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Tax Update (September 24)

Sep 24, 2019 | SHARE  

2017 Tax and Jobs Cuts Act (TCJA) Faces Renewed Criticism

Democratic lawmakers are stepping up their criticism of international provisions of the TCJA, specifically the addition of a tax on Globally Intangible Low-Taxed Income (GILTI). The criticism stems from research suggesting this provision may already be pushing jobs offshore. However, data on the law’s economic effects is limited thus far. In order to secure more information on the issues, senators Amy Klobuchar (D-MN), Chris Van Hollen (D-MD), Tammy Duckworth (D-IL), and Rep. Peter DeFazio (D-OR) wrote a letter asking Treasury Secretary Steve Mnuchin and Internal Revenue Service (IRS) Commissioner Charles Rettig for the steps the government is taking to keep companies from offshoring jobs because of a tax law change. In other TCJA news, the IRS reaffirmed its position that Congress must fix the inadvertent exclusion of business improvements to the act’s bonus depreciation benefit. The announcement could add urgency to the issue on Capitol Hill, but Senate Finance Democrats suggested to reporters that it would be among several issues under negotiation in the lead up to a potential end-of-year tax deal.


Green Extenders Battle

House Speaker Nancy Pelosi (D-CA) met with Ways and Means Committee Chairman Richard Neal (D-MA) about a Green Energy Tax package. Ways and Means is expected to mark up a package next month centered around an expanded Electric Vehicle (EV) Tax Credit. The package may potentially include an extension of the Investment Tax Credit (ITC), frequently referred to as the solar tax credit. The ITC, which provides a 30 percent credit for installing solar energy systems, will begin to phase down at year’s end. Businesses are scrambling to get the full incentive before this time.[1] Rumors of an ITC extension have raised concerns about the “potentially devastating” effects on the wind energy industry, which is not actively pursuing an extension of their Production Tax Credit (PTC).[2] The Wood Mackenzie report claims the inequity between industry tax policy could hurt the ability of the wind industry, already struggling to compete with solar, to rebound in the next decade. Even without extension, solar energy has a leg up; while PTC drops to nothing following the end of year sunset, solar projects will be eligible for up to 10 percent ITC indefinitely.


E-Cigarette Tax Legislation

In an effort to address the growing concerns around underage use and health risks of e-cigarettes, Rep. Tom Suozzi (D-NY) put out legislation on Thursday (9/19) to ban flavored e-cigarettes and tax those that would remain on the market. The bill would tax e-cigarettes at a rate equal to $3 a pack. The legislation is cosponsored by Rep. Peter King (R-NY), and, additionally would triple federal taxes on regular cigarettes to discourage users from switching to traditional tobacco products.[3] Health groups have endorsed the Suozzi-King bill and have long argued that higher taxes are an effective way to curb youth tobacco use. Nineteen states and the District of Columbia have passed measures that have targeted e-cigarette products with higher taxes. In the other chamber, Senators Mitt Romney (R-UT) and Jeff Merkley (D-OR) introduced a similar bill Thursday (9/19) that would ban flavored e-cigarettes and tax the vaping industry at a rate consistent with existing tobacco taxes. Additionally, the Senate bill would focus on design standards for the devices in order to dissuade youth usage.


Department of Treasury Confirmations

This week, the Senate confirmed two top Treasury Department officials who are expected to play major roles in tax policy issues. Brent McIntosh will serve as Undersecretary for International Affairs at the department, and Brian Callanan will replace McIntosh as the department’s General Counsel.[4] Throughout the confirmation hearing, Republicans praised the nominees and their qualifications. “In the midst of ever-changing global markets, trade, and economic dynamics, keeping the Treasury Department staffed with experienced hands like Brent McIntosh and Brian Callanan is critical,” Senate Finance Chairman Chuck Grassley (R-IA) said in a statement. Democrats opposed the nomination, and claimed that McIntosh and Callanan have been involved in “controversial” Treasury actions throughout the Trump administration. [5] The chamber confirmed both nominees along mostly party lines.


References

[1] Becker, Bernie “Gaming out the year’s end” Politico Pro, 16 Sep 2019 https://subscriber.politicopro.com/newsletter/2019/09/gaming-out-the-years-end-743536

[2]Stromstra, Karl-Erik “Solar ITC Extension Would Be ‘Devastating for US Wind Market: WoodMac” Green Tech Media, 12 Sep 2019 https://www.greentechmedia.com/articles/read/solar-itc-extension-devastating-for-wind#gs.4tf0ns

[3] Lorenzo, Aaron and Owermohle, Sarah “Bipartisan bill would hit e-cigarettes with flavor ban, new taxes” Politico Pro, 19 Sep 2019 https://subscriber.politicopro.com/article/2019/09/bipartisan-bill-would-hit-e-cigarettes-with-flavor-ban-new-taxes-1752723

[4] Wilhelm, Colin “Senate Confirms Two Trump Nominees for Treasury Posts” Bloomberg Tax, 19 Sep 2019 https://news.bloombergtax.com/daily-tax-report-international/senate-confirms-two-trump-nominees-for-treasury-posts?utm_source=rss&utm_medium=DINW&utm_campaign=0000016d-44c0-d00c-afff-7cfd696f0001

[5] Jagoda, Naomi “Senate confirmed two treasury nominees over Democratic objections” The Hill, 18 Sep 2019 https://thehill.com/policy/finance/461834-senate-confirms-two-treasury-nominees-over-dems-objections

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