Alex Hendrie

Senate Finance Conservation Easement Report Should Not Be An Excuse for Retroactive Tax Increases

Share on Facebook
Tweet this Story
Pin this Image

Posted by Alex Hendrie on Tuesday, August 25th, 2020, 2:23 PM PERMALINK

The Senate Finance Committee today released a report examining the conservation easement tax deduction. The report, released by Chairman Chuck Grassley (R-Iowa) and Ranking Member Ron Wyden (D-Ore.), explores potential taxpayer abuse related to the deduction.

While it is Congress’s prerogative to investigate waste, fraud, and abuse in the tax code, lawmakers should reject efforts to retroactively raise taxes on taxpayers claiming the conservation easement deduction. 

If Congress determines that the deduction (or any statutory provision) is being used by taxpayers in a way that is inconsistent with its original intent, Congress should disallow or modify the provision on a prospective basis. 

The appropriate way to hold taxpayers accountable that are alleged to be using the deduction improperly is through the courts, not Congress. While the IRS is currently doing that, it is also important that this process affords taxpayers fairness and due process.

Efforts to Investigate the Conservation Easement Deduction Must be Fair

The conservation easement deduction was first enacted in 1976 with the goal of incentivizing property owners to conserve land and historic sites through a charitable deduction. In order to claim the deduction, the taxpayer must agree to restrict their right to develop or alter the property. Organizations known as land trusts agree to monitor the restrictions placed on the property. 

In exchange for foregoing the opportunity to develop the land, the taxpayer is allowed to deduct the “fair market value” of the property, limited to 50 percent of adjusted gross income (AGI) in any given year with the ability to carry forward any unused deductions for up to 15 years.  

The Senate Finance Committee report focuses its investigation on so-called “syndicated conservation easement transactions,” which is when the deduction is claimed by taxpayers through a partnership.

Critics of the deduction have claimed that some taxpayers are abusing the tax benefits by overvaluing property and increasing their tax deduction.

While there may be bad actors taking advantage of the provision, the possibility of tax avoidance occurring is not unique to the conservation easement deduction.

If taxpayers are abusing the provision, it is incumbent on the IRS to take these taxpayers to court and challenge them based on the letter of the law.

In many cases, the IRS has done that. However, the agency has repeatedly lost these cases. According to an analysis of lawsuits by Tax Notes, of the $92.7 million in conservation easement deductions claimed by taxpayers, over 80 percent – or $74.7 million of those deductions were upheld by the courts.

Increasingly, the IRS is putting pressure on taxpayers through heavy enforcement actions and burdensome compliance requirements. For instance, taxpayers wishing to claim an easement deduction covered by the Notice must now fill out Form 8886, a “Reportable Transaction Disclosure Statement.” This form takes approximately 20 hours to complete and has a top penalty of $100,000 for failing to properly complete it.

In addition, the IRS is routinely alleging that conservation easement donations have little or no value and that taxpayer easement appraisals are inflated. While it can be expected that there are disputes over valuation, it is difficult to believe that donations have no value.

Ultimately, in cases where a taxpayer may have abused the conservation easement deduction, it is incumbent on the IRS to resolve the case through the legal process in a fair and balanced way.

Congress Should Reject Retroactive Tax Increases

The increased scrutiny of the conservation easement deduction has not been limited to the IRS. Some in Congress have proposed S. 170, the “Charitable Conservation Easement Program Integrity Act of 2019,” legislation that would make changes to the conservation easement deduction effective to “contributions made in taxable years ending after December 23, 2016.”

This legislation should be rejected.

S. 170 would restrict or disallow deductions from donations made as far back as January 2016 – imposing tax increases on taxpayers retroactively for tax years 2016, 2017, 2018, and 2019 and imposing tax increases prospectively.

Not only would this significantly increase taxes, it would undermine the legal agreement that taxpayers enter into with a land trust to forgo developing the land. Under S.170, the taxpayer would still be bound by this agreement, even though their ability to claim the tax deduction would be reduced or eliminated.

The December 23, 2016 date coincides with the release of IRS Notice 2017-10, a notice released without prior stakeholder input that subjected taxpayers to burdensome new filing requirements and onerous compliance costs. While this notice signaled the intent of the IRS to scrutinize transactions, there is no basis for it to be used as justification to narrow the deduction.

