Negotiating positions harden as partial government shutdown continues

Transcription

1 Tax News & Views Capitol Hill briefing. In this issue: Negotiating positions harden as partial government shutdown continues... 1 Democrats gain 10 new members on Ways and Means... 3 Tax filing season begins January 28, refunds will be issued during shutdown, IRS says... 4 Negotiating positions harden as partial government shutdown continues Three weeks after the government went into partial shutdown at midnight on December 21, roughly a quarter of federal departments and agencies including the IRS and Treasury remain shuttered due to the continuing impasse over President Donald Trump s proposed wall along the US southern border. In fact, positions appeared to harden even further this week with Trump walking out of and deriding as a total waste of time a January 9 meeting with House Speaker Nancy Pelosi, D-Calif., and Senate Minority Leader Charles Schumer, D-N.Y. a gathering that came a day after the trio laid out their arguments to the nation in dueling prime time television addresses, Trump from the oval office and Pelosi and Schumer from the halls of the Capitol. The talks have become so intractable that speculation is growing and Trump himself is suggesting that the president may declare a national emergency (or invoke some other type of executive action) as a way to advance his wall policy without the affirmative consent of Congress. I have the absolute right to declare a national emergency. If this doesn t work out I would say almost definitely, Trump told reporters on January 10. Tax News & Views Page 1 of 5 Copyright 2019 Deloitte Development LLC

2 Congressional Democrats and other groups would almost certainly bring a court challenge to any emergency designation, but some observers are beginning to view such a move as perhaps the only way to reopen the government while allowing Trump and Democrats to fight another day on the wall issue. I could see it coming to that. I don t think it s legal. I think it will be challenged in court. But it might be the only way out, said Sen. Joe Manchin, D-W.Va. House Dems approve IRS funding, Trump promises veto Attempting to put pressure on Republicans to reopen those portions of the government that have no jurisdiction over border security, Speaker Pelosi this week teed up debate on four fiscal year 2019 appropriations bills (of the seven bills that remain unfinished), including the Financial Services and General Government appropriations measure, which, among other things, provides funding for the Treasury Department and the Internal Revenue Service. That bill, which passed the House on January 9 by vote, mirrors legislation approved by the Senate in August of last year that called for roughly $11.3 billion in IRS funding, including $77 million dedicated to implementing the 2017 tax cut law. But after a lobbying blitz by the White House and a formal veto threat from President Trump only eight House Republicans broke ranks to vote with the Democrats, a number far lower than GOP leaders had feared earlier in the week. The vote pattern was similar on the two other measures House Democrats cleared on January 10 that would provide funding for the Departments of Agriculture, Interior, and Transportation, as well as the Food and Drug Administration. (Lawmakers were expected to vote January 11 on legislation to fund the Interior Department and the Environmental Protection Agency.) There was some speculation that Pelosi brought up the Treasury-IRS funding package first to remind the public that keeping the IRS closed at the traditional start of the tax filing season would mean a delay in sending out income tax refund checks, given that previous administrations have held that issuing refunds is not an essential IRS function and therefore not a permissible activity during a shutdown. But that message was blunted somewhat when the Trump administration announced on January 7 that, in spite of the shutdown, the 2018 tax filing season will begin on January 28 and refunds will be issued to taxpayers as scheduled. (See related story in this issue for more on the Service s filing season plans.) McConnell uncharacteristically silent Senate Majority Leader Mitch McConnell, R-Ky., has remained fairly passive in the debate thus far and has even stated that the Senate will only consider legislation that President Trump has promised to sign a position that doomed from the get-go House Democrats efforts to move the stand-alone appropriations bills as well as the omnibus appropriations package the House approved when the new Congress convened on January 3. (For prior coverage, see Tax News & Views, Vol. 20, No. 1, Jan. 4, 2019.) URL: This bystander approach is unfamiliar for McConnell, who in recent years has been deeply involved in cutting deals on government funding, the debt limit, and other matters. Indeed, it seems possible McConnell may become more involved in finding a solution to the current impasse as time wears on and if more GOP senators join Republicans Susan Collins of Maine, Lisa Murkowski of Alaska, and Cory Gardner of Colorado in publicly expressing support for reopening all or most of the government while negotiating border security separately. When the government is shut down there are consequences and people are starting to feel those consequences, Murkowski noted on January 9 after a meeting between Senate Republicans and the president spending debate far from over Irrespective of how lawmakers ultimately settle appropriations legislation for the remainder of fiscal year 2019, they will have to turn almost immediately to reaching an accord on funding for fiscal 2020, which begins October 1 of this year. Complicating matters further, statutory caps on discretionary spending known as the sequester are scheduled Tax News & Views Page 2 of 5 Copyright 2019 Deloitte Development LLC

