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July 25, 2014 Washington Update This Week in Congress . House – The House passed the “STELA Reauthorization Act” (H.R. 4572); the “Empowering Students Through Enhanced Financial Counseling Act” (H.R. 4984); the “Student and Family Tax Simplification Act” (H.R, 3393); and the “Child Tax Credit Improvement Act of 2014” (H.R. 4935). Senate – The Senate invoked cloture on the motion to proceed to the “Bring Jobs Home Act” (S. 2569) by a vote of 93-7. The Senate completed the Rule 14 process for S. 2648 to make emergency supplemental appropriations for the fiscal year ending September 30, 2014; and reached an agreement to begin consideration of the “Highway and Transportation Funding Act of 2014” (H.R. 5021) to provide an extension of Federal-aid highway, highway safety, motor carrier safety, transit, and other programs funded by the Highway Trust Fund. Next Week in Congress . House – The House will consider four bills on endangered species pursuant to a rule; as well as the “Sunscreen Innovation Act” (H.R. 4250); the “National Cybersecurity and Critical Infrastructure Protection Act” (H.R. 3696); and the “Critical Infrastructure Research and Development Act” (H.R. 2952). The House may also consider legislation to address the ongoing immigration crisis on U.S.-Mexico border. Senate – The Senate is expected to begin consideration of S. 2648, a bill making emergency supplemental appropriations for the fiscal year ending September 30, 2014. Senate Majority Leader Harry Reid (D-NV) is expected to seek cloture on the “Bring Jobs Home Act” (S. 2569), which would bar companies from deducting expenses of moving personnel or operations overseas and provide a 20 percent tax credit for returning operations from overseas. It was a very busy week on the issue of tax TAXES inversions in Congress and in the Administration. Senate Finance Committee Holds International Tax Reform Hearing; the Table of Contents White House and Senate Continue to Drill Taxes 1 Down on Inversions Financial Services 6 Energy & Environment 12 Key Points: Defense 15 . President Obama, along with some Senate Health 19 Democrats on the Finance Committee, urge Transportation & Infrastructure 21 Congress to act soon to stop corporate Technology 24 inversions ____________________________________________ ©2013 Williams & Jensen , PLLC 701 8th Street, N.W. Suite 500 Washington, D.C. 20001 Telephone: (202) 659-8201 Fax: (202) 659-5249 www.williamsandjensen.com Williams & Jensen – Washington Update July 25, 2014 This week, President Barack Obama gave a companies that invert their headquarters speech, spoke on CNBC on inversions and also offshore. This proposal has not been included posted to the White House blog a statement in any of the inversions bills that have been attacking companies that use inversion offered and Wyden has not endorsed the idea transactions to escape U.S. taxes, calling them so far. “corporate deserters.” The President expressed his view that urgent action is needed to stop On the Senate floor, Senate Majority Leader these transactions. Harry Reid (D-NV) spoke about the potential Walgreens merger calling the strategy “dash On that note, the Senate Finance Committee and stash” referring to a company’s ability to held a hearing to discuss international tax merge offshore with the expectation of reform and specifically addressed inversions. continued use of certain U.S. tax credits. He During the hearing, Chairman Ron Wyden (D- urged Congress to address the “loophole,” OR) said that the issue must be addressed, further stating that the Senate Finance commenting that “this inversion loophole must Committee will act soon. Reid indicated that he be plugged.” Though Wyden has expressed his is ready to act now on inversions. preference to make changes as part of a comprehensive reform effort, he has also Inversions also came up in the context of the indicated the “flood” of transactions calls for defense authorization bill, the “Carl Levin urgent action explaining that tax reform is National Defense Authorization Act for Fiscal moving slowly and inversions are moving Year 2015” (S. 2410) though the Senate is not rapidly. currently considering the bill. Specifically, Senator Bernie Sanders (I-VT) filed two floor Ranking Member Orrin Hatch (R-UT) has also amendments to S. 2410 that would prohibit the seemed to signal openness to acting on government from entering into contracts with inversions though he too would like to see the certain inverted companies. The definition of issue addressed through a re-write of the an inverted company under both Sanders corporate international tax code. He has said amendments is similar to the expanded there may be steps that Congress can take to at definition proposed by the Obama least partially address this issue aside from Administration and contained in legislation comprehensive reform. While he does not (H.R. 4679 and S. 2360) the “Stop Corporate support the anti-inversion bills introduced thus far, he would consider alternative approaches, Upcoming Dates though