There is significant legislative history affirming the intent of Congress to preserve and expand the deduction:

  • In 2006, the deduction was temporarily enhanced with strong bipartisan, bicameral support to allow taxpayers to deduct up to 50 percent of their adjusted gross income and carry forward any unused deductions for up to 15 years.  This enhancement was made permanent in 2015, a year before Notice 2017-10.
  • Since the 2016 notice, Congress has passed several substantive pieces of tax legislation including the Tax Cuts and Jobs Act and tax extenders legislation. In each case, Congress declined to impose limitations on the deduction.

The tax code must be applied with consistency, certainty, and fairness. Taxpayers routinely make decisions based on a reasonable interpretation of the law with the expectation that future changes to the law will not be applied looking backwards.

Retroactively changing the tax code undermines these principles by changing the rules after the fact. This can have significant financial consequences for taxpayers in the form of thousands or millions of dollars in additional tax liability from past years’ individuals or businesses.

It can also increase costs prospectively given that financial decisions would have been made based on the prior interpretation of the law.

This undermines confidence in the tax system and discourage taxpayers from taking advantage of explicit tax incentives (e.g., for charitable contributions, business investments, and energy efficiency) if they fear Congress might retroactively eliminate these incentives in the future.

Moving forward, lawmakers should reject any effort to impose retroactive tax increases on taxpayers claiming the conservation easement deduction. The proper way to hold taxpayers accountable is through the courts, a process that must be conducted fairly and with the guarantee of due process. If lawmakers decide they wish to modify the deduction, they should do so prospectively.

Photo Credit: Matt Wade

ATR Leads Coalition of 80 Groups Opposing “Most Favored Nation” Executive Order

Share on Facebook
Tweet this Story
Pin this Image

Posted by Alex Hendrie on Tuesday, August 11th, 2020, 4:00 AM PERMALINK

Americans for Tax Reform today released a coalition letter signed by 80 free market, conservative, and libertarian groups and activists in opposition to President Donald Trump’s recent “Most Favored Nation” executive order. 

If implemented, the order would impose an “International Pricing Index” on Medicare Part B drugs, tying American drug prices to the prices in foreign countries with government-run healthcare systems. 

President Trump has repeatedly stood strong against the left’s calls for socialized medicine, even promising in the 2020 State of the Union Address that “we will never let socialism destroy American healthcare.” 

Unfortunately, an MFN policy would adopt these same socialist healthcare policies and threaten American medical innovation. As the letter notes: 

Adopting these price controls will slow medical innovation, threaten American jobs, and undermine criticism of single-payer systems. In addition, a United States embrace of price controls will make it immeasurably more difficult to get foreign countries to pay their own way in the development of new medicines.

An MFN policy would also threaten our COVID-19 response and exacerbate foreign freeloading off of American innovation. As the letter notes: 

The U.S. is the best in the world when it comes to developing innovative, lifesaving and life preserving medicines. Because of this, the U.S. is leading the way when it comes to developing COVID-19 vaccines, with several promising candidates entering the final stages of testing and clinical trials.

In contrast, foreign countries have been free riding off this American medical innovation for decades through crushing price controls and other market-distorting government rules and regulations.

The MFN order would also harm our economy through a decrease in research and development. Medical innovation directly or indirectly supports 4 million jobs and $1.1 trillion in total economic impact, which will be threatened by importing price controls from foreign countries. 

Finally, the letter urges President Trump to apply the same successful, deregulatory, market-based approach that he has championed in other policy areas to health care: 

As President, you have championed vital changes in tax and regulatory policies that have allowed free market innovation to flourish. We believe a market-based approach like those that your administration has consistently supported in other policy areas will lead to economic growth and promising new treatments, but adopting price controls through the MFN plan would undermine rather than build on those successes.

Click here to read the full letter.

Photo Credit: Tom Lohdan

Biden and Pelosi have Repeatedly Praised Payroll Tax Cuts

Share on Facebook
Tweet this Story
Pin this Image

Posted by Alex Hendrie on Monday, August 10th, 2020, 3:14 PM PERMALINK

President Trump has signed an Executive Order deferring the collection of the 6.2 percent social security employee payroll tax through the end of the year. While this will provide much needed liquidity for American families, Democrats like House Speaker Nancy Pelosi (D-Calif.) and Joe Biden have criticized this proposal as doing little to help Americans and undermining social security.

