Category

Taxation

Senate Taxwriters Advance Nomination of Top Treasury Tax Official

By | Shopfloor Policy, Taxation | No Comments

The Senate Finance Committee today approved the nomination of tax expert David Kautter to be Assistant Treasury Secretary for Tax Policy, clearing the way for Senate confirmation of the nominee to a post where he will play a key role the tax reform debate.

Over the past months, tax reform meetings between the House, Senate and Administration have heated up and having Kautter in place at Treasury will bring additional technical expertise to these discussions and hopefully help speed up the process. As a liaison to the IRS, he also will major role in the current effort underway to repeal or rewrite a number of tax rules issued during the last administration.

Kautter, whose nomination was put forth by President Trump in May, is extremely well qualified for the job. He currently serves as partner-in-charge of RSM’s Washington National Tax practice. Earlier in his career, he was managing director of the Kogod Tax Center and executive-in-residence at the Kogod School of Business at American University. Before holding this position, he spent more than 30 years at Ernst and Young, serving as director of national tax for more than 13 years.

Advancing pro-growth tax reform and rolling back anti-manufacturing tax regulation are two top priorities for the NAM and time is running out on both. Having Dave Kautter in place as the Assistant Treasury Secretary for Tax Policy will be key to advancing these two initiatives. We strongly urge the Senate to confirm his nomination ASAP.

Treasury Opts to Revisit Tax Regulations Causing Problems for Manufacturers

By | Regulations, Shopfloor Policy, Taxation | No Comments

The Treasury Department in a notice issued today said it plans to propose reforms, including possible repeal, of eight sets of regulations issued in 2016 by the Obama Administration. Included on the list are four regulation projects of specific concern to manufacturers: Sec. 385 debt-equity rules, proposed rules on valuing minority interests in family-owned businesses, rules for calculating gains and losses on currency exchanges and regulations allowing contractors hired by the Internal Revenue Service (IRS) to fully participate in summons interviews and receive summoned documents.

Notice 2017-38 was issued under an executive order issued by President Trump in April that asked Treasury to identify tax regulations issued in 2016 that impose an undue financial burden on taxpayers, add unnecessary complexity to the tax code or exceed the statutory authority of the Internal Revenue Service. Under the executive order, Treasury has until September 18, 2017, to recommend specific changes to regulations to address these issues.

The Sec. 385 debt/equity regulations were proposed in April 2016 and finalized six months later. As originally proposed, the rules, which would treat intercompany debt as equity, would have imposed new taxes on manufacturers and threatened legitimate and well-established business practices. While the NAM’s aggressive, large-scale, advocacy effort was successful in obtaining some favorable changes to the proposed rules, the final regulations still impose a significant and unnecessary administrative and cost burden on manufacturers. We continue to advocate for total repeal of these rules.

Also on the list are proposed regulations under Sec. 2704 on valuing minority interests in family owned businesses, which were issued in the fall of 2016. NAM members believe that the proposed regulations—which incorporate some of the most sweeping changes to estate tax policies in the last 25 years—would unnecessarily increase estate and gift taxes on family-owned manufacturing companies by an estimated 30 percent or more, severely impacting the ability of owners of these family businesses to transfer their companies to the next generations. If finalized in their current form, these regulations would harm their ability to invest and grow their businesses and reduce their competitiveness versus non-family-owned firms. Consequently, we have urged both the Trump and Obama Administrations to withdraw this proposal.

Treasury also included the final and temporary Section 987 regulations on the review list. These regulations, which would change the way companies calculate certain currency exchange gains and losses, would require businesses to change their tax and accounting systems and dedicate significant time and resources to comply with regulations. Moreover, in many cases companies would not be able to get new technology systems developed and installed by the January 1, 2018, effective date for the final regulations, forcing these companies to spend additional resources on temporary systems.

The Sec. 987 regulations, represent a significant change from the long-standing proposed regulations and impose new and additional compliance burdens on companies. Given the negative impact on jobs, investment and economic growth, we support withdrawal of these regulations.

Finally, Treasury indicated that it will revisit final regulations under Section 7602 that allow contractors hired by the IRS, i.e., outside economists, engineers, consultants, or attorneys) access to books, papers, records, or other data summoned by the IRS. In addition, under the regulations contractors may, in the presence of an IRS officer or employee, participate fully in the interview of a person the IRS has summoned as a witness to provide testimony under oath.

