Taxation & Representation, January 23, 2019

Taxation & Representation, January 23, 2019

Jan 23, 2019

Client Alert

Brownstein Client Alert, January 23, 2019

IN THIS ISSUE

 

 

MEET THE MEMBERS

As we approach the third week of the new session, the tax writing committees have been formally announced, and we at Brownstein want to introduce you to all of the new faces. This week, we feature new House Ways and Means Committee members Gwen Moore (D-WI), Jodey Arrington (R-TX) and Don Beyer (D-VA).

 

Rep. Gwen Moore (D-WI-04). On the anniversary of her 30th year of public service, Rep. Moore joined the House Ways and Means Committee after previously serving on the House Financial Services Committee. An active member in both the Congressional Progressive Caucus (CPC) and Congressional Black Caucus (CBC) for the past 14 years, Rep. Moore has been a consistent progressive voice in the House. She has co-sponsored over 200 tax-related bills and introduced the Top 1% Accountability Act, which mandated those claiming an itemized deduction over $150,000 to submit to a drug test or take the lower standard deduction. During the height of the financial crisis, she introduced a pair of bills targeted at homebuyer tax credits and taxing employee bonuses from financial firms that received funds from the Troubled Asset Relief Program.

Rep. Jodey Arrington (R-TX-19). Rep. Arrington, representing Texas since 2016, has prioritized reducing government spending, strengthening the U.S. military and protecting individual liberties. Previously, he served as an advisor to President George W. Bush, assisting with assembling his agriculture, water and energy teams. Rep. Arrington then became chief of staff to FDIC Chair Don Powell, where he assisted in reducing regulations on community banks. During his time, he urged Congress to approve a law in 2006 that increased the amount insured by the federal government to $250,000. The legislation also provided banks with rebates in the event the country’s deposit insurance fund reached a particular level. He is a member of the House Republican Study Committee and co-chairs the Congressional Ports-to-Plains Caucus.

Rep. Don Beyer (D-VA-08). Rep. Beyer has been a fixture in the Washington metropolitan region for several decades as a business owner, economic development chair in northern Virginia and representative for parts of Arlington, Alexandria and Fairfax County since 2015. A former VA lieutenant governor (1990-1998) and ambassador to Switzerland and Liechtenstein (2009-2013), Rep. Beyer’s diverse background has given him experience legislating on everything from tax evasion to climate change to tech policy. Rep. Beyer comes to the Ways and Means Committee as a member of the New Democrat Coalition, having cosponsored nearly 50 tax bills, including once proposing legislation that would allow reciprocal “above-the-line” deductions for adult, elementary, and secondary school teachers.

 

 

LEGISLATIVE LOWDOWN

Neal and Mnuchin Spat. This week, Ways and Means Committee Chairman Richard Neal (D-MA) invited Treasury Secretary Steven Mnuchin to testify before the committee on the shutdown’s impact on the Treasury Department. However, Treasury responded saying that “If the purpose of the upcoming hearing is to inform Congress and the public, we are confident that goal will be best served by testimony from the senior department officials with the deepest and broadest expertise on the subject of the hearing.” Chairman Neal on Thursday retorted that Mnuchin should reconsider his response, given the gravity of the issue and Mnuchin’s now-cancelled attendance at this week’s World Economic Forum in Davos, Switzerland.

GOP Members Added to Ways and Means. On Tuesday, the Committee on Ways and Means announced that three new Republican members are joining the committee, completing its roster for the congressional session. The new members include Reps. Drew Ferguson (R-GA), Jodey Arrington (R-TX) and Ron Estes (R-KS). Earlier, the Democrats had named 11 new members. They include Reps. Donald Beyer (D-VA), Brendan Boyle (D-PA), Dwight Evans (D-PA), Steven Horsford (D-NV), Daniel Kildee (D-MI), Gwen Moore (D-WI), Stephanie Murphy (D-FL), Jimmy Panetta (D-CA), Bradley Schneider (D-IL), Thomas Suozzi (D-NY) and Jimmy Gomez (D-CA). With the committee expanding by two members this Congress, the total ratio of Democrats to Republicans is 25 to 17.

