TAX TAKE: Everybody (Congress is Back, Alright!)
With House lawmakers returning to DC and the Senate already in session for a week, Congress is back to work on a packed autumn legislative agenda. Political battles over government spending priorities will most likely grab all the headlines this month as tax policymaking moves forward in the background.
Senate Finance Committee Chairman Ron Wyden (D-OR) is expected to make good on his promise to advance legislation that would provide treaty-equivalent tax treatment for cross-border commerce between Taiwan and the U.S. Ranking Member Mike Crapo (R-ID) is providing bipartisan support for the effort, which would mitigate double taxation and establish reduced rates for withholding taxes on dividends, interest, and royalties.
The Taiwan bill's prospects look bright, though Senate taxwriters will need to contend with a competing proposal championed by Foreign Relations Committee Chairman Robert Menendez (D-NJ), who sits on the Finance Committee. A compromise may be in the offing. If successful, a bipartisan Taiwan tax bill could become an attractive vehicle for unrelated tax provisions.
Also on the Senate's tax agenda is the nomination of Marjorie Rollinson to serve as Chief Counsel at the Internal Revenue Service (IRS). As the only Senate-confirmed position at the IRS below the Commissioner, the Chief Counsel wields major influence on tax policy and provides key legal advice on the proper interpretation and enforcement of IRS laws and regulations. A confirmation hearing is possible in the coming weeks.
In the House, taxwriters still face several unresolved issues, including a GOP-backed package of business tax provisions. The Build It in America Act includes provisions to reinstate the deduction for research and development (R&D) expenses, fix the section 163(j) interest expense deduction limitation calculation to take into account earnings before interest, taxes, depreciation, and amortization (EBITDA), extend 100 percent bonus depreciation, and override the foreign tax credit regulations in certain circumstances. But some House Republicans are demanding that the legislation be expanded to address the current limitation on the state and local tax (SALT) deduction.
Committee on Ways and Means Chairman Jason Smith (R-MO) has been working on a possible SALT compromise to secure enough GOP support for passage. If that happens, it will build momentum for action in the Senate. Many of the business tax provisions are backed by Senate Democrats, but the price for their support will likely be an expansion of the child tax credit. There will also need to be a bipartisan agreement on if, and how, the legislation will be paid for – as Senate Democrats will certainly oppose the House Republicans' proposal to repeal many of the Inflation Reduction Act (IRA) green energy credits.
Although Chairman Wyden says he's had "good conversations" in recent weeks with Chairman Smith on these issues, a compromise on this stand-off isn't likely to emerge until Congress reaches an overarching agreement on government funding (including funding for the IRS) for the next fiscal year, which starts October 1. A temporary funding measure is likely to emerge before the end of the month that will allow Congress to continue negotiating a bipartisan agreement through the fall. From there, absent a government shutdown, a year-end omnibus spending bill could provide the best legislative vehicle for attaching any bipartisan tax policy provisions. #TaxTake
Upcoming Speaking Engagements and Events
On October 30, Loren will speak at the IBA Annual Conference on a panel titled, "How Do the OECD and the U.N. Address International Tax Issues (Past, Present, and Future)?"
Also on October 30, Marc will present a tax legislative outlook at the 58th Annual Southern Federal Tax Institute.
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