On The Hill

Congress

Pelosi/Mnuchin Negotiations

House Speaker Nancy Pelosi (D-CA) and Treasury Secretary Steven Mnuchin said they have made progress this week to reach a deal on a stimulus package before the election.

As of Friday (Oct. 23) morning, Pelosi said she was waiting to hear back from committees on policy negotiations.

Throughout this week, Pelosi and Mnuchin have continued discussions on the package. They have indicated the two sides are close on language, but that two issues have presented problems: state and local funding and liability protections for businesses.

Notably, Democratic lawmakers told Pelosi they do not want a pre-election vote on a potential relief bill unless the Senate would take it up prior to election day. Senate Majority Leader Mitch McConnell (R-KY) has indicated he would bring a stimulus package to the floor if it had the White House’s support.

McConnell Bills

This week, McConnell held votes on a $500 billion COVID-19 relief package and a bill to restart the Paycheck Protection Program (PPP). Both measures failed to gain the 60 vote threshold needed to move forward.^[1] 

Supreme Court

On Thursday (Oct. 22), the Senate Judiciary Committee voted 12-0 to advance Judge Amy Coney Barrett’s nomination to the Supreme Court to the full Senate. Democrats on the committee boycotted the vote. The full Senate will vote to confirm Barrett next week.^[2] 

 

Fed Municipal Lending Program

On Tuesday (Oct. 20), the Congressional Oversight Commission released a letter from the Department of Treasury that said the agency does not see the need to keep the Federal Reserve’s emergency lending program for state and local governments open past the end of the year.

“At this time, the Treasury Department does not believe that the Municipal Lending Facility should be extended beyond its current expiration date of December 31, 2020,” the letter stated.

Democrats on the Commission said the program has not offered generous loan terms for municipalities, while Republicans noted the program served its purpose and should be “wound down.” However, the letter said Treasury and the Federal Reserve will monitor market stability to determine if the expiration date should be extended.^[3] 

To view the letter from Treasury, click here.

 

Digital Tax

On Monday (Oct. 19), European Commission Executive Vice President Valdis Dombrovskis said the organization stands ready to impose a digital tax at the European Union (EU) level. However, Dombrovskis reiterated an Organization for Economic Cooperation and Development (OECD) agreement remains the preferred option. The OECD recently delayed a deal on digital taxes until mid-2021. Dombrovskis also stated his support for France if the U.S. imposes tariffs over digital taxes.

“The EU’s position on this has been clear: Taxation is a sovereign right of countries and so we are not accepting that third countries are interfering with taxation rights of the member states, especially if those are done in a horizontal way not addressed to any particular country,” Dombrovskis said.^[4] 

 

TCJA Regulations

This week, a Treasury Department official said the agency is pushing to finish regulations on the 2017 Tax Cuts and Jobs Act (TCJA) by the end of the year. Some of these regulations include: carried interest rules, a new tax on highly paid executives at tax-exempt organizations, and a rule restricting tax-exempt entities from using a loss from one business to offset income from an unrelated business. The effort could be interrupted if another COVID-19 stimulus bill is passed.^[5] 

 

Nonprofit Tax Exemption

On Tuesday (Oct. 20), Democrats on the House Ways and Means Subcommittee on Oversight wrote a letter to Treasury Secretary Mnuchin and asked for an explanation of why close to 31,500 nonprofits lost their tax-exempt status this year. The letter requests that all erroneous automatic revocations of nonprofits tax status that occurred during the COVID-19 pandemic be reversed. According to IRS data, 25,197 revocations occurred on May 15 (which is the normal filing deadline). However, the IRS extended the deadline to July 15 due to the COVID-19 pandemic.^[6] 

This week, the IRS announced it is fixing the “programming glitch” that caused nonprofits to automatically lose their tax-exempt status. A spokesperson for the IRS declined to detail how many organizations were impacted by the glitch.

“Due to systemic limitations, we were unable to update this deadline in the program that automatically issues notices of revocation,” the IRS statement said. “This caused some revocation notices to be issued prematurely,” the IRS statement added”^[7] 

To view the letter to Treasury, click here.

 

Federal Reserve

On Wednesday (Oct. 21), Federal Reserve Governor Lael Brainard said the largest risk to the economy, besides COVID-19, is Congress not passing an additional COVID-19 stimulus package.

“Too little support would lead to a slower and weaker recovery,” Brainard said. “Premature withdrawal of fiscal support would risk allowing recessionary dynamics to become entrenched, holding back employment and spending, increasing scarring from extended unemployment spells, leading more businesses to shutter and ultimately harming productive capacity,” she added.

