Tax Update (July 30)
On Thursday (July 25), the House passed a $2.7 trillion budget agreement that would keep the federal government open through FY 2021; it also increases the federal debt ceiling through the same period of time. It establishes a $1.37 trillion budget agreement in the first year, with $738 billion for defense spending and $632 billion in nondefense spending for fiscal year 2020. The budget also represents an increase of $326.5 billion in additional spending compared to the original budget caps set in 2011, with $77 billion in offsets, according to the Congressional Budget Office (CBO). The deal, coupled with a recent House vote to repeal the “Cadillac Tax,” at a cost of $200 billion, demonstrated there is little interest on Capitol Hill in “paying for” legislation, which could spur hope to complete a tax extenders package after all. The House passed the Bipartisan Budget Act 284 -149 and the Senate will vote on the bill next week. With topline numbers, Congress will have to work quickly to develop a spending package before appropriations run out on September 30 when the fiscal year ends. An omnibus or continuing resolution (CR) is the most likely vehicle for extenders, according to one senior staffer on the Senate Finance Committee. Senate Majority Leader Mitch McConnell (R-KY) has stacked the schedule next week, resulting in the budget likely not getting a vote until Thursday.
Business leaders are encouraging Treasury Secretary Steve Mnuchin to ensure that companies with a foreign tax rate of at least 13.125 percent are not subject to a Global Intangible Low-Taxed Income, or GILTI. According to the letter, no other country has a minimum tax like GILTI. “Not only are the GILTI expense allocation rules inconsistent with congressional intent, very importantly, they also will have adverse effects on the U.S. economy,” the group wrote to Treasury. Over three dozen corporations comprise the Alliance for Competitive Taxation. Currently, Secretary Mnuchin is involved in international tax negotiations through the Organization for Economic Cooperation and Development.
Rep. Francis Rooney (R-FL) will introduce a bill that would create a carbon tax of $30 per metric ton on fossil fuel producers and large industrial emitters. Under the proposed legislation, an automatic $2 per ton increase occurs every two years if emissions reduction goals are not met. The legislation proposes using the tax revenue to reduce payroll taxes for employees and employers, fund research and development for clean energy, and compensate low-income households for increased costs. Rep. Dan Lipinski (D-IL) and Sen. Chris Coons (D-DE) also introduced carbon tax bills on Thursday (July 25), joining two other bipartisan measures that were introduced earlier this year. “The idea is to have several of these carbon tax bills on the table for debate,” Rep. Rooney said.
IRS Revenue Procedures
On Monday (July 22), the Internal Revenue Service (IRS) provided three new revenue procedures related to the insurance industry. Full details on each procedure are below:
– Revenue Procedure 2019-29 provides indexing adjustments required by statute for certain provisions under section 36B. Specifically, this revenue procedure updates the applicable percentage table used to calculate an individual’s premium tax credit for taxable years beginning in calendar year 2020 and updates the required contribution percentage for plan years beginning after calendar year 2019.
– Revenue Procedure 2019-30 provides simplified procedures for an insurance company to obtain automatic consent of the Commissioner of Internal Revenue to change its method of accounting for discounting unpaid losses and expenses unpaid, estimated salvage recoverable, and unearned premiums attributable to title insurance, as applicable, to comply with § 846, as amended by section 13523 of the Tax Cuts and Jobs Act, Public Law 115-97 (131 Stat. 2054, 2152) for taxable years beginning after December 31, 2017, and ending on or before December 31, 2019.
– Revenue Procedure 2019-31 prescribes revised discount factors for the 2018 accident year, as well as discount factors for the 2019 accident year. These discount factors will be used to compute discounted unpaid losses under § 846 of the Internal Revenue Code and discounted estimated salvage recoverable under § 832. The discount factors prescribed in the revenue procedure are determined under § 846, as amended by section 13523 of the Tax Cuts and Jobs Act, Public Law 115-97 (131 Stat. 2054, 2152), and final regulations under § 846 published in the Federal Register (84 FR 27947) on June 17, 2019.
 Foran, Clare. “House passes sweeping budget and debt limits deal.” CNN. 25 Jul 2019. https://www.cnn.com/2019/07/25/politics/house-vote-budget-debt-limit-deal/index.html
 Jennifer Scholtes, Caitlin Emma, “Two more steps before the budget deal’s sealed” Politico Pro. 26 Jul 2019. https://subscriber.politicopro.com/newsletter/2019/07/two-more-steps-before-the-budget-deals-sealed-696947
 Bernie Becker, “Business groups urge Mnuchin to modify GILTI regs” Politico Pro. 23 Jul 2019. https://subscriber.politicopro.com/article/2019/07/business-groups-urge-mnuchin-to-modify-gilti-regs-3620612
 Miranda Green, “Carbon tax shows new signs of life in Congress” The Hill. 26 Jul 2019. https://thehill.com/policy/energy-environment/454819-carbon-tax-shows-new-signs-of-life-in-congress
 John Siegel, “Republican climate hawk Francis Rooney to introduce carbon tax bill that cuts payroll taxes” Washington Examiner. 24 Jul 2019. https://www.washingtonexaminer.com/policy/energy/republican-climate-hawk-francis-rooney-to-introduce-carbon-tax-bill-that-cuts-payroll-taxes