26th Annual Tuesday & Wednesday, January 24‐25, 2017 Hya� Regency Columbus, Columbus, Ohio Ohio Tax Federal Tax Policy: A Discussion of Comprehensive Tax Reform Efforts and Other Legislative Developments Caroline L. Harris Vice President, Tax Policy & Chief Tax Policy Counsel, U.S. Chamber of Commerce Washington, DC Wednesday, January 25, 2017 10:00 a.m. to 10:45 a.m.
Caroline L. Harris Vice President, Tax Policy, and Chief Tax Policy Counsel, U.S. Chamber of Commerce Caroline L. Harris is vice president, tax policy, and chief tax policy counsel at the U.S. Chamber of Commerce. She directs the development, promotion, and publication of the Chamber’s policy on tax-related matters. She analyzes tax legislation, other legislation with revenue-raising provisions, and tax reform proposals, and submits comments, Hill letters, and testimony to Congress and regulatory agencies. Harris routinely meets with members of Congress and their staffs, the administration, and regulatory agencies to promote the Chamber’s tax policy. Harris also frequently speaks to business leaders, local chambers of commerce, other trade associations, and member companies to educate them on the Chamber’s tax policy priorities and current legislative outlook. She regularly meets with Chamber members to assess what provisions affect their businesses. In addition, Harris publicizes the Chamber’s tax policy through media communications with the Dow Jones and the Financial Times . She contributes opinion pieces in notable newspapers, such as The Washington Post and The Washington Times and comments on tax policy on national television networks, including Bloomberg and Fox Business. Harris serves as the Committee Executive for the Chamber’s Taxation Committee and represents the Chamber on the Steering Committee of several national tax coalitions. Harris is admitted to the District of Columbia Bar. She is a member of the American Bar Association and its Tax Section. Harris received a B.A. in economics from the University of Wisconsin–Madison and her J.D. from The George Washington University School of Law. She received a Master of Laws in Taxation, with distinction, from the Georgetown University Law Center. Harris hails from Philadelphia and currently resides in Washington, D.C. with her husband, Ethan. 1615 H Street, NW Washington, DC 20062 202-659-5406 The U.S. Chamber of Commerce is the world’s largest business federation representing the interests of more than www.uschamber.com 3 million businesses of all sizes, sectors, and regions, as well as state and local chambers and industry associations. Rev. April 2016
The 2017 Tax Outlook • Where Are We? – Where Did We End Up? – Election 2016 Results • Legislative Outlook? – Budget • Vote‐A‐Rama? • Health Care? – Regulatory Reform – Tax Reform • Process and Timing? • Key Players? • Starting Points? • Revenue Considerations? • Winners and Losers? • Effective Dates? • What Should YOU Be Doing? • Regulatory Outlook – Debt/equity – Minority Valuation • Litigation Outlook – Internet sales tax – Altera – Inversions
The 2017 Tax Outlook: I’m Still Here
Where Did We End Up?: Year End • Tax Reform? Nope… • Remaining Tax Extenders? Bye‐bye racehorses, NASCAR, and Hollywood… • State and Local Tax Issues? – PITFA? Yes! – Internet Sales Tax? Marketplace Fairness, OSSA, DMA v. Brohl… Nope… – BATSA? Nope… – Mobile Workforce? Nope…. • Regulations? Debt/Equity went final, minority valuation still in proposed… • Tax Treaties? No ratification 6 ½ years and counting…
Where Are We?: Election 2016 Results • Republicans control both branches of Congress – 51 Republican Senators – 241 House Republicans • A Republican White House and House and Senate Republican Leadership can set a common agenda
Where Are We?: Election 2016 Results • Senate Republicans now have 51 votes… • Enough to pass expedited budget legislation, approve Cabinet… • But not enough to overcome filibusters, approve Supreme Court….