The NAM believes that these regulations also should be repealed. The final regulations fall short on both policy and procedural grounds. Moreover, by allowing contractors to fully participate in summons interviews and receive summoned documents the regulations will lead to longer and less efficient examinations.

Manufacturers applaud Treasury for acting decisively to begin to address the onerous, costly and unnecessary burden these tax regulations impose on manufacturers. We strongly urge Treasury recommend the withdrawal or repeal of these regulations in its final recommendations in September.

Once Again, the House Approves a Measure to Simplify State Taxation of Nonresident Workers

By | Shopfloor Policy, Taxation | No Comments

The House this week, by voice vote, approved the Mobile Workforce State Income Tax Simplification Act of 2017 (H.R. 1393), which clarifies and simplifies the ability of states to tax nonresident employees. The legislation—which sets a bright line test for when states can tax income earned by nonresident workers—has been approved by the House in earlier sessions of Congress but has yet to pass the Senate.

Many manufacturers have employees who travel outside their home states as part of their job. Unfortunately, these out-of-state assignments sometimes result in an arbitrary compliance burden and tax liability for both employees and employers. In particular, employees are required to track and comply with various tax filing requirements while employers are required to maintain records and withhold state income taxes for these employees. This is particularly onerous for small and medium-sized manufacturers that do not have in-house tax departments. Clarifying the ability of states to tax mobile workforces will free up resources for employers to use in their business and leave more money in the paychecks of their employees.

Now that the House has—once more—supported this commonsense legislation, the National Association of Manufacturers urges the Senate to follow suit and pass H.R. 1393.

More in Congress Call for Urgent Repeal of the Medical Device Tax

By | Health Care, Shopfloor Policy, Taxation | No Comments

Co-authored by Christine Scullion, NAM Director of Human Resources Policy

For years, the National Association of Manufacturers (NAM) has been urging Congress to do away with the 2.3 percent excise tax on medical device manufacturers stemming from the Affordable Care Act (ACA) that threatens to hinder growth and innovation in this industry. Now, more members of Congress are joining in calling for a repeal of this onerous taxand fast!

The NAM has always strongly opposed industry- and product-specific taxes, as they serve to inhibit growth in targeted sectors and impede on the ability of  companies to compete in the global marketplace. The 2.3 percent tax applies to sales of taxable medical devices starting in January 2013, but thanks to the efforts of manufacturers and our friends in Congress, a two-year moratorium on the medical device tax was enacted. The moratorium runs out at the end of 2017, making swift repeal a priority.

Congressmen Erik Paulsen (R-MN) and Ron Kind (D-WI) have been leaders on this issue and have most recently introduced the Protect Medical Innovation Act of 2017 (H.R. 184) to repeal the medical device tax once and for all. A bipartisan majority of 245 members of the House have cosponsored H.R. 184. As another positive sign of support in the House, Congressman Jim Banks (R-IN) and 17 other members of the House freshman and sophomore class sent a letter to House Speaker Paul Ryan (R-WI) asking that H.R. 184 be put on the fast track toward passage and enactment.

On the other side of the Capitol, Senate Finance Committee Chairman Orrin Hatch (R-UT) and a bipartisan group of nine senators have introduced the Medical Device Access and Innovation Protection Act (S. 108), which also aims to repeal the medical device tax. The NAM strongly supports H.R. 184 and S. 108 and applauds the bipartisan, bicameral support the legislation has received.

While the effort to repeal and replace the ACA will be a considerable undertaking, the NAM is urging Congress to include full repeal of the law’s burdensome taxes on manufacturers, including the medical device tax, “Cadillac” tax and the health insurance tax in the upcoming budget reconciliation bill.

 

NAM Supports House Action to Rescind Burdensome SEC Rule

By | Shopfloor Policy, Taxation | No Comments

The National Association of Manufacturers (NAM) is pleased that the House will soon be voting on H.J. Res. 41, a resolution providing for congressional disapproval under the Congressional Review Act of a Securities and Exchange Commission (SEC) rule relating to the disclosure of payments by resource extraction issuers (the Section 1504 rule). The existing SEC extraction issuers rule, as finalized, subjects manufacturers to reporting requirements that are overly burdensome and is an impediment to manufacturing growth in the global economy.  Read More

When Manufacturing Succeeds, America Succeeds

By | Shopfloor Main, Shopfloor Policy, Taxation | No Comments

The National Association of Manufacturers (NAM) is releasing in-depth Competing to Win policy papers to equip Congress and the Trump administration with blueprints for delivering on manufacturers’ priorities. Today’s release is the second in the series and focuses on tax. For more on the NAM’s 12 Days of Transition, follow @ShopfloorNAM.

