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Tax Update (July 27)

Jul 27, 2020 | SHARE  

COVID-19 Stimulus

On Thursday (Jul. 23), Senate Majority Leader Mitch McConnell (R-KY) said a package of COVID-19 relief legislation will be released early next week.

“The administration has requested additional time to review the fine details, but we will be laying down this proposal early next week. We have an agreement in principle on the shape of this package,” McConnell said.

Senate Republicans planned to release the proposal Thursday (Jul. 23), but disagreements between lawmakers and the White House delayed the introduction.[1] 

On Thursday (Jul. 23), Treasury Secretary Steven Mnuchin said the next COVID-19 relief legislation will include more stimulus payments and tax credits for personal protective equipment (PPE) and rehiring workers. Mnuchin said that a payroll tax cut will not be included in the bill.

“The president is very focused in getting money into people’s hands quickly. He likes the payroll tax cut, we think it’s the right, long term policy. But his priority, and he understands, direct payments work now,” Mnuchin said.[2] 

This week, House Ways and Means Republicans introduced multiple bills that provide tax incentives for bringing offshore intellectual property back to America. These bills would also provide tax incentives for manufacturing and research and development. Republican lawmakers hope these proposals will be included in the next stimulus legislation.[3] 

Senator Mike Rounds (R-SD) said Republicans are on track to support a decrease in Unemployment Insurance (UI) benefits from $600 a week to $200 a week, however it was suggested by another senator that UI benefits could be scaled to be proportional to income. McConnell said his top priority is liability protections for employers and that this will be included in the legislation.

“We will preserve accountability in cases of actual gross negligence or intentional misconduct, but we’re going to make sure that nurses and doctors who fought an unknown enemy are not swamped by a tidal wave of malpractice suits,” McConnell said.[4] 

It is reported that the employee retention credit will be included in the stimulus legislation, however, specific details are unclear. Additionally, it is reported another round of targeted Paycheck Protection Program loans will be included for small businesses.[5] 


GILTI Regulations

On Monday (Jul. 20), the Internal Revenue Service (IRS) and Treasury Department released a final regulation on a provision in the Tax Cuts and Jobs Act (TCJA) that addresses treatment of income earned by certain foreign corporations that is subject to a high rate of foreign tax. The final regulations permit taxpayers to exclude certain high-taxed income of a controlled foreign corporation from their global intangible low-taxed income (GILTI) computation on an elective basis.

Additionally, IRS and Treasury released a proposed regulation regarding the high-tax exception in the GILTI high-tax exclusion.[6] 


Digital Tax

On Wednesday (Jul. 22), Deputy Director of the Organization for Economic Cooperation and Development (OECD) Center for Tax Policy and Administration, Grace Perez-Navarro, said in a webcast that a digital services tax proposal will address corporate losses and profits. Businesses were concerned that a digital services tax proposal from the OECD would not acknowledge losses.

“There’s a very broad support for computing these rules applying the same types of computational rules to both profits and losses,” Perez-Navarro said.

Director of the OECD Center for Tax Policy and Administration, Pascal Saint-Amans, said on the same webcast that G20 finance ministers told the OECD they remain committed to reaching a deal by the end of 2020. Additionally, Saint-Amans said the OECD will present blueprints to Pillar One and Pillar Two plans by October. He said that a deal will not be easy and emphasized that expectations need to be realistic. 

“As much as we welcome the G20 telling us that they hope to have an agreement by year-end, and they aim to have an agreement by year-end, we have to recognize there are a number of pending issues,” said Saint-Amans.[7] 


Tax Court

On Wednesday (Jul. 22), U.S. Tax Court Chief Judge, Maurice Foley, said the court’s shift to virtual trials will provide benefits moving forward. He said the option of remote trials in the future will cut down on court expenses and reduce time and travel costs. Additionally, Foley said taxpayers would be able to file petitions electronically. A demonstration has been scheduled for July 27 and the court will post mock trial videos to its website.[8] 



[1] Carney, Jordain. “Senate GOP punts coronavirus package to next week.” The Hill, 23 Jul. 2020. https://link.edgepilot.com/s/0a312bbd/_hsvwv2UsUetDVOwbh7rYw?u=https://thehill.com/homenews/senate/508823-senate-gop-punts-coronavirus-package-to-next-week

[2] Lorenzo, Aaron. “Mnuchin says same stimulus payments coming, plus tax credits.” Politico Pro, 23 Jul. 2020. https://link.edgepilot.com/s/624f498d/CzYZumcPOUqK8W0mXYQRxA?u=https://subscriber.politicopro.com/article/2020/07/mnuchin-says-same-stimulus-payments-coming-plus-tax-credits-3982763

[3] Lorenzo, Aaron. “House GOP tax writers weigh in with more tax bills for virus relief.” Politico Pro, 23 Jul. 2020. https://link.edgepilot.com/s/8fbb8ab4/8dYcMlU8b02aoy2U-BNoiQ?u=https://subscriber.politicopro.com/article/2020/07/house-gop-tax-writers-weigh-in-with-more-tax-bills-for-virus-relief-3982771

[4] Kragie, Andrew. “GOP Virus Aid Plan Stalls Despite Deal On PPP, Taxes, Checks.” Law360 Tax Authority, 23 Jul. 2020. https://link.edgepilot.com/s/c270aec8/HRFbC9CC2EmUZT3XISp3ew?u=https://www.law360.com/tax-authority/federal/articles/1294972/gop-virus-aid-plan-stalls-despite-deal-on-ppp-taxes-checks?nl_pk=19f12e87-7ef0-48bc-8cfd-cd480139d3bb%26utm_source=newsletter%26utm_medium=email%26utm_campaign=tax-authority/federal

[5] Pramuk, Jacob. “Here’s what we know is in the Republican coronavirus relief bill.” CNBC, 24 Jul. 2020. https://link.edgepilot.com/s/df4ad64e/nnapCXR3qUSGQ1MWPOkewQ?u=https://www.cnbc.com/2020/07/24/heres-what-we-know-is-in-the-republican-coronavirus-relief-bill.html

[6] IRS. “Treasury, IRS issue final and proposed regulations on income subject to a high rate of foreign tax.” 20 Jul. 2020. https://link.edgepilot.com/s/9df16efb/3bzIQ4eDJUuTnMrGG-egbQ?u=https://www.irs.gov/newsroom/treasury-irs-issue-final-and-proposed-regulations-on-income-subject-to-a-high-rate-of-foreign-tax

[7] Gottlieb, Isabel. “Details of OECD Digital Tax Plan Taking Shape.” Bloomberg Tax, Jul. 23 2020. https://link.edgepilot.com/s/56078705/jtuOjk6Cr0K7U20QXZZy7A?u=https://news.bloombergtax.com/daily-tax-report-international/oecd-digital-tax-plan-to-include-loss-rules-dispute-panels

[8] Lorenzo, Aaron. “Tax Court stepping into new world of virtual proceedings.” Politico Pro, 22 Jul. 2020. https://link.edgepilot.com/s/e6f671a9/hs-fdfL0zEWLI-oHBn0TKg?u=https://subscriber.politicopro.com/article/2020/07/tax-court-stepping-into-new-world-of-virtual-proceedings-3982739


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