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If You're Not Already Preparing for Revenue Raisers, You're Not Doing It Right

Posted @ Tuesday, May 22, 2018    By Aindriu Colgan
Posted in [ Blog, Tax, Regulatory, Legislative, Economic and Community Development ] | 0 Comments

The Department of the Treasury is steadily making progress on writing guidance for the Tax Cuts and Jobs Act and have announced a tentative release schedule: June/July for the passthrough deduction, late summer/early fall for the new limitations on interest expense, and December for the big international provisions (e.g. GILTI and BEAT).

In the meantime, the Committee on Ways and Means is contemplating a second round of tax cuts, or Tax Reform 2.0 as they like to call it.  They are aiming to make permanent the new individual provisions as well as full expensing for businesses.  It remains unlikely, however, that the Senate will ever vote on more tax cuts before November, not least because it would give 8 vulnerable Democrats the chance to vote for tax cuts with the package still failing to meet the 60 votes needed for Senate passage. 

That said, Ways and Means has hinted that it is discussing whether it will “pay for” the new tax cuts.  While it seems unlikely that the House would alienate businesses in an election year, after the failure of the Farm Bill, the House is anything but predictable.  If your industry benefited from the rate cuts in the Tax Cuts and Jobs Act and escaped most of the base broadening, you need to be prepared.  The tax-writing committees will be looking for revenue raisers, if not for Tax Reform 2.0, then for corrections and changes to the law in the future.  Tax-writers like fairness; they like to spread the base broadening as much as possible or have the industries that will benefit from a new provision be the ones that pay for it.  That is why the Camp Draft had the “bank tax” on SIFIs—they benefitted tremendously from the rate cuts but escaped a lot of the base broadening—or why then Ways and Means Chairman Ryan discussed paying for an innovation box by amortizing R&D expenses.  Even if Tax Reform 2.0 isn’t signed into law, any pay-fors it contains will be used again.

Additionally, the Joint Committee on Tax (JCT) is beginning work on a blue book for tax reform in addition to a package of technical corrections.  JCT Chief Tom Barthold has publicly mentioned that Congressional intent will be forefront in completing both projects.  Those comments appear to indicate that JCT will likely be considering a broader range of issues than they would typically in either a blue book or technical corrections package.  It is imperative that you start discussing your tax reform issues with JCT and/or the tax-writing committees now before the process moves too far along.

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