he emphasized whatever approach is August 1: Projected insolvency of taken, it should not be retroactive or punitive Highway Trust Fund and, it should be revenue neutral. Senator September 30: FY 2014 Ends and Charles Grassley (R-IA) said that he wants the MAP-21 expires Department of the Treasury to complete a October 1: FY 2015 Begins mandated study on inversions before anything November 4: Midterm Elections moves forward. Also during the hearing March 2015: Debt limit suspension Senator Charles Schumer (D-NY) asserted that expires anti-inversion legislation should further limit or disallow the current interest expense deduction under Section 163(j) of the tax code for Williams & Jensen, PLLC 701 8th Street, N.W. Suite 500 Washington, D.C. 20001 Telephone: (202) 659-8201 Fax: (202) 659-5249 www.williamsandjensen.com Page 2 of 26 Williams & Jensen – Washington Update July 25, 2014 Inversions Act” introduced by House Ways and Means Committee Ranking Member Key Points: Sander Levin (D-MI) and Senator Carl Levin . The House passes education and child tax (D-MI). measures in its continued effort to address individual permanent tax measures Finally, during consideration of S. 2569, “The Bring Jobs Home Act,” Democratic supporters The House passed the “Empowering Students said the bill would play a part in slowing tax- Through Enhanced Financial Counseling Act” driven corporate mergers but Republicans (H.R. 4984) by a 405-11 vote, which increases countered that the bill is the wrong approach. federal financial aid counseling to include recipients of Pell Grants and Parent PLUS loan Senate Advances a Measure that Gives borrowers. The bill would require the Companies a Tax Credit for Moving Jobs counseling be tailored for the individual Back to the U.S. student's borrowing and take place annually. The House passed another permanency Key Points: measure this week, the “Student and Family . The Senate will move forward to consider a bill Tax Simplification Act” (H.R. 3393) by a 227- to incentivize brining jobs back to the U.S. by 187 vote, which makes permanent the providing a tax credit for doing so American Opportunity Tax Credit for qualifying college tuition and expenses. On July This week, Senate agreed to the motion to 25, the House also passed the “Child Tax proceed to “Bring Jobs Home Act” (S. 2569) Credit Improvement Act” (H.R. 4935) by a by a voice vote after Republicans supported 237-173 vote that would adjust the child tax bringing up the bill earlier in the week. credit for inflation and eliminate its marriage Senators John Walsh (D-MT) and Debbie penalty. Stabenow (D-MI) introduced the bill, which would give companies a tax credit on certain At this time it is uncertain whether the House expenses related to moving jobs back to the will take up additional individual measures after United States while denying a similar deduction the August recess. House Republicans are for companies that move jobs overseas. targeting including in any final negotiated extenders package some of the permanent During consideration, Republicans offered over measures the House has passed. The most 80 amendments including measures to make likely provisions for potential permanency if permanent the research and development tax the House Republicans are ultimately credit, to permanently extend Section 179 successful are those that are broadly bipartisan expensing, to repeal the estate tax, and to like the R&D tax credit and enhanced Section tighten rules on the IRS related to taxpayer 179 expensing rules for smaller businesses. audits. Stabenow said that Democrats were Nonetheless, the tax extender issue is not likely willing to negotiate on amendments, but only if to be resolved until later this year after the they were germane to the bill. As such, the election, or even in early 2015. chances of passage of this bill are less likely. Senate Permanent Investigations House Passes Education and Child Tax Subcommittee Holds Hearing on Financial Measures Products Structured for Tax Avoidance Williams & Jensen, PLLC 701 8th Street, N.W. Suite 500 Washington, D.C. 20001 Telephone: (202) 659-8201 Fax: (202) 659-5249 www.williamsandjensen.com Page 3 of 26 Williams & Jensen – Washington Update July 25, 2014 5021) which extends the HTF through May 31, Key Points: 2015 with the following amendments to be . Senate Permanent Subcommittee on considered: Investigations holds hearing to discuss financial products and tax avoidance . Wyden #3582- The Preserving American’s Transit and Highways Act This week, the Senate Permanent (PATH Act,) which is very similar to Subcommittee on Investigations (PSI) held a the underlying House bill but includes hearing on the use of structured financial the Finance Committee-passed offsets products to avoid income taxes on capital as an alternative to the House offsets); gains. During the hearing PSI Chairman Carl . Carper-Corker-Boxer #3583 that Levin (D-MI) examined the use of certain changes the date of authorization to the financial products to avoid taxes and leverage end of the year, thus requiring action limits.