allow for timely implementation of a series of tax treaty measures aimed at updating international tax rules and preventing tax avoidance by multinational enterprises (MNEs). A signing ceremony is scheduled for June 2017, though the United States is presently not expected to sign-on to the MLI.