Tax policy in a time of change: Setting priorities in an election year

January 27, 2016

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By Michael W. Burak, US & Global Industrial Products Tax Leader

During our quarterly Talking Tax webcast series, I usually have the opportunity to host some stimulating panel discussions around tax policy. Our most recent webcast (click here for the archive) was no different – it took place just a few days after President Obama signed a $680 billion tax package and the beginning of a Presidential election year. George Callas, Senior Tax Counsel to House Speaker Paul Ryan, and Scott McCandless, a principal in PwC’s Tax Policy Services practice,  joined me on the panel to discuss key policy issues to watch in 2016 as well as this significant year-end legislation and other Congressional accomplishments in 2015.

Key policy issues to watch in 2016

The Iowa Presidential Caucus is scheduled for February 1, followed by the New Hampshire primary on February 9. Election-year politics will dominate legislative action this year as both parties lay down policy agendas for 2017 and beyond.

We expect President Obama and the Republican leaders of Congress to offer competing plans on how to reform the US tax system and to promote other policies intended to increase economic growth and make American companies more competitive. At the same time, both Democratic and Republican candidates seeking their party’s presidential nomination are advancing tax reform plans.

In our PwC 2016 Tax Policy Outlook, we offer a preview of the key tax policy issues facing the Obama Administration and Congress in advance of the November 8 elections, including tax reform, global tax controversy, IRS challenges, new regulatory projects, and other tax policy matters of importance to today’s business leaders.

The PATH Act

In mid-December, President Obama signed into law the Protecting Americans from Tax Hikes (PATH) Act. Of importance to industrial products companies is the PATH Act’s permanent extension (retroactive to January 1, 2015) of the research credit, the Subpart F exceptions for active financing income, and a number of other business tax provisions. The Act also renews for five years (2015 through 2019) bonus depreciation (with a phase down), look-through treatment of payments between related controlled foreign corporations, and certain tax credits. In addition, the legislation renews for two years (2015 and 2016) other provisions that expired at the end of 2014.

The PATH Act also extends and phases out certain renewable energy incentives, extends the Internet tax moratorium through October 1, 2016, and includes a number of substantial real estate investment trust provisions. Significant provisions affecting the Affordable Care Act include a two-year (2016 and 2017) moratorium on the medical device excise tax, a one-year suspension (2017) of a health insurance provider excise tax, and a two-year (2018 and 2019) delayed implementation of the ‘Cadillac’ excise tax on high-cost employer-sponsored health insurance.

For more information on these and other provisions of the PATH Act, see our Insights: President Obama signs tax extender, government funding legislation and House approves major tax extender package with permanent, five-year, and two-year extensions provisions.

Other Congressional accomplishments in 2015

Despite continued political partisanship and gridlock in 2015, Congress enacted a substantial amount of tax-related legislation, including the Permanent Medicare Sustainable Growth Rate (the ‘doc fix’), the Trade Promotion Authority (for six years), the Bipartisan Budget Act of 2015 (budget agreement for fiscal years 2016 and 2017), the debt ceiling suspension (until March 2017), the federal highway and transit program reauthorization and funding (for five years), and education reform.

Next webcast

Please join me for our next Talking Tax webcast, which is scheduled for April 12, 2016.

 

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