On The Hill
Tax Update (July 1)
| Opportunity Zone Notice
Notice 2019-42 amplifies Notice 2018-48, 2018-28 I.R.B. 9, which lists the population census tracts that the Secretary of the Treasury designated as qualified opportunity zones. This notice adds two additional census tracts in Puerto Rico that have been designated as qualified opportunity zones under § 1400Z-1(b)(3) of the Internal Revenue Code and can now benefit from the Tax Cuts and Jobs Act of 2017 (TCJA). States and US territories have the ability to choose census tracts based on their poverty levels and median incomes compared to the rest of the state or metro area to maximize incentives, though decisions are subject to the approval of the Treasury Department.[1]
This week, the Senate Foreign Relations Committee approved four tax protocols with Switzerland, Spain, Japan, and Luxembourg. The Committee rejected several amendments offered by Sen. Rand Paul (R-KY). Paul has concerns that the treaties do not include privacy protections for taxpayers and has long slowed the treaties’ progress. The protocols now must be approved by the full Senate. Majority Leader Mitch McConnell (R-KY) noted the importance of the treaties to American businesses but has not committed to a floor vote. However, a floor vote is likely to occur before August.[2]
French lawmakers have agreed on the final text of the country’s proposed digital services tax targeting US tech giants, moving it one step closer to enactment. The tax would impact tech giants such as Facebook Inc., Google, and Amazon and has been met with fierce opposition from US officials who claim the digital tax unfairly targets American companies[3]. Most recently, Senate Finance Committee Chairman Chuck Grassley (R-IA) and Ranking Member Ron Wyden (D-OR) stated in a letter to Treasury Secretary Steven Mnuchin that he should “consider all available tools under U.S. law to address such targeted, discriminatory taxation.”[4] French President Emmanuel Macron has 15 days to sign the levy into law.
Transportation Secretary Elaine Chao punted on the issue of raising the federal gas tax. She also advocated for leveraging private dollars to pay for infrastructure, and panned a favored infrastructure pay-for of congressional Democratic leaders: rolling back corporate tax cuts. With the first presidential debates underway, the path forward on the broad bipartisan infrastructure package is close to impossible.
The White House is preparing a plan that would reduce taxes by indexing capital gains to inflation, according to people familiar with the matter. The plan would primarily benefit wealthy Americans and the White House is considering making the change through a rule or executive order, as it would have little chance of passing through Congress. However, such an action would likely face legal challenges. The Treasury Department has been moving slowly on this issue in the past year over concerns about side-stepping Congress. White House Economic Advisor Larry Kudlow has long pushed for this policy, claiming that it will spur economic growth and job creation, though Alan Viard, a tax and budget specialist at the American Enterprise Institute, has noted that the change would not be significant enough to boost the economy. The inflation adjustment would result in a several percentage point tax cut for investors, according to the Congressional Research Service, and could reduce tax revenue by $102 billion over the next ten years, according to the Penn Wharton Budget Model.[5]
[1] Lydia O’Neal “New Opportunity Zone Tract in Puerto Rico has Trump Ties” Bloomberg Tax, 06/25/1029 https://news.bloombergtax.com/daily-tax-report/new-opportunity-zone-tract-in-puerto-rico-has-trump-ties [2] Aaron Lorenzo “Tax treaties clear committee but Paul vows to block expedited ratification” Politico Pro, 06/25/2019 https://subscriber.politicopro.com/article/2019/06/tax-treaties-clear-committee-but-paul-vows-to-block-expedited-ratification-3486813 [3] Hamza Ali, “French Digital Tax Now One Step Away From Law, Enforcement” Bloomberg Tax, 06/27/2019 https://news.bloombergtax.com/daily-tax-report-international/french-digital-tax-now-one-step-away-from-law-enforcement [4]Toby Eckert “Grassley, Wyden urge Mnuchin to step up efforts against French digital tax” Politico, 06/24/2019 https://subscriber.politicopro.com/article/2019/06/grassley-wyden-urge-mnuchin-to-step-up-efforts-against-french-digital-tax-3475482 [5] Saleha Mohsin “White House Considers Capital Gains Tax Break That Would Benefit Wealthy” Bloomberg, 06/27/2019 https://www.bloomberg.com/news/articles/2019-06-27/white-house-mulls-capital-gains-tax-break-that-benefits-wealthy |
HOUSE.GOV
The Week Ahead
For the main events of the next week and more, go straight to the key events on the house.gov website.
SENATE.GOV
The Week Ahead
For the main events of the next week and more, go straight to the key events on the senate.gov website.