Politico
An early filing of the day's tax news
With help from Heather Caygle and Toby Eckert
BRING ON THOSE RULES: There’s no doubt that the business world is anxious to see the Treasury Department flesh out lots of parts of the new GOP tax law.
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But they also really, really want more information on how those new international rules and the new deduction for pass-through businesses will work, Pro Tax’s Aaron Lorenzo reports.
On the international side, that means seeking more intel on matters like the onetime tax on offshore business profits, including what income will qualify for that tax’s lower rate for illiquid assets. But speaking to the complexity of transferring to a new international system, companies and tax lawyers say there’s still a lot of uncertainty surrounding both the BEAT (base erosion and anti-abuse tax) and the GILTI (global intangible low-taxed income) that are key parts of the new set-up.
What it all adds up to: Despite all the hullabaloo around Apple’s new investments in the U.S., “until regulatory uncertainties surrounding those provisions are resolved, many companies will hold back on new projects and other investments, said Gavin Ekins, a research economist at the Tax Foundation.” As for pass-throughs, one expert suggested that it would be best for Treasury and the IRS to quickly roll out rules defining an independent contractor. “When all of a sudden you have potentially millions of middle-class small business owners positively affected by this, I think it’s just good governance to get the news out like the way they just reduced withholdings,” said Don Susswein of RSM US.
Speaking of which: Hope you’re not a big fan of Treasury and IRS notices, because a senior Treasury official said last week that the Trump administration doesn’t plan to lean heavily on them when implementing the new tax system. That would be in what Tax Notes calls a “stark contrast” to the 1986 tax overhaul, in which the Reagan administration largely did rely on notices. Dana Trier, Treasury’s deputy assistant secretary for tax policy, said the department plans to issue more regulations than notices, but also said there will be some limited-scope notices used to clear up basic questions.
THANKS FOR COMING BACK for another week of Morning Tax, where your author succumbed to stereotype and listened to the Philadelphia police scanner on Sunday night. Good times, everybody!
Better late than never, you’d think: It’s now been 33 years since then-Mayor Ugo Vetere of Rome and then-Mayor Chedli Klibi of Carthage signed a treaty officially ending the Third Punic War. (Hostilities in that smallest of the Punic Wars had ended in 146 B.C.E., but who’s counting?)
Email: bbecker@politico.com, teckert@politico.com, bfaler@politico.com, cwilhelm@politico.com, alorenzo@politico.com. Twitter: @berniebecker3, @tobyeckert, @brian_faler, @colinwilhelm, @AaronELorenzo, @POLITICOPro and @Morning_Tax.
WHEN KEEPING IT REAL GOES WRONG: The GOP’s efforts to criticize Democrats’ complaints that workers were getting “crumbs” out of the tax bill hit a speed bump over the weekend, when House Speaker Paul Ryan (R-Wis.) deleted a tweet noting that a secretary was getting an extra $1.50 a week ($78 a year) out of the new law.
To be fair, Julia Ketchum, the high school secretary from Lancaster, Pa., was pleased about that extra money, which she told the Associated Press was more than she expected from the GOP tax cut and would pay for her yearly Costco membership. But Ryan’s tweet uncorked a stream of criticism from Democrats and liberals who said it proved their point that corporations and the wealthy were the real winners of the tax bill. Not only that, the eventual scrubbing of the tweet prompted stories out of The New York Times, CNN and others.
STAY THE COURSE: That doesn’t mean that Republicans will be easing up on their case that the Democrats’ “crumbs” approach makes them out of touch – not when more and more taxpayers are expected to get bigger paychecks because of the tax cut this month, and certainly not when House Minority Leader Nancy Pelosi (D-Calif.) is out there as a target. “Tying Pelosi to other Democrats is a time-tested strategy for the GOP, which has for years used the California liberal to attack Democratic candidates and paint the party as elitist,” The Hill’s Naomi Jagoda writes, noting that President Donald Trump got into that act last week, too.
