Tax Update (November 15)
2020 Election Update
On Saturday (Nov. 7), all the major networks, including the Associated Press, announced former Vice-President Joe Biden had defeated President Donald Trump to become the 46th President of the U.S.
The Trump campaign has filed various lawsuits in swing states challenging the results, and Judges in Georgia, Michigan, and Nevada have already rejected its cases. Experts appear skeptical that the ongoing litigation could change or have a significant impact on the presidential race.
Leaders from across the world have already started to congratulate Biden on his victory.
Democrats retained the House majority with a 219-202 margin with 14 races left to be called. Republicans had a net gain of six House seats and are expected to expand that margin. NBC News projects Democrats will hold a 224-211 majority in the House. Prior to the election, Democrats held 232 seats. At this point, the party will likely lose various seats on crucial committees, including Ways and Means.
This week, Senators Thom Tillis (R-NC) and Dan Sullivan (R-AK) won re-election. Both seats in Georgia will be officially determined in a runoff on January 5, 2021. Notably, on Monday (Nov. 9), Sen. Joe Manchin (D-WV) said that if there is a 50-50 split he would not vote to end the filibuster or “pack the courts.”
On Wednesday (Nov. 11), Ron Klain was named White House Chief of Staff for President-elect Biden. Klain has been a longtime aide for Biden and served as Chief of Staff for Biden when he was Vice President.
This week, the Biden-Harris transition announced agency review teams to oversee operational transitions at federal agencies. Don Graves will lead the Treasury Department transition team and Jonathan Swain will lead the Small Business Administration team.
To view a list of the Biden-Harris agency review teams, click here.
The Biden-Harris transition team also released platforms for early priorities that include economic recovery. The plan states that Biden will extend COVID-19 unemployment insurance, provide a “comeback” package for Main Street businesses, and give state and local governments funds to make sure essential workers are not laid off. The platform outlines the need to build an industrial base and small business led supply chains in America to ensure the U.S. is not dependent on foreign countries for critical materials. The plan states that these initiatives will be paid for by reversing some Tax Cuts and Jobs Act (TCJA) provisions for corporations and making sure the wealthiest American’s pay “their fair share.”
To view the economic recovery platform, click here.
On Thursday (Nov. 12), House Speaker Nancy Pelosi (D-CA) and Senate Minority Leader Chuck Schumer (D-NY) said they do not plan to change their position on a $2 trillion COVID-19 package. Senate Majority Leader Mitch McConnell (R-KY) said he supports a $500 billion bill and cited the improved economic data as the reason for a highly targeted bill.
“I gather (Pelosi) and the Democratic leader in the Senate still are looking at something dramatically larger. That’s not a place I think we’re willing to go,” McConnell said.
“But I do think there needs to be another package. Hopefully we can get past the impasse we’ve had now for four or five months and get serious,” he added.
Pelosi said she has “no interest” in a $500 billion package. Senator Susan Collins (R-ME) said Senate Democrats should advance the Republican stimulus bill and come to a compromise with House Democrats.
On Tuesday (Nov. 10), Senate Appropriations Chairman Richard Shelby (R-AL) released all 12 appropriations bills for FY21. It is expected that the Senate will not hold markups on the bills and will go straight into negotiations with the House. The House passed 10 of the 12 appropriation bills earlier this year.
“House appropriators are reviewing the Senate’s bills right now and are prepared to quickly begin bipartisan negotiations,“ House Appropriations Committee spokesperson Evan Hollander said in a statement. “There is strong momentum to complete the fiscal year 2021 appropriations process this year, and Chairwoman (Nita) Lowey will do everything she can to make that happen,” he added.
“(House Speaker Nancy Pelosi) has told me she wants to get it out of the way and move onto the next Congress. We don’t want to shut any government down,” Shelby said.
Senate Appropriations Ranking Member Patrick Leahy (D-VT) said most of the bills are a result of bipartisan work, however, he also wants to address some significant issues in negotiations with the House.
Government funding is set to expire December 11, 2020. Lawmakers could pass another continuing resolution (CR) if negotiations fail on the appropriation bills.
To view the Senate bills, click here.
On Tuesday (Nov. 10), IRS Chief Counsel Michael Desmond said the agency may issue guidelines on debt businesses will not have to pay back after borrowing from the Paycheck Protection Program (PPP). Some companies have complained that the debt forgiveness process for the PPP has not been clear. This spring, IRS guidance stated companies could not take tax deductions for covered expenses if they had used forgiven PPP loans to pay for those expenses. However, lawmakers have urged the IRS to change its position and said they meant to exclude forgiven PPP loans from taxable income.
According to a Government Accountability Office (GAO) report, the IRS is collecting a limited amount of data on Opportunity Zones (OZ) and it may not be enough to evaluate the program’s impact. Additionally, some data on OZs may be protected due to taxpayer secrecy laws. The report recommended Congress consider passing more comprehensive reporting requirements for the program.
To view the GAO report, click here.
According to a survey by EY, most big businesses say they would invest more in domestic production if federal policies incentivize a shift away from foreign production. Around two-thirds of companies said their strategies would be influenced by onshoring incentives. Lawmakers from both parties have expressed support for onshoring initiatives but have differing approaches to the issue. Biden has outlined his onshoring plan that includes tax penalties for businesses that move abroad and sell products in the U.S. The President-elect’s plan also includes tax incentives for companies that return to America.
House Ways and Means Oversight Hearing
IRS Commissioner Chuck Rettig has agreed to appear before the House Ways and Means Subcommittee on Oversight on Friday (Nov. 20). Subcommittee Chairman Bill Pascrell (D-NJ) asked for Rettig to testify in October, however Rettig requested a November hearing. In his initial outreach to Pascrell, Rettig said that he would not discuss President Trump’s tax returns.
 “U.S. House Election Results 2020” NBC News, 13 Nov. 2020
 Cassella, Megan & Thompson, Alex. “Biden announces Ron Klain will be White House chief of staff.” Politico Pro, 11 Nov. 2020.
 Everett, Burgess & Ferris, Sarah “Congress deadlocked on stimulus as lame duck begins.” 12 Nov. 2020.
 Emma, Caitlin. “Senate appropriators release fiscal 2021 spending bills.” Politico Pro, 10 Nov. 2020.
 Lorenzo, Aaron. “Guidance on forgiven PPP loans under consideration, IRS chief counsel says.” 10 Nov. 2020.
 Faler, Brian. “IRS data on Opportunity Zones may not shed much light, GAO says.” 9 Nov. 2020.
 Lorenzo, Aaron. “Business community looks amenable to ‘onshoring’ policies, survey finds.” 11 Nov. 2020.
 Lorenzo, Aaron. “IRS chief to appear at Ways and Means Oversight hearing.” Politico Pro, 13 Nov. 2020.