TaxProf Blog

Editor: Paul L. Caron, Dean
Pepperdine University School of Law

Monday, March 12, 2018

NY Times: Tax Law’s Errors Upset Companies As Congressional Leaders Feud

New York Times p. 1:  Tax Law’s Errors Upset Employers As Leaders Feud, by Jim Tankersley & Alan Rappeport:

The legislative blitz that rocketed the $1.5 trillion tax cut through Congress in less than two months created a host of errors and ambiguities in the law that businesses big and small are just now discovering and scrambling to address.

Companies and trade groups are pushing the Treasury Department and Congress to fix the law’s consequences, some intended and some not, including provisions that disadvantage certain farmers, hurt restaurateurs and retailers and could balloon the tax bills of large multinational corporations.

While Treasury can clear up uncertainty about some of the murky provisions, actual errors and unintended language can be solved only legislatively — at a time when Democrats seem disinclined to lend votes to shoring up a law they had no hand in passing and are actively trying to dismantle.

On Thursday, the U.S. Chamber of Commerce sent the Treasury Department 15 pages of detailed requests for clarification on how the law affects multinational corporations, mutual fund investors and mom-and-pop pass-through entities.

It was a public display of the lobbying that businesses are waging primarily behind the scenes to change or shape enforcement of the law, most notably its byzantine new provisions intended to crack down on multinationals sheltering profits abroad for tax purposes.

“The question is whether our system is set up today in a way to do little midcourse corrections as time goes on, or is it not,” said Dana Trier, who left the Treasury Department last month after serving as deputy assistant secretary for tax policy during the drafting of the bill. “The mistakes or unintended consequences for this or that group won’t show up for months.”

The result could be a tax-theme replay of the years after passage of the Affordable Care Act, when Republicans refused to cooperate with so-called technical corrections legislation, and a Democratic administration was forced to push the limits of its authority to address concerns in the enforcement of its signature policy accomplishment.

Among the problematic portions to emerge so far is what has become known as the “grain glitch.” A late change to the legislation altered a deduction for United States production in a way that permitted farmers to deduct 20 percent of their total sales to cooperatives — agricultural organizations owned by groups of farmers that operate for the benefit of their members. This allows farmers to deeply reduce their tax bills, but it has caused an uproar among independent agriculture businesses that say they can no longer compete with cooperatives, since farmers would choose to sell to cooperatives to take advantage of the more generous tax break. ...

For now, at least, Democratic leaders appear disinclined to provide those votes. They are still fuming over the partisan process that delivered the bill to President Trump’s desk. “I’m willing to make technical changes, but they have to be substantive, too,” said Senator Sherrod Brown, Democrat of Ohio and a member of the Finance Committee. “We’re not just going to sit down and fix the things they did badly because they did it in the dead of night with lobbyists at the table.”

A second, much larger group of issues are those that need Treasury clarification — areas of the law that companies say could be construed in any number of ways, with vastly differing consequences for tax liabilities.

That includes questions over which businesses, and what types of business income, qualify for a new 20 percent deduction for so-called pass-through entities, whose owners pay taxes on the companies’ profits through the individual code. For example, the Chamber of Commerce is pushing to ensure the deduction applies to investors in mutual funds that own stakes in real estate investment trusts.

It also includes a dizzying number of concerns over the new system for taxing multinational corporations that the law created. ...

David J. Kautter, the acting commissioner of the Internal Revenue Service and Treasury’s assistant secretary for tax policy, said last month that the agency had a detailed plan for introducing clarifications and, when possible, fixes to the legislation. “We have multiple work teams focused on the entire bill,” Mr. Kautter said. “We’re going full bore on guidance.”

Bloomberg:  Rich Americans Have Found Yet Another Tax Loophole, by Lunnley Browning:

Highly paid professionals including investment managers, doctors and lawyers are eyeing a loophole in what’s supposed to be a mom-and-pop benefit of the new tax law as a way to supersize their savings.

The loophole lies in the law’s 20 percent deduction for owners of small businesses run as partnerships, limited liability companies and the like. These so-called pass-through entities underpin the U.S. economy, ranging from small-town builders to law practices, but also private-equity and hedge fund firms.

The law features a guardrail intended to keep service professionals such as hedge fund managers or cardiologists from using the break once their income hits a certain level. But top earners can exploit a gap that lets the benefit go to anyone who runs profits through an obscure entity known as a cooperative.

Tax, Tax Policy in the Trump Administration | Permalink


Perfect example of governing by GOP and Trump.

Posted by: Gator | Mar 13, 2018 11:15:21 AM

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