If there is one single issue that could have the greatest positive impact on manufacturing overall, tax reform is likely that issue.

As it stands today, our tax code is dragging down manufacturers and holding us back. We have the highest corporate tax rate in the world, and some small manufacturers that are structured as S-corporations and file as individuals pay tax rates greater than 40 percent, which is absurd.

Our goal needs to be making the United States the most attractive place to manufacture and invest, and we will make great strides in that direction through pro-growth tax reform.

In the NAM’s “Competing to Win” agenda, released in early 2016 and now updated with in-depth policy blueprints, we lay out very clearly the problems and solutions for our elected officials, and we have shared this with President-elect Donald Trump’s transition team.

For manufacturers, a tax reform plan must include:

  • Reduced tax rates on corporate and pass-through business income;
  • A robust capital cost-recovery system;
  • Strong research and development incentives; and
  • Modern, competitive international tax rules.

A study released by the NAM in January 2015, titled A Missed Opportunity: The Economic Cost of Delaying Pro-Growth Tax Reform, found that comprehensive tax reform that includes this multipronged pro-growth tax package would substantially grow the economy and result in increased jobs and investment. Over a 10-year period, this pro-growth tax reform plan would:

  • Increase GDP by more than $12 trillion relative to Congressional Budget Office projections;
  • Increase investment by more than $3.3 trillion; and
  • Add more than 6.5 million jobs to the U.S. economy.

Our outdated system is taking a toll on our economy. Just look at recent years’ slow growth, static investment and an employment rate that does not match our growth potential. Manufacturers stand ready to be the solution in generating economic growth that we have not seen in a very long time. We are not just identifying the problems, we are being the solution. After all, when manufacturing succeeds, America succeeds.

To view the blueprint, click here.

 

This blog is part of the NAM’s 12 Days of Transition series, an effort to provide the presidential transition team and other Washington policymakers with a roadmap to bolster manufacturing in the United States. Read the other blogs in the series here.

IRS Hearing Day on Family-Owned Business Estate Tax Regs

By | Regulations, Shopfloor Main, Shopfloor Policy, Taxation | No Comments

Family-owned businesses and their advocates are watching closely the hearing happening today at the IRS on the so-called “minority valuation proposed regulations.” These proposed regulations, released in August, would alter how families are able to value minority interests in a family-owned company, in some cases resulting in a tax increase of more than 30 percent.

In comments submitted by the NAM and the Family Business Estate Tax Coalition of which the NAM is a co-director and co-founder, we highlighted the numerous concerns manufacturers and family-owned businesses across the economy have about this proposal. Shortly after the release of the proposal, when the potential impact begun to be understood by the business community and as concerns were beginning to be raised, Treasury’s policy team began to assert that the proposal is not meant to reduce the use of minority valuation discounts for lack of marketability and lack of control that are used in determining the value of shares sold to family members in a closely held business. Instead, they were just seeking to target abuses in the valuation discounts utilized by some simply to avoid taxes. However, as the IRS and Treasury teams will hear from the grand majority of the 30 people testifying at today’s hearing, the impact as understood by the tax- and estate-planning community is very different.

Manufacturers appreciate that Treasury is listening and that today’s hearing affords the public another opportunity to weigh in on this rule. However, the negative impact of these proposed regulations on NAM family-owned businesses cannot be overstated. In a recent letter, the third-generation owner of an active manufacturing enterprise explained the potential impact of the regulations:

“Our board has been working an ownership succession plan for years. Stock valuation and financing stock transfer are an ongoing challenge. Stock is transferred through the sales, gifts and redemptions of shares, and the value of the stock is the fair market value at time of transfer. We are within a couple of years of completing the transfer of ownership from the third to the fourth and fifth generations. Our advisers have informed us the proposed regulations will eliminate discounts that have traditionally been applied. If this happens, the cost of transferring the stock will increase by 43 percent. This will put an additional strain on our capital and would lead us to underinvest the capital required to grow or even sustain our company. It means diminished ability to invest in job creating, value creating and value-retaining projects.”

The last line of our member’s letter says it all, and today’s hearing should reinforce what they’ve already heard in the voluminous comments to Treasury, that they should withdraw these proposed regulations and not harm family-owned businesses.