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Tax Update (June 15)

Jun 15, 2020 | SHARE  
Digital Tax
On Thursday (Jun. 11), French Finance Minister Bruno Le Maire said the U.S. was the only country obstructing a deal on an international digital services tax (DST).
“The last state to block an OECD agreement on digital taxation is the United States. All the others have rallied around (the OECD) proposal,” said Le Maire at a hearing in the French Senate.
Le Maire stated he was in discussions with Secretary of Treasury Steven Mnuchin to “convince him the first step (had) to be taken.”
A “safe harbor” proposal from Mnuchin that would allow companies to choose to operate under the potential new tax will pose a major hurdle in negotiations. France has stated that it will move forward with a DST if negotiations at the Organization for Economic Cooperation and Development (OECD) fail. Last week, the Trump administration threatened to launch Section 301 trade investigations into countries that adopt a digital tax.[2]
Despite this, many countries, including the U.K., are moving forward with a digital tax. The U.K. hopes to resolve the digital tax issue with the U.S. through negotiations at the OECD. There are concerns that this issue could complicate the U.S. – U.K. trade deal negotiations.[3]
NOL Carrybacks
The IRS released FAQs on Monday (Jun. 8) to provide guidance for tax-exempt organizations that have carrybacks of net operating losses (NOLs) from unrelated business or trade. The CARES Act allows organizations to carryback NOLs generated in taxable years beginning after December 31, 2017, and before January 1, 2021, for up to five years.[4]
New Stimulus Measures
On Wednesday (Jun. 10), Treasury Secretary Steven Mnuchin testified before the Senate Small Business Committee and firmly advocated for new legislation that would put more money into the economy, however, said these funds need to be targeted at specific businesses. He suggested changes could be made to the Paycheck Protection Program (PPP) and possibly tax credits.
“We’re open-minded, but we absolutely believe small businesses — and by the way many big businesses in certain industries — are absolutely going to need more help,” Mnuchin said.
Senators from both parties on the committee noted that the PPP was likely a factor in the surprising job gains reported in May. Mnuchin said the program has kept “tens of millions of employees connected to their jobs.”
On Friday (Jun. 12), Senate Democrats sent a letter to Mnuchin, and SBA Administrator Jovita Carranza urging the administration to streamline and simplify PPP loan forgiveness. The letter, which was signed by the entire caucus, expressed concerns voiced by small businesses regarding the complexity of receiving a loan.
Tax Filing Date
The National Taxpayers Union and National Treasury Employees Union, along with a number of different groups, have called for the tax deadline to be pushed back again. The current deadline is July 15. Treasury Secretary Steven Mnuchin was noncommittal when asked about the issue.
“Right now, we haven’t made any decision on that. I will tell you, I have not heard a lot of comments from people on that at this point,” said Mnuchin.[5]
Senate Finance Committee Examines UI
On June 9, 2020, the Senate Finance Committee held a hearing on the impact of unemployment insurance during the COVID-19 pandemic. Chairman Chuck Grassley (R-IA) emphasized the crucial need to help people get back into the workforce. Grassley and other Republicans reiterated that the $600 weekly unemployment benefit is disincentivizing people to go back to work. Additionally, Republicans touted the jobs report that was released last week as a good sign that the economy is recovering. Senator Rob Portman (R-OH) mentioned his back to work bonus proposal that he believes will incentivize people to return to work.
Democrats argued against Republicans’ claims that many people are returning to work and that generous unemployment benefits are disincentivizing people from returning to work. Ranking Member Ron Wyden (D-OR) asked Secretary of Labor Eugene Scalia if states had the ability to implement a 100 percent wage replacement on an individual basis, which Scalia replied he would be willing to discuss that issue further. Wyden said Scalia’s comments were misleading on that issue among others. Democrats expressed concern that the Department of Labor has not released requirements on workplace safety and felt there is not enough protection for workers to keep unemployment benefits if they feel their workplace is unsafe. They also emphasized the need to extend certain unemployment benefits beyond the August deadline, and Scalia responded by saying a lot can change up until then and said it would be wise to look at that issue when it gets closer to the deadline. Senators Michael Bennet (D-CO) and Wyden proposed the idea of tying unemployment insurance to economic conditions.
To view an executive summary, click here.
[1]Emma, Caitlin. “Senate appropriations markups to begin week of June 22.” Politico Pro, 9 Jun. 2020.
[2]Braun, Elisa. “U.S. is only country blocking deal on digital tax, says French finance minister.” Politico Pro, 11 Jun. 2020.
[3]Palmer, Doug. “U.K. hopes for trade deal with U.S. before Nov. 3 election.” Politico Pro, 11 Jun. 2020.
[4]“FAQs on NOL Carrybacks for Exempt Organizations Issued by IRS.” Steptoe & Johnson, 9 Jun. 2020
[5]Lorenzo, Aaron. “Morning Tax.” Politico, 12 Jun. 2020


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