ABOUT THOSE BONUSES: The New York Times has now weighed in on that key debate of the tax law’s aftermath – just how much of a boost do those bonuses give to workers? On the plus side, many bonuses now are going to workers who haven’t gotten that kind of reward in the past. But at some companies, workers with shorter tenures and part-time workers will get just a fraction of the maximum bonus, and the onetime payments aren’t expected to be the start of a bigger trend of higher pay for workers. And there’s this: “Some corporations offering bonuses will be able to subsidize their payouts with taxpayer funds. If they announced their plan before the end of 2017, they will be allowed to deduct the cost of the bonuses at last year’s 35 percent corporate rate, even if they pay employees in the early months of 2018, after the rate dropped to 21 percent,” the NYT’s Patricia Cohen wrote.
OFF TO OHIO: Trump also heads to the Cincinnati area today for yet another event stumping for those tax cuts. But as the Cincinnati Enquirer reports, the president’s visit is also about trying to ensure Republicans have a united front in the Buckeye State this year. Sen. Rob Portman (R-Ohio), a Finance Committee member who helped craft the tax plan, will appear with Trump for the first ever time in Ohio. And Trump could endorse Rep. Jim Renacci (R-Ohio), currently a House tax writer, in his effort to unseat Sen. Sherrod Brown (D-Ohio), yet another Finance member.
NOT GIVING UP YET: Sen. Marco Rubio (R-Fla.) and Ivanka Trump, a key adviser to her father, are teaming up on paid family leave. Following the president’s backing of the idea in the State of the Union address last week, Rubio is trying to craft a plan that would limit the burden on employers and not raise taxes. “Rubio is still in the early stages of crafting a paid leave plan that a critical mass of congressional Republicans and the Trump administration could get behind. In private conversations with senators, Ivanka Trump has discussed hiking payroll taxes or otherwise paying into Social Security to create a new, personal paid leave fund, according to multiple senior GOP sources,” our Seung Min Kim reported, adding that Ivanka Trump is willing to be flexible to cut a deal.
DOUBLE WHAMMY: There’s a lot to like in the new tax cut for a lot of U.S. businesses. But as The Wall Street Journal reports, that’s not necessarily the case for companies on the cusp of bankruptcy. The new law gets rid of net operating loss carry-backs, which allowed businesses to get an immediate tax rebate by applying a current loss to previous taxable income. “Coupled with a limit on interest deductions, which makes borrowing costlier, the changes will leave strapped firms with fewer options, according to bankruptcy lawyers and advisers.”
PERSONNEL UPDATE: Emily Schillinger, most recently seen helping get the GOP tax bill into law as House Ways and Means Chairman Kevin Brady’s communications director, is heading off the Hill. Schillinger will be taking over as vice president for public affairs for the American Investment Council, the private equity industry’s trade association. One of the industry’s key tax priorities, the preferential tax treatment for carried interest, made it through basically unscathed in the new tax law.
INTERNATIONAL UPDATE
GERMANY GETS CUTTING: A proposal to gradually scrap Germany’s air transport tax might get dropped in negotiations over forming a new government, Reuters reports. The tax, which adds up to 40 euros (around $50) on flight tickets, raises more than 1 billion euros for Berlin each year. A tentative proposal that Reuters had seen Friday called for getting rid of the tax, but the news agency reported Sunday that idea could be dropped from a final coalition agreement. Chancellor Angela Merkel and her Christian Democrats have been negotiating with Social Democrats to form a new coalition.
STATE NEWS
MEET ME IN COURT: The Massachusetts high court will begin hearing arguments this week on a legal challenge against the state’s so-called “millionaires tax,” the Associated Press reports. “The constitutional amendment would impose a surtax of 4 percent on any portion of an individual’s annual income that exceeds $1 million. The justices are not being asked to decide on the merits of the proposal, but instead whether it runs afoul of restrictions the state constitution places on the scope of ballot initiatives.”
QUICK LINKS
The early returns on the big business response to the GOP tax cut.
Tax headline of the weekend: “Billionaire takes a property tax stand over pooping geese.”
DID YOU KNOW?
Martha, the last known passenger pigeon in existence, died at the Cincinnati Zoo in 1914.