Tax Issues Not Atop Lawmakers' Fall To-Do List

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By Aaron E. Lorenzo

Sept. 4 — Tax items on the fall congressional agenda appear limited to revenue for federal highway spending and extenders, but neither looks likely to get much immediate attention as lawmakers return to Washington the week of Sept. 7 after more than a month away.

Other issues and events are occupying the near-term schedule.

Continued debate around President Barack Obama's proposed nuclear agreement with Iran, potential shutdown talk over government spending and Pope Francis' Capitol visit to address a joint session of Congress on Sept. 24 are atop the list. Energy legislation might also make it to the House floor, if a bill advances out of committee.

The busy slate signals uncertainty for action on tax matters anytime soon.

“Still unclear,” House Ways and Means Committee spokesman Doug Andres said when asked for guidance on when the panel would begin more public consideration of tax items.

Ways and Means Chairman Paul D. Ryan (R-Wis.) has previously said he wanted to address the numerous tax breaks and benefits known as extenders this fall, and committee staff has said a raft of proposals to change taxes on international profits would follow a recently released “innovation box” proposal to trim tax rates on income from intellectual property.

But all that—especially international tax policy discussion—is happening behind closed doors, according to lobbyists, business interests and several congressional staffers whose bosses don't yet have a sense of the package. Ryan has yet to tip his hand.

Awaiting Specifics

Timing questions and incomplete details notwithstanding, the issues remain on the Ways and Means must-do agenda, Andres said.

The committee will also work to reauthorize welfare programs under Temporary Assistance for Needy Families, or TANF, and address the ceiling on federal borrowing—the debt limit—which could be reached late this year or early next year. Budget reconciliation instructions that could focus on the Affordable Care Act also represent a priority.

International tax changes are tied to highway funding, at least in Ryan's mind. A mandatory tax on overseas earnings sitting abroad, known as deemed repatriation, could be used to replenish dwindling reserves in the Highway Trust Fund, as could a shift to more of a territorial or exemption taxation system on U.S. companies' foreign-derived profits.

Ways and Means aides have said they would provide details on these matters in the coming months, after having outlined an innovation box plan just before last month’s recess. That proposal, from Reps. Charles Boustany Jr. (R-La.) and Richard E. Neal (D-Mass.), would effectively offer a 10 percent tax rate on money U.S. firms earn from a wide range of intellectual property-protected products as well as a tax-free transfer of intellectual property into the country.

Ryan has said he would prefer to include extenders in a package of international tax changes and highway funding, but if that isn't possible, the issues would move separately.

Such a concept has general bipartisan support across the Capitol, where Sens. Rob Portman (R-Ohio) and Charles E. Schumer (D-N.Y.) have come together around a less-detailed framework. Senate Finance Committee Chairman Orrin G. Hatch (R-Utah) has said the innovation box idea merits consideration.

But the committee's ranking member, Sen. Ron Wyden (D-Ore.), hasn't yet weighed in on the Boustany-Neal idea. The suggestion from some interests to connect domestic production to the tax benefit proposal is among questions Wyden has been considering during recess, said one of his aides, who spoke on condition of anonymity because Wyden is still looking at pros and cons.

Wait and See

That wait-and-see approach isn't unique, as even a staffer to Hatch declined to discuss the committee's agenda before members reconvene and consult on next steps.

Senate Majority Leader Mitch McConnell (R-Ky.) has thrown cold water on tying together international tax revisions and highway funding, pushing instead a Senate-passed bill with three years of money for highways and authorization for another three years, but Ryan still has a chance.

Some expect him to unveil his international tax details before highway funding authority expires at the end of October, though current funding levels would be sufficient to sustain the authority well into December. A date change could give more of a runway to negotiate the plan.

Ryan has said he would prefer to include extenders in a package of international tax changes and highway funding, but if that isn't possible, the issues would move separately. House Republicans have voted to make some of the extenders permanent, including the tax credit for research and development and popular accelerated depreciation provisions under tax code Section 179. A number of Senate Republicans have the same inclination, though a two-year renewal has emerged from Hatch's panel.

Wyden's aide said permanency for some of the provisions remains possible, along the lines of a near-deal late last year that ultimately fell apart.

Late-year timing on tax extenders action looks most likely, perhaps in a broad package that includes a highway bill and appropriations for the next federal fiscal year, as well as an increase in the debt limit.

Resolution of wider-reaching appropriations battles isn't expected until the end of the year, so a final spending level for the Internal Revenue Service wouldn't emerge until then for the 2016 federal fiscal year.

To contact the reporter on this story: Aaron E. Lorenzo in Washington at aaron@bna.com

To contact the editor responsible for this story: Brett Ferguson at bferguson@bna.com