On the Hill. This morning, the House Ways & Means Committee will hold a hearing on the tax treatment of health care. The panel’s Subcommittee on Trade will hold a hearing today on the “Miscellaneous Tariff” bill introduced yesterday. Ways & Means also approved four bills that would place limits on the IRS. On the other side of the Capitol, Senator Elizabeth Warren introduced a bill yesterday that would instruct the IRS to develop a free online tax-preparation service and bar it from partnering with tax prep firms, as those agreements limit IRS provision of free tax prep services.
The House GOP probably won’t pass a budget by Friday. Members have not been able to agree on a spending level or on cuts. The House routinely misses the budget resolution deadline. Congress already approved a $1.04 trillion spending target in its deal with the White House last fall.
An inverted company wins its IRS appeal. Delphi Automotive moved its mailing address from Troy, Michigan, to the United Kingdom in October, 2009, after emerging from bankruptcy. The IRS wanted the auto supplier to consider itself a US taxpayer (paywall) even after the inversion. The agency contended that because the new company acquired certain Delphi assets during bankruptcy, it met the 80 percent ownership threshold to remain taxed by the US. But the IRS Office of Appeals ruled against the IRS. Had the IRS won, Delphi would have owed taxes retroactive from October 2009 and its effective tax rate would have climbed from 17 percent to 20 or 22 percent.
Other companies face no US tax liability, for different reasons. The Government Accountability Office, in response to a request from Senator (and Democratic hopeful) Bernie Sanders, finds that at least two-thirds of active US corporations reported no federal tax liability from 2006 to 2012. About 42 percent of large corporations had none in 2012, and nearly 20 percent of profitable large corporations had no liability that year. Why? From 2008 to 2012, about half of all active corporations had negative net tax income. Other companies had positive net tax income completely offset by operating loss deductions they carried forward from previous years.
Revising the Child Tax Credit: Let us count the ways. TPC’s Elaine Maag outlines six ways here. Congress could: (1) reduce the refundability threshold to $0; (2) double the maximum credit to $2,000 per child; (3) provide an additional $1,500 credit to families with children under age 3; (4) increase the maximum age for the credit from 16 to 18; (5) index all elements of the CTC for inflation; or (6) increase the phaseout threshold for married couples. Which one is best? It depends on Congress’ distributional goals and how much money it wants to spend.
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