Legislative Activity

House Tax Writers to Hold Retreat as Senator Hatch Hatches His Own Plan for Reform

After being delayed due to winter weather, the House Ways and Means Committee is set to hold its retreat this week. As expected, the retreat will afford Republican tax-writers an opportunity to flesh out their agenda for the year, which is likely to include a focus on international tax reform and the Organisation for Economic Co-operation and Development’s (OECD) Base Erosion and Profit Shifting (BEPS) Project. Though Chairman Kevin Brady (R-TX) has indicated that he wants input from Committee members in determining their exact path forward, he has also made clear “[w]e’re advancing tax reform, one or more ways, in 2016… good tax policy is going to blossom, and we’re going to have a chance to give [tax reform] oxygen over 2016 and 2017.” Still, while we will know more following the retreat, Speaker Paul Ryan (R-WI) has suggested that, in general, he wants to “go big on ideas,” but may ultimately not hold votes on significant legislation in 2016.

On the Senate side, Finance Committee Chairman Orrin Hatch (R-UT) recently indicated that he intends to move forward in the next few weeks with a tax reform bill aimed at addressing double corporate taxation. While there are few details publicly available (and the legislation is still being drafted), it appears that he intends to offer companies a deduction for money paid to shareholders as dividends. Chairman Hatch has suggested that such legislation would also be helpful in slowing the rate of inversions, as it would take away some of the incentive that corporations have to leave the U.S. According to a Finance Committee spokesperson, “[i]f done right, corporate integration has the potential to significantly reduce effective tax rates, reduce incentives to move businesses offshore for tax purposes, and encourage more investment here at home.”

This Week’s Hearings:

• Tuesday, February 2: The House Ways and Means Committee will hold a hearing titled “Reaching America’s Potential: Delivering Growth and Opportunity for All Americans.”

Regulatory Activity

U.S., EU Move Forward with CbyCR Implementation

Following the release last year by the OECD of its final BEPS reports, various countries have already begun taking steps to implement certain actions called for in the BEPS Project into their domestic law, with much of the initial focus being on country-by-country reporting (CbyCR). Notably, following-up on Treasury’s CbyCR regulations released last year, Bob Stack, U.S. Deputy Assistant Treasury Secretary for International Tax Affairs, recently emphasized that the U.S. intends to enter into such bilateral agreements “with appropriate countries that have also adopted country-by-country reporting provisions, have appropriate safeguards and infrastructure in place, and with respect to which the U.S. has an income tax treaty or tax information exchange agreement in effect.”

More broadly, the European Commission (EC) has indicated that, in addition to regulations being implemented by its member states, an EC version of CbyCR is also appropriate. As such, on Thursday, January 28, the EC released a proposal that a prior directive be expanded to require “mandatory automatic exchange of country-by-country reports between Member states.” However, any such action would first require unanimous approval by all EU member states before taking effect.

Treasury to Hold Borrowing Advisory Committee Meeting

On Tuesday, February 2, the Treasury Borrowing Advisory Committee of The Securities Industry and Financial Markets Association will meet in closed session. The agenda for the meeting provides for a charge by the Secretary of the Treasury or his designate that the Committee discuss particular issues and conduct a working session. Following the working session, the Committee will present a written report of its recommendations. Treasury staff will provide a technical briefing to the press on the day before the Committee meeting, following the release of a statement of economic conditions and financing estimates. This briefing will give the press an opportunity to ask questions about financing projections. The day after the Committee meeting, Treasury will release the minutes of the meeting, any charts that were discussed at the meeting, and the Committee’s report.