Chairman Camp Announces Tax Reform Delay
House Ways and Means Chairman Dave Camp (R-MI) stated last week that comprehensive tax reform legislation will not be circulated this year. The Chairman had aimed to release a comprehensive reform draft this year for markup in committee, but other occurrences like the government shutdown had slowed any momentum toward a bill. Chairman Camp has made clear that he would like to markup legislation next year, but before doing so will likely spend some time educating House members – both on and off the Ways and Means Committee – on the ins-and-outs of his planned legislation.
The delay will provide stakeholders more time to consider the discussions drafts currently in circulation, including the recent international, cost recovery and tax administration drafts released by Senate Finance Committee Chairman Max Baucus (D-MT).
In addition, tax extenders (provisions that are due to expire at the end of 2013, including the research and development credit, wind credit and the exception for active financing, among many others) are expected to expire, at least temporarily. While in the past such provisions have almost always been extended retroactively, the path for extenders next year is muddied by a variety of factors, including the fact that neither Chairman Camp nor Chairman Baucus appear inclined to address extenders while they continue to pursue comprehensive reform.
This Week’s Hearings:
- Tuesday, December 10: The Senate Finance Committee will hold a hearing to consider the Nomination of John Andrew Koskinen, to be Commissioner of Internal Revenue.
- Wednesday, December 11: The Senate Finance Subcommittee on International Trade, Customs, and Global Competitiveness will hold a hearing titled “The Digital Trade Agenda.”
- Thursday, December 12: The Senate Finance Committee will hold an open executive session to consider an original bill to repeal the sustainable growth rate system and to consider health care extenders; and the Supporting At-Risk Children Act.
Treasury Issues Final and Reproposed Regulations on Dividend Equivalents
On Wednesday, December 4, Treasury issued final and reproposed regulations on the treatment of dividend equivalent payments under section 871(m) of the Internal Revenue Code (Code). The final regulations extend to January 1, 2016, the applicability of the current statutory framework for determining covered notional principal contract (NPC) payments.
The reproposed regulations provide for a new delta-based approach for defining NPC payments made on or after January 1, 2016.
IRS Holds Hearing on Identified Mixed Straddles
Last Wednesday, the IRS held a hearing on proposed regulations titled “Mixed Straddles; Straddle-by-Straddle Identification Under Section 1092(b)(2)(A)(i)(I).” At the hearing, witnesses, including Peter Bauz from the American Council of Life Insurers, testified that, as proposed, the rules would have a negative effect on insurance companies.
Mr. Bautz argued that a taxpayer’s use of an identified mixed straddle transaction to realize and recognize gain that it economically earned is appropriate and consistent with the Code. He noted that essential to the design of the capital loss limitations and carryforwards is the recognition that selective realization of gains within the loss carryforward period is not only appropriate, but the only way a taxpayer can ensure that it is taxed on its net economic income.
Final rules on the treatment of identified mixed straddles could be released as soon as the summer of 2014.