Tax News

CCH (cch.taxgroup.com) reports:

  It is not clear how the House Ways and Means Committee will proceed on the president's international tax proposals, a committee staff member indicated June 19. Melissa Mueller, the committee's majority tax counsel, told a group of international tax practitioners that the message has gotten "fuzzy." Speaking at a BNA Tax Management luncheon held at Buchanan, Ingersoll & Rooney P.C. and moderated by Herman Bouma.Mueller, Mueller stressed that she was expressing her own views and was not speaking on behalf of Committee Chairman Charles Rangel, D-N.Y., or Rep. Richard Neal, D-Mass., for whom she works.

  Some view the proposals as addressing tax evasion, while others view the issues as matters of policy, not tax evasion, Mueller said. Neal, for example, has indicated that some proposals, such as deferring U.S. taxes, involve policy choices, not abuse. Reform concerns are growing out of the issue of hidden overseas bank accounts. With the president carrying out his own tax reform study, the Ways and Means Committee may be reluctant to move on some issues until the administration makes its recommendations.

  While some members talk about bringing jobs back to the United States, Mueller noted that companies may have substantial business reasons for locating overseas that do not depend on U.S. taxation. Eliminating deferral will not necessarily bring back jobs.

  Mueller said that changes to the check-the-box (CT rules are now estimated to raise $30 billion in revenue, a sharp decline from the initial estimate of $80 billion. Some practitioners at the luncheon, including Pam Olson of Skadden, Arps, Slate, Meagher & Flom LLP, questioned whether the changes would raise any revenue. Mueller said that foreign tax credit (FTC) proposals are "scored" to raise $40-50 billion in revenue, while changes to the deferral rules are estimated to raise $50-60 billion.

  Michael Durst of Steptoe & Johnson LLP commented that no one knows the economic impact of these proposals. Companies do not know the impact and do not know how to explain their concerns. He suggested that the CTB proposal could increase the overall tax burden on U.S. companies without raising much tax revenue. Barbara Angus of Ernst & Young LLP commented that the CTB and FTC proposals all have an impact on tax deferral, even though they are not labeled in that manner, and that the cumulative impact could be substantial.

  Mueller said that the committee staff has not been briefed on the proposals. She urged the practitioners to have private companies, not just trade groups, contact the committee to discuss the impact of the proposals.

  Mueller mentioned that a value-added tax (VAT) had been identified as a possible revenue-raiser for health reform. Asked about the seriousness of this proposal, Mueller said that the cost of health reform may elicit big proposals, and perhaps this is a time to move on a VAT.

  Asked whether there will be another generation of the "mother of all tax bills," Mueller said that things had changed, and she could not say what might be in the next bill. A reduction in overall corporate tax rates to 28 percent is still a possibility. She indicated that the next tax bill could also address the issue of deferral.

  By Brant Goldwyn, CCH News Staff