Hill Briefs: Brady, Koch Discuss Taxes; Hatch Meets Mnuchin

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By Aaron E. Lorenzo and Laura Davison

Dec. 8 — Dialogue has begun between Koch Cos. Public Sector LLC and House Ways and Means Committee Chairman Kevin Brady (R-Texas) on the GOP tax plan’s import-export provision, but the two are far from on the same page.

The company has complained that the import tax and export exemption included in the House plan to reshape U.S. tax laws is flawed. Consumer prices would rise as a result, according to Koch, both on imported goods as well as domestic products because of distortions created by not taxing exports.

The company has complained that the import tax and export exemption included in the House GOP plan to reshape U.S. tax laws is flawed. Consumer prices would rise as a result, according to Koch, both on imported goods as well as domestic products because of distortions created by not taxing exports.

Brady defended the cross-border proposal to tax imports and exempt exports—called border adjustability—as a central element of the plan to eliminate existing tax incentives that encourage businesses to move their jobs, research or headquarters overseas.

“This is a crucial part of pro-growth tax reform,” he told Bloomberg BNA Dec. 8. “But we want to hear more and learn more about their specific concerns because I’m hopeful we can address them.”

Koch argued against proposals that would favor some industries and companies over others, according to a Dec. 7 statement from Philip Ellender, president of government and public affairs for Koch.

“Our tax system should encourage, not destroy, free exchange and trade resulting in robust commerce and lower, not higher, prices for consumers,” he said.

Retail industry representatives have also voiced concern over causing consumer costs to climb.

The provision is an important revenue raiser for the overall plan. It would generate about $1 trillion over a decade, according to an estimate from the Tax Policy Center.

“There are consequences in the code for removing the big provisions we’ve put in it,” Brady said. “But before we go there, let’s see if we can figure out a solution.”

Brady and Republicans on the committee are scheduled to meet in Washington Dec. 14-15 to discuss this issue and others tied to their tax plans, as well as health care.

Hatch Praises Mnuchin

President-elect Donald Trump’s pick to run the Treasury Department has won over Senate Finance Committee Chairman Orrin Hatch (R-Utah).

“He’s brilliant, he’s successful, he’s a doer,” Hatch told Bloomberg BNA Dec. 8 after meeting Treasury secretary nominee Steven Mnuchin.

The committee will hold a hearing on the nomination next year, after ending its vetting process, so no date has been scheduled.

Hatch praised Mnuchin’s private sector experience as a positive for challenges ahead, including efforts to reshape the tax code. But Hatch said they didn’t discuss too many particulars.

“I didn’t get into anything in depth,” he said.

Mnuchin also received praise from Sen. Charles Grassley (R-Iowa), who in a statement not only mentioned tax change possibilities, but also said he emphasized the importance of listening to whistle-blowers within the Treasury Department and those who flag tax fraud for the Internal Revenue Service.

Sunday in the Senate

The House passed federal spending legislation Dec. 8, but the Senate could work into Dec. 11—a Sunday—to finish work on the bill.

At issue are pension benefits for miners.

The House-passed appropriations bill, which passed 326-96 to fund federal operations through April 28, includes a provision to backstop mine workers’ health insurance benefits. But it doesn’t backstop their pension benefits.

Some House Republicans said they feared opening the door to endless federal bailout requests from pension plans.

The Senate Finance Committee approved miner pension rescue legislation (S. 1714) in September.

Senate debate rules signaled activity on Dec. 10 unless the disagreement could be settled beforehand.

Deduction Decision Dispute

Three Senate Finance Committee members introduced legislation that would make the domestic production deduction for manufacturers more flexible even as the Internal Revenue Service is working on rules to make the eligibility requirements stricter.

Sens. Rob Portman (R-Ohio), Sherrod Brown (D-Ohio) and Debbie Stabenow (D-Mich.) introduced the Promoting More American Manufacturing Jobs Act on Dec. 7, which would clarify that any party substantially involved in the creation of goods domestically could be eligible to take the deduction under tax code Section 199.

The legislation would address a long-standing disagreement between the IRS and some taxpayers. The IRS is working to issue final rules that are expected to say that a contract manufacturer, rather than the underlying company that owns and sells the product, is the only party eligible to take the deduction. Some manufacturers have complained this shifts the tax benefit away from the party taking the risk to develop the product.

The domestic production deduction could be eliminated in a possible overhaul of the tax code next year. The House Republican tax plan doesn’t preserve this deduction.

Reports on Reports on Reports

The Treasury Inspector General for Tax Administration is recommending more onerous documentation requirements for the Taxpayer Advocate Service after discovering the taxpayer assistance unit didn’t complete all the tasks it reported.

The IG report examined 20 recommendations for improvements to the IRS that TIGTA referred to the Taxpayer Advocate to address. Thirteen of the corrective actions weren’t completed, didn’t have proper documentation or didn’t meet the stated deadline, according to the report released Dec. 8.

To contact the reporters on this story: Aaron E. Lorenzo in Washington at aaron@bna.com and Laura Davison at ldavison@bna.com

To contact the editor responsible for this story: Meg Shreve at mshreve@bna.com

For More Information

The Promoting More American Manufacturing Jobs Act is at http://src.bna.com/kC0.

The TIGTA report is at https://www.treasury.gov/tigta/auditreports/2017reports/201710005fr.pdf.

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