She highlighted a survey from the Census Bureau in October that found more than 30 percent of small businesses reported having one month or less cash on hand. Brainard also said the “easiest improvements (to the labor market) are likely behind us.”^[8] 

 

Opportunity Zones

On Thursday (Oct. 22), Ja’Ron Smith, deputy assistant to the president, said the Trump administration would like to increase the amount of eligible areas for the Opportunity Zone (OZ) program. Smith emphasized that once the 2020 census is complete, new areas categorized as “low income” may warrant these areas to be added to the OZ program. He also criticized some state officials for their initial selections of areas for the program. Congressional action would be needed to expand the number of OZs.^[9] 

 

Tax Analysts Webinar

On Wednesday (Oct. 21), Tax Analysts held a webinar entitled “Tax Policy After Election Day: What’s Next?” with panelists Jon Talisman, Managing Partner at Capitol Tax Partners, and Mark Prater, Managing Director at PwC.

To view a summary of the webinar, click here.

 

References

^[1] Levine, Marianne. “Senate Democrats block Republicans’ narrow Covid relief plan.” Politico Pro, 21 Oct. 2020. https://link.edgepilot.com/s/c5423f0e/aH1MCJvUZkqW_paJ7AhmNw?u=https://subscriber.politicopro.com/article/2020/10/senate-dems-block-republicans-narrow-covid-relief-plan-2011946

^[2] Fandos, Nicholas. “Republicans Advance Barrett’s Supreme Court Nomination Over Democratic Boycott.” New York Times, 22 Oct. 2020. https://link.edgepilot.com/s/23426770/S09nAEUB4UCOiTDvo9765Q?u=https://www.nytimes.com/2020/10/22/us/politics/barrett-nomination-republicans.html

^[3] Guida, Victoria. “Treasury doesn’t expect to extend Fed municipal lending past year-end.” Politico Pro, 20 Oct. 2020. https://link.edgepilot.com/s/c3872998/az9EGiwCZ0umiXrvTb9mTQ?u=https://subscriber.politicopro.com/article/2020/10/treasury-doesnt-expect-to-extend-fed-municipal-lending-past-year-end-2011667

^[4] Bade, Gavin & Palmer Doug. “EU ready to impose digital services tax.” Politico Weekly Trade, 19 Oct. 2020. https://link.edgepilot.com/s/6a39d3a8/2iquIuMC0kSc5fWWKS9WSw?u=https://www.politico.com/newsletters/weekly-trade/2020/10/19/eu-ready-to-impose-digital-services-tax-791044

^[5] Faler, Brian. “Treasury pushing to finish up TCJA regulations by end of year.” Politico Pro, 23, Oct. 2020. https://link.edgepilot.com/s/19a76007/QdDwLQ_X7kq7j2WNLrFLcw?u=https://subscriber.politicopro.com/article/2020/10/treasury-pushing-to-finish-up-tcja-regulations-by-end-of-year-3984810

^[6] Lorenzo, Aaron. “Democrats demand explanation for surge in nonprofits losing tax exemptions.” Politico Pro, 21 Oct. 2020. https://link.edgepilot.com/s/902d80d8/pjfXAym9e0Gldg5RAEL8og?u=https://subscriber.politicopro.com/article/2020/10/democrats-demand-explanation-for-surge-in-nonprofits-losing-tax-exemptions-3984754

^[7] Lorenzo, Aaron. “IRS says it’s working to fix glitch in nonprofit tax exemptions.” Politico Pro, 23 Oct. 2020. https://link.edgepilot.com/s/fc5324e8/HcGVj4DJckiIX03xlOeYig?u=https://subscriber.politicopro.com/article/2020/10/irs-says-its-working-to-fix-glitch-in-nonprofit-tax-exemptions-3984807

^[8] Guida, Victoria. “Fed’s Brainard: Lack of aid is biggest economic risk beyond Covid.” Politico Pro, 21 Oct. 2020. https://link.edgepilot.com/s/e9cdddd1/TJPtdAba9UCnyhXzpigXaA?u=https://subscriber.politicopro.com/article/2020/10/feds-brainard-lack-of-aid-biggest-economic-risk-beyond-covid-2011828

^[9] Faler, Brian. “Administration hopes to expand Opportunity Zones, criticizes governors’ selections for program.” Politico Pro, 22 Oct. 2020. https://link.edgepilot.com/s/95fe3713/GMkTihAlD0u7CtG0WkLIkQ?u=https://subscriber.politicopro.com/article/2020/10/administration-hopes-to-expand-opportunity-zones-criticizes-governors-selections-for-program-3984782