3 to come back in full force on October 1, creating a situation that, without further congressional action, would result in tens of billions of dollars in reduced funding for defense and domestic programs. Democrats and Republicans have come together on three separate occasions since 2013 to raise the statutory caps most recently through the Bipartisan Budget Act of 2018, which boosted the caps by a total of roughly $300 billion over fiscal years 2018 and It is also worth noting that if Trump does attempt to advance his border wall proposal through an emergency declaration or other executive action, congressional Democrats would likely attempt to cut off funding for the effort as part of the fiscal 2020 appropriations process. That outcome could further complicate the spending debate for the upcoming fiscal year by putting lawmakers in a predicament similar to the one they are facing now. Alex Brosseau Democrats gain 10 new members on Ways and Means A week after the 116th Congress was sworn in, the House Democratic leaders named 10 new members to the Ways and Means Committee. Reps. Gwen Moore of Wisconsin, Dan Kildee of Michigan, Brendan Boyle of Pennsylvania, Don Beyer of Virginia, Dwight Evans of Pennsylvania, Brad Schneider of Illinois, Tom Suozzi of New York, Jimmy Panetta of California, Stephanie Murphy of Florida, and Steven Horsford of Nevada will join the 14 Democrats who remain on the committee from the 115th Congress. Democrats now control a total of 24 seats on the panel compared to 16 for Republicans, leaving the size of the committee and the ratio of majority and minority members unchanged from the last Congress. Republicans have not yet announced who will fill the two current vacancies on their roster. (Ten of the 24 House Republican taxwriters from the 115th Congress are no longer on the Ways and Means Committee because they retired from Congress, lost their 2018 re-election bids, or sought another office.) More progressives, but no freshmen In appointing the new Democratic taxwriters, party leaders fulfilled a recent promise by House Speaker Nancy Pelosi of California that members of the left-leaning Congressional Progressive Caucus (CPC) would hold 40 percent of the Democratic seats on key House committees. Five of the new Ways and Means members Beyer, Evans, Horsford, Moore, and Panetta are members of that group, which is the largest caucus among House Democrats. (CPC members already on Ways and Means include Reps. John Lewis of Georgia, Lloyd Doggett of Texas, Earl Blumenauer of Oregon, Danny Davis of Illinois, and Linda Sánchez and Judy Chu of California.) In his January 9 statement announcing the new members, Chairman Richard Neal of Massachusetts said Ways and Means work touches every American, every business, and nearly every corner of the US economy. I am confident our new members will join us in using this privilege to advance Democrats progressive vision for the future. The large Democratic freshman class, which has made waves with its diverse and unusually outspoken members, also sought to gain more clout in the tax policy arena, with a number of them signing a letter late last year asking Democratic leaders to give new members slots on the most powerful and sought-after committees, including Ways and Means. However, all of those named to the committee this week have previously served in the House. An early glimpse at the agenda Neal told Massachusetts newspaper The Reminder in an interview January 7 priority number one for Ways and Means will be preserving pre-existing conditions protections under the Affordable Care Act, adding that he intends to Tax News & Views Page 3 of 5 Copyright 2019 Deloitte Development LLC

4 hold hearings on the issue in the next several weeks. Other priorities include improving infrastructure and strengthening pensions, he said. Neal introduced legislation on January 9 that would help shore up certain underfunded employee pension plans through the creation of a Pension Rehabilitation Administration within the Treasury Department. The new office would be authorized to issue bonds to finance loans to troubled multiemployer pension plans. Storme Sixeas Tax filing season begins January 28, refunds will be issued during shutdown, IRS says The IRS announced this week that despite the ongoing partial government shutdown, the 2018 tax filing season will begin on January 28 and refunds will be issued to taxpayers as scheduled. The IRS and Treasury Department are among the federal departments and agencies that were forced to limit their operations to essential functions after the shutdown took effect at midnight last December 21. The announcement, which was released January 7, came amid questions over whether the Service has the authority to issue refunds during a shutdown. (Previous administrations have held that issuing refunds is not an essential IRS function and therefore not a permissible activity while the government is shut down.) Congress directed the payment of all tax refunds through a permanent, indefinite appropriation (31 USC. 1324), and the IRS has consistently been of the view that it has authority to pay refunds despite a lapse in annual appropriations, the announcement explained. Although in 2011 the Office of Management and Budget (OMB) directed the IRS not to pay refunds during a lapse, OMB has reviewed the relevant law at Treasury s request and concluded that IRS may pay tax refunds during a lapse. The deadline for submitting tax returns for most individual taxpayers is April 15, 2019; however, because of certain local holidays that fall on or near the filing date, the deadline is extended to April 17, 2019, for taxpayers in Maine and Massachusetts, the announcement said. According to the Service, a significant portion of currently furloughed IRS employees will be called back to work to carry out the agency s filing season activities while the shutdown remains in effect. A new, detailed shutdown contingency plan for handling the tax filing season as well the Service s ongoing enforcement and taxpayer assistance responsibilities had not been released as of press time but is expected in the coming days. (The contingency plan that was in effect at the start of the shutdown expired when the 115th Congress officially adjourned on January 3.) Treasury-IRS funding bill clears House; no Senate action expected In a related development, the House of Representatives on January 9 approved and sent to the Senate a financial services and general government appropriations bill (H.R. 264) that, among other things, would provide $11.3 billion in funding for the IRS, including $77 million to implement provisions in the massive tax cut law enacted in The House bill mirrors an appropriations package that cleared the Senate in August of last year and its passage is part of an ongoing effort by House Democrats to pressure congressional Republicans and President Trump into reopening the government. H.R. 264 is not expected to receive a vote in the Republican-controlled Senate, however, and the president has indicated he would not sign it if it reached his desk. (See related coverage in this issue.) Michael DeHoff Tax News & Views Page 4 of 5 Copyright 2019 Deloitte Development LLC

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