Legislative Outlook: Budget: Health Care • Procedure : Senate passed budget with reconciliation instructions on health care, sent to House • Repeal and Delay Strategy? Replacement ? – Will need revenues for replacement so isn’t clear what will happen to the ACA taxes – Cadillac and medical device? Bipartisan engagement…. – 3.8% investment tax? Optics issues…. • Outlook : Internal politics, D resistance but will pass
Legislative Outlook: Reg Reform • House : Will pass: – REINS Act (require congressional approval of any exec branch regs costing over $100M) – Midnite rules (repeal Obama rules in clusters using the Congressional Review Act (CRA)) • Senate : Bills will hit snag b/c need 8 Ds • Outlook : One or more Obama rules will be killed using CRA
Tax Reform: Process • Bipartisan Process? – GOP Blueprint HWM Markup Full House Vote (limited amendments) – Senate Bill SFC Markup Full Senate Vote (amendments more likely) – Conference Committee to resolve differences – Vote on Conference Agreement – Bill to President for Signature
Tax Reform: Process • Bipartisan Process: Requires 60 in Senate, Min 8 Dems • Targets: 2018 Dems Sitting in Red States – Nelson (D‐FL) – Donnelly (D‐IN) – Stabenow (D‐MI) – McCaskill (D‐MO) – Tester (D‐MT) – Heitkamp (D‐ND) – Brown (D‐OH) – Casey (D‐PA) – Manchin (D‐WV) – Baldwin (D‐WI)
Tax Reform: Process • Reconciliation Process? – Pass budget, which includes instructions on details (like tax reform); limited to how many reconciliation bills can do in one year; if ACA early, tax reform later – Committees of jurisdiction cobble together underlying legislation, vote at least month after – but quicker if House, Senate, Pres on same page • Limitations: Cannot add to deficit outside of 10 year window (need phaseouts… see fiscal cliff fiascos…) • Benefits: Only need 51 votes, so can do with NO Democrats • Feasible could do 2 bills: 1 bipartisan, 1 under reconciliation
Tax Reform: Timing • Questions: House has blueprint, Senate does not…. • 1986 Lessons: A 13‐month Process – House • HWM conducted 26 days of markup of tax reform (September 18, 1985‐December 3, 1985, with breaks) • Full House passed the bill 2 weeks after the markup concluded (on December 17, 1985) – Senate • SFC reported its reform bill approximately 4½ months after the House passed its version • SFC conducted 17 days of markup (March 19, 1986‐May 6, 1986, with breaks) • SFC filed report for its bill on May 29, 1986, full Senate deliberated for a little under a month before passing its bill, with amendments, on June 24, 1986. – Conference: Conference committee approved a conference agreement about 2 mos. after Senate passage and filed its report a month later (on September 18, 1986) which was then approved by both the House and the Senate – President: Signed into law on October 22, 1986
Tax Reform: Key Players • Admin : Treasury Secretary Mnuchin, unnamed Treasury Policy positions • House : Speaker Ryan, HWM Chair Brady • Senate : Majority Leader McConnell, SFC Chair Hatch, SFC Budget Chair Enzi, Minority Leader Schumer, SFC Ranking Member Wyden
Tax Reform: Starting Point: Individual Issue Trump GOP House Blueprint Tax Brackets 3 brackets (12%, 25%, 33%) Same Cap Gains/ Dividends Retain existing capital gains tax Taxed at ordinary rates with 50% exclusion structure (effective tax rates of 6%, 12.5%, 16.5%) Repeal 3.8% NIIT Repeal 3.8% ACA tax Carried Interest Tax as ordinary income Follows proposed treatment of capital gain (i.e., tax at ordinary rates with 50% exclusion for max effective rate of 16.5%) Itemized Deductions Cap itemized deductions at $200K Retain deductions for mortgage interest, (married)/$100K (single) charitable giving; eliminate most others Standard Deductions; Increase standard deduction to Consolidate standard deduction & personal Other Credits $15K (individuals), $30K (MFJ) exemption into 1 larger standard deduction of Eliminate personal exemptions and $12K (single) , $18K (single with child), $24K head‐of‐household filing status (MFJ) Create new above‐the‐line tax Consolidate personal exemption for children & deductions for child /elder care child tax credit into single $1,500 credit, expenses, tax‐preferred savings $1,000 of which is refundable accounts Repeal, eliminate stepped up basis Estate Tax Repeal
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