 

 

1111 CONSTITUTION AVENUE

Shutdown Constraining IRS. The fourth consecutive week of the partial government shutdown has steadily eroded or stopped key functions at leading tax agencies. Routine auditing at the IRS has ceased since the onset of the shutdown, and this week the IRS stated that it would no longer be able to process tax-exempt status applications or determinations. Meanwhile, the U.S. Tax Court on Thursday canceled 13 national trials sessions as a result of shutdown, with its official website announcing that decisions on a series of February 11 cases will be determined in the coming weeks. Despite the challenges, the IRS remains committed to its January 28 start of the tax filing season. On Tuesday of last week, the Treasury Department announced the return of 46,052 employees to staff the agency for tax filing. Previously, the National Treasury Employees Union president Tony Reardon indicated that roughly 45,000 employees would be needed throughout the filing season, or a 10,000-person increase from the initial 35,000 staff deemed essential.

IRS Waives Penalty for Some Taxpayers. Earlier this week, the IRS decided to shield taxpayers by waiving fines on those who underpaid their 2018 federal taxes. In the agency’s guidance, the IRS has indicated it will not pursue individuals who paid at least 85 percent of the required 90 percent that was imposed under the Tax Cuts and Jobs Act. The decision comes after lawmakers—Senate Finance Committee Chairman Chuck Grassley (R-IA), Ranking Member Ron Wyden (D-OR) and House Ways and Means member Rep. Judy Chu (D-CA)—urged the agency to be “lenient” with taxpayers who may have been unaware of the 90-percent rule. In a statement, IRS Commissioner Charles Rettig said the agency realizes “there were many changes that affected people last year, and this penalty waiver will help taxpayers who inadvertently didn't have enough tax withheld."

 

 

TAX DOCTOR

Comptroller of the Chronic. Comptroller of the Currency Joseph Otting hoped by next year, the marijuana industry should be granted improved guidance for how banks can serve legal distributor businesses. Despite several states having decriminalized medicinal and recreational marijuana the past few years, federal restrictions have made it increasingly onerous for participating businesses to receive financing from federal banks without needing to file a suspicious activity report with every banking transaction. Speaking at a press roundtable on Wednesday morning, Otting stressed his hope to get the issue resolved by 2020 and underscored that lawmakers must take federal action to provide clarity and to allow “entities involved in that business to utilize the U.S. banking system.” The taxation of legalized marijuana has generated massive tax windfalls for participating states; in 2017, Colorado and Washington generated $250 million and $320 million, respectively, in revenue from marijuana taxation and fees, while Michigan’s forthcoming 10 percent percent tax on recreational marijuana is projected to generated $737.9 million over the course of the next four years. 

 

 

AT A GLANCE

  • Michael Desmond, President Trump’s nominee to be chief counsel for the IRS, was re-nominated last week.
     
  • The Treasury Department declined to make IRS Commissioner Charles Rettig available to brief the House Ways and Means Committee members on the impact of the partial government shutdown on the tax filing season.
     
  • Fifty-one conservative groups—including the Americans for Tax Reform, the Club for Growth and the National Taxpayers Union—have released a letter to President Trump urging him to unilaterally index capital gains to inflation.
     
  • The new Ways and Means Democratic majority has changed the name of the Tax Policy subcommittee to the Selective Revenue Measures subcommittee, returning it to its previous name.

 

 

BROWNSTEIN BOOKSHELF

  • Confused about the new Opportunity Zones? See our explanation here.  
     
  • The partial government shutdown has impacted nine federal agencies, including the Treasury Department and IRS. This week, IRS workers began walking out. Read the story here.
     
  • Rep. Alexandria Ocasio-Cortez’s (D-NY) tax plan probably won’t go very far in Congress, but Democrats seem to be pushing left on taxes. CNN Business’s William Gale has some thoughts.
     
  • Bloomberg, on the other hand, offers a case against the 70 percent tax.