White House Sends Economic Report to Congress
On February 19, the White House released the Economic Report of the President, together with the Annual Report of the Council of Economic Advisors. In the report, the Administration weighs the merits of various approaches to tax reform, including repealing the corporate income tax, cutting the top individual rate in conjunction with the corporate rate, adopting a territorial system, and allowing the expensing of new investment. According to the report, all of these options are flawed in some way. Instead, the report suggests the best approach is business tax reform that complements other pieces of the President’s agenda, including investment in infrastructure, individual tax reform, and policies that “guarantee all Americans can share in this growth.” As part of its responsibilities, the Joint Economic Committee will now undertake a review and analysis of the report.
JCT Releases Document on the Economy and Tax Policy
In preparation for the Senate Finance Committee hearing scheduled for Tuesday, February 24, the Joint Committee on Taxation (JCT) has released a report discussing how tax policy can affect economic growth through its impact on labor, capital investment, technological development, and human capital. The report also provides historical data on productivity growth, real gross domestic product (GDP) growth, the growth of the labor force and changing labor force participation rates, and growth in workers’ real compensation per hour.
House to Consider Bill to Improve Section 529 Plans
This week, the full House of Representatives will consider H.R. 529, a bill to amend the Internal Revenue Code of 1986 (Code) to improve section 529 college savings plans. Specifically, the legislation, which was recently approved by the House Ways and Means Committee, would: (1) allow the purchase of a computer to count as a qualified expense; (2) remove distribution aggregation requirements; and (3) allow students who receive a refund on a qualified expense to redeposit the refund into their plan without penalty. The legislation would cost approximately $51 million over 10 years and be effective with respect to distributions made after December 31, 2014.
This legislation is targeted at a proposal in President Obama’s FY 2016 Budget – a proposal that the President has recently indicated he will no longer pursue – that would remove some of the tax benefits associated with 529 plans.
Senate Finance Committee Approves FIRPTA Reforms
Last week, the Senate Finance Committee approved a bill that would make significant changes to the Foreign Investment Real Property Tax Act (FIRPTA), encouraging investment in U.S. real estate in several ways. To help finance the changes, the bill would increase FIRPTA withholding tax and increase reporting and disclosure requirements with respect to foreign investment in Real Estate Investment Trusts (REITs) and Regulated Investment Companies (RICs). While further action on the legislation has yet to be announced, lawmakers – including Senate Finance Committee Ranking Member Ron Wyden (D-OR) – are particularly supportive of the bill.
This Week’s Hearings:
- Tuesday, February 24: The Senate Finance Committee will hold a hearing titled “Tax Reform, Growth and Efficiency.”
- Wednesday, February 25: The House Ways and Means Subcommittee on Social Security will hold a hearing titled “Maintaining the Disability Insurance Trust Fund’s Solvency.”
- Wednesday, February 25: The House Budget Committee will hold a hearing to discuss Members’ views of the FY 2016 Budget.
- Wednesday, February 25: The Senate Budget Committee will hold a hearing titled “The Coming Crisis: America’s Dangerous Debt.”
- Thursday, February 26: The Senate Finance Committee will hold a hearing titled “Congress and U.S. Tariff Policy.”
Treasury May Finalize Anti-Inversion Regulations by Year’s End
Last week, a Treasury official announced that, while no specific timeframe has been determined, it is possible that Treasury will release its anti-inversion regulations this year. These regulations stem from September 2014 Treasury guidance, which the Administration released in an effort to curb a stream of corporate tax inversion transactions.