March 25, 2019

March 25, 2019

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Tax-Writers To Focus On Obamacare, Likely To Repeal Estate Tax

Legislative Activity

Tax-Writers to Focus on Obamacare

With the tax filing deadline just around the corner in the first tax season with implications from the Affordable Care Act (ACA), tax-writers are slated to host a series of hearings focusing on various tax-related aspects of the law. In the House Ways and Means Committee, Members will hold a hearing this week on the ACA’s individual and employer mandates. In addition to concerns over the rising penalties, Republican lawmakers are also likely to focus on complaints by tax preparers that the tax filing process has become even more complicated due to the ACA, as many filers underestimated their annual income when purchasing subsidized health care and are now finding themselves with a larger tax bill as a result.

At the Senate Finance Committee, the Subcommittee on Health Care has scheduled a hearing later this month to give a “fresh look” at the Medical Device Tax and its impact on “jobs, innovation, and patients.” However, concerned about the partisan nature of the hearing, Ranking Member Ron Wyden (D-OR) last week noted that “[i]t is unfortunate that [the] hearing…is being held by the Health Care Subcommittee …[as] hearings on major policy issues are conducted by the full Finance Committee, [which] is necessary to focus on the broad range of issues, including, in this case, not only health policy but also tax policy that must be considered if changes are to be made.” According to Ranking Member Wyden, proceeding in this way may “politicize the issue at a time when both sides should be seeking common ground” and could “hurt the chances of successfully moving legislation that can be signed into law.”

House to Vote on Repealing the Estate Tax

As lawmakers return to Washington this week, the House will vote on various tax-related bills that were favorably reported out of the Ways and Means Committee before Congress adjourned for recess, including legislation to repeal the Estate Tax, as well as legislation reforming aspects of the Internal Revenue Service (IRS). Relatedly, Senator John Thune (R-SD) has recently introduced a Senate counterpart (S. 860) to the House bill repealing the Estate Tax. However, should this bill receive a vote and pass the Senate, President Obama is likely to veto the legislation, as he favors increasing the tax.

This Week’s Hearings:

  • Tuesday, April 14: The House Ways and Means Subcommittee on Health will hold a hearing titled “The Individual and Employer Mandates in the President’s Health Care Law.” This hearing will be preceded by an organization meeting of the Subcommittee.

  • Tuesday, April 14: The Senate Finance Committee will hold a hearing titled “Creating a More Efficient and Level Playing Field: Audit and Appeals Issues in Medicare.”

  • Wednesday, April 15: The Senate Homeland Security and Governmental Affairs Committee will hold a hearing titled “IRS Challenges in Implementing the Affordable Care Act.”

  • Wednesday, April 15: The Joint Economic Committee will hold a hearing titled “Small Business, Big Taxes: Are Taxes Holding Back Small Business Growth?”

Regulatory Activity

IRS Warns of More Burdensome Corporate Audits; To Hold Meeting on Credits for Software Developed for Internal Use

In arguing against further potential cuts to its operating budget, IRS Commissioner John Koskinen has warned that any such cuts are likely to lead to more burdensome audits for corporations. “It may sound like good news to corporations that we’re conducting fewer audits, but the ones we do are more likely to be burdensome, because we have fewer examiners with specialized training.” Instead, Commissioner Koskinen is urging Congress to sufficiently fund the agency to replace the 25-percent of its workforce eligible to retire by the end of 2016.

Also, on Friday, April 17, the IRS will hold a meeting to receive public comment on a proposed rule regarding credits for increasing research activities on computer software that is developed for internal use by taxpayers. Specifically, the proposed regulations provide a definition of software developed primarily for internal use and describe software not developed primarily for internal use. These proposed regulations also provide that certain internal use software is eligible for the research credit if the software satisfies the high threshold of innovation test. Additionally, the proposed regulations provide rules for computer software that is developed for both internal use and non-internal use (dual function computer software), including a safe harbor test for determining if any of the expenditures with respect to dual function computer software are qualified research expenditures.

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About this Author

Brandon Roman, Corporate Attorney, Squire Patton Boggs Law Firm
Associate

Brandon Román advises domestic and international clients on a range of legal, legislative, and regulatory issues. Mr. Román helps clients develop comprehensive strategies to address legislative and regulatory interests as well as legal concerns. His work includes identifying client needs and helping them navigate the legal, legislative, and regulatory landscape, focusing primarily on government investigations, financial services and products, tax, and real estate. 

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