From Daily Tax Report®
December 18, 2017
The GOP tax plan—an Internal Revenue Code overhaul poised to clear Congress less than two months after being introduced—is going to need fixing.
Changes required to revise drafting errors and overlooked policy problems in the fast-tracked bill will likely range from minor tweaks to complete rewrites of some sections, say lobbyists and staffers who have watched the process.
Passing those changes could require some Democratic support, something many in the minority aren’t willing to give after feeling sour about Republicans cutting them out of tax reform talks.
“They’re the ones that decided to go headstrong on this, and the pushback is enormous,” House Ways and Means Committee ranking member Richard E. Neal (D-Mass.) told Bloomberg Tax. “We’ve done our work. They’re going to have to embrace an unpopular tax bill.”
Senate Finance Committee ranking member Ron Wyden (D-Ore.) said the fact that people are talking about technical corrections before the legislation has even been enacted is the “ultimate indictment” of the bill.
This is “what happens when you move with reckless haste,” Wyden told Bloomberg Tax. He wouldn’t say whether he would vote for legislation to fix the Republican tax bill.
“The speed and process with which Congress has dealt with a bill of this magnitude and complexity does a disservice to the Congress and to taxpayers,” said Gregory F. Jenner, a partner at Stoel Rives LLP who has been both acting assistant secretary for tax policy and deputy assistant secretary for tax policy at the Treasury Department.
“There are going to be technical corrections for years to come on these provisions,” said Jenner, who was tax counsel for the Senate Finance Committee from 1985 to 1989 and helped write the Tax Reform Act of 1986 (Pub. L. No. 99-514).
Marc J. Gerson, chair of Miller & Chevalier Chartered in Washington, said it’s likely that many potential corrections have already been identified but won’t be included in the final bill because that would hold up the process. “And numerous technical corrections will be identified as taxpayers digest the legislation and identify unintended consequences, unintended interactions with other provisions and other technical glitches.”
Given the volume of likely requests, the tax committees may consider some type of formal submission process, Gerson, a former tax counsel to the Ways and Means Committee, said in an email.
Ways and Means Chairman Kevin Brady (R-Texas) has said that technical changes are a normal part of the process with bills as big as this one. In recent years, however, technical corrections haven’t always been brought to a vote after landmark bills.
Republicans refused to vote for technical fixes to the 2010 Affordable Care Act. Revisions to the partnership audit regime and other changes in the 2015 Bipartisan Budget Act never got attached to a moving piece of legislation, despite having bicameral and bipartisan support.
Democrats haven’t forgotten how Republicans didn’t support ACA changes, Ways and Means member Lloyd Doggett (D-Texas) said. He said he suspects that his Republican colleagues will try to make substantive changes and pass them off as technical revisions.
“It would be important to have public hearings to review whatever corrections they’re proposing to determine if they are truly technical, are they just the result of having rushed this thing through, or are they additional protections for the wealthy and corporations,” Doggett said.
Rep. Bill Pascrell Jr. (D-N.J.), also a Ways and Means member, said he wouldn’t support a technical corrections bill because Democrats have been kept in the dark during the entire process. “The cooperation is not forthcoming.”
Democrats could be swayed to vote for a bill that is purely technical changes, but they have no political incentive to vote for legislation to clean up policy mistakes, a tax lobbyist said on the condition of anonymity to speak freely.
Gerson, who was a lead counsel for technical corrections while on the Ways and Means Committee, said technical corrections are usually attached to other legislation. “A standalone consideration is a result of when there are one or more particular time sensitive technicals where enactment on a timely basis is necessary,” he said.
Majority and minority tax-writing staff, as well as the Joint Committee on Taxation, Treasury, and the Internal Revenue Service, have to agree that a proposal “qualifies as technical,” Gerson said.
Technical corrections could be tacked onto a must-pass bill, such as spending legislation, or an infrastructure or tax extenders package with bipartisan support, the lobbyist said.
Another option is for lawmakers to tack broader policy onto the fiscal year 2019 budget reconciliation instruction that GOP leadership is looking at to move a health care bill. Those changes would go beyond typical technical corrections. Lawmakers could then pass the measure with only GOP votes, although the margin is tight with Senate Republicans set to have a 51-seat majority in 2018.
Republicans had briefly considered using a single reconciliation bill to pass a repeal of the ACA and tax reform this year, but ultimately decided against it because of the difficulty of balancing the political considerations of both policy areas.
Democrats are already spoiling for a fight in the coming days over provisions in the bill.
Senate Democrats are prepared to examine the final version of the tax bill, known as the conference report, for any provisions they could appeal to the parliamentarian as a violation of the Byrd Rule, a procedural requirement that says all provisions in a bill passed through budget reconciliation must relate to federal revenue and spending and can’t add to the deficit after a decade.
Conference reports aren’t amendable, except for parts that violate the Byrd Rule.
“Until we do the final vote there is always the possibility of Byrd Rule issues,” Senate Budget Committee Chairman Michael B. Enzi (R-Wyo.) said Dec. 15. “We think we’ve been through it thoroughly.”
Wyden announced late Dec. 14 that one provision had already been ruled out of order by the parliamentarian. “I’m pleased to announce that Democrats successfully prevented the repeal of the Johnson Amendment from being jammed into any final Republican tax deal,” he said. The Johnson Amendment is a decades-long ban that prevents nonprofits such as churches from getting involved in politics.
“I will continue to fight all attempts to eliminate this critical provision that keeps the sanctity of our religious institutions intact, prevents the flow of dark money in politics, and keeps taxpayer dollars from advancing special interest biddings,” Wyden said.
Once the parliamentarian deems a provision an infraction, Republicans can’t replace the language with a measure that is compliant.
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