Regulatory updateThe U.S. Department of the Treasury and the IRS have made significant strides in implementing the Tax Cuts and Jobs Act (TCJA) ahead of the 2019 filing season. Though these efforts were complicated by the 35-day partial government shutdown that ended on Jan. 25, 2019, an agreement was reached to fund the government for three weeks while negotiations on appropriations continue.
Even though there was a lapse in funding for Treasury and the IRS, special appropriations enacted last year allowed work on the TCJA to continue during the shutdown. As a result, final regulations on the IRC Section 965 transition tax and the Section 199A pass-through deduction, as well as other guidance under Section 199A, were released on the IRS website. These regulations are being published in the Federal Register now that the shutdown is over.
Despite these successes, the shutdown did cause some delays. For instance, the hearing on the opportunity zone credit proposed regulations originally scheduled for Jan. 10, 2019, was rescheduled for Feb. 14, 2019, and hearings on the global intangible low-tax income (GILTI) rules now are scheduled for Feb. 13, 2019.
IRS computer programming and work on 2018 tax forms and instructions for the TCJA also continued during the shutdown. However, the pass-through deduction regulations released during the shutdown required that the IRS update some of those instructions, which potentially could cause confusion for taxpayers. The shutdown also delayed the IRS’ hiring and training for filing season, created a backlog of correspondence, and interrupted compliance and enforcement activities.
Legislative updateLawmakers on both the House Ways and Means Committee and the Senate Finance Committee are beginning negotiations on initial tax legislation for the 116th Congress. Both chambers have expressed an interest in renewing the recently expired tax credits known as “tax extenders.” It is unclear what vehicle would be used to move these provisions through the legislative process, but it is possible that they could be coupled with technical corrections to the TCJA. Due to the divided Congress, it is still unclear how broad of a tax policy package can be bundled together and still garner the necessary majority support in both chambers. It is encouraging to note that leaders on both committees have expressed a desire to tackle these issues.
In addition, the tax-writing committees have begun bipartisan conversations on reforms to retirement savings and the IRS. The Senate is waiting for the new majority in the House to put forward its proposals on these issues.