This is a sharp reversal from a decade ago when Pelosi and Biden vocally supported payroll tax cuts pushed by the Obama administration.

Throughout this period, President Barack Obama, Vice President Joe Biden, and House Speaker Nancy Pelosi repeatedly highlighted payroll tax cuts as way to give middle class families more money and help grow the economy.

For instance, in a blog post, the Obama administration highlighted that payroll tax cuts would give the typical family $40 per two-week pay cycle. As the document noted

 “$40 is real money for working families, as people all over the country told us. That money buys things like school lunches, the gas needed to get to work or visit ailing relatives, and co-pays for doctor visits and essential prescription medicines.”

It is important to note that Trump’s payroll tax deferral applies to the entire 6.2 percent tax while Obama’s payroll tax cut reduced the tax from 6.2 percent to 4.2 percent for two years. As a result, the same working family highlighted by Obama would be seeing three times the benefit under Trump, or roughly $130 per pay cycle.

Democrats also repeatedly highlighted how a payroll tax cut will help workers. For instance, in a speech given on December 17, 2010, President Obama noted that the payroll tax cut would reduce taxes for 155 million workers:

“Over the course of 2011, 155 million workers will receive tax relief from the new payroll tax cut included in this bill -– about $1,000 for the average family. This is real money that’s going to make a real difference in people’s lives.”

Similarly, in a speech given on May 22, 2012, Biden highlighted the administration’s efforts to cut the payroll tax, noting that it would reduce taxes for 98 percent of Americans:

“In December of 2010 we passed the payroll tax that gave each and every American an average of $1,000 tax cut. One thousand dollars less was taken out of their pay in payroll taxes. We repassed that not long ago, allowing another $1,500 to go into people's pockets instead of going into taxes. Ninety-eight percent of the American people -- they get a pay stub. They pay payroll taxes. So when you cut taxes for people with a -- with a payroll tax, 98 percent of the American people are getting a tax cut.”

Joe Biden’s biography on the Obama White House website even specifically highlighted his effort to cut payroll taxes for American workers:

“Fought for payroll tax cuts during the economic recovery -- ensuring a tax cut for every single worker in America.”

Speaker Pelosi also vocally supported payroll tax cuts. For instance, On December 13, 2011, Speaker Pelosi said that a payroll tax cut will give more money to Americans and help create more jobs:

“This is about a thriving middle class.  It's about a payroll tax cut that does what it sets out to do, puts $1,500 in the pockets of Americas families who need it, who spend it and in doing so inject, inject demand--demand, demand--into our economy which further creates jobs.”

Pelosi even supported extending the payroll tax cut without offsetting lost revenue, as her February 13, 2012 press release noted

“Democrats have always demanded that we extend the payroll tax cut for 160 million Americans without paying for it.”

In addition, following a jobs report released on December 2, 2011, Pelosi called for expanding the payroll tax cut:

“Today's jobs report sends a clear message: we've made some progress but we have work to do. The American people's top priority remains job creation. Democrats want to put more money in the pockets of all Americans and strengthen small businesses by expanding the payroll tax cut.”

President Trump has called on Congress to make the tax deferral a permanent tax cut. Given their past support for payroll tax cuts, Biden and Pelosi should join Trump in calling for permanent payroll tax relief.

Photo Credit: Pete Souza

Next COVID-19 Package Should Include Ways and Means GOP Proposals

Share on Facebook
Tweet this Story
Pin this Image

Posted by Alex Hendrie, Tom Hebert on Wednesday, July 29th, 2020, 2:35 PM PERMALINK

House Republicans on the Ways and Means Committee have released a package of legislation that will help American workers and businesses as we recover from the Coronavirus pandemic.

Within this package is several bills that will help incentivize new investment which will help the American economy recover and create jobs for American workers. As lawmakers continue negotiating the next Coronavirus relief package, they should include these proposals. 

Proposals include:

The Accelerate Long-Term Investment Growth Now (ALIGN) Act, introduced by Rep. Jodey Arrington (R-Texas). This legislation would make full business expensing permanent, simplifying the tax code and giving businesses the equivalent of a zero percent rate on new investments.

Full business expensing reduces taxes by allowing businesses to deduct the cost of new investments (machinery, equipment etc.) in the year they are made. Full expensing incentivizes growth, increases productivity, creates jobs, and raises wages. In a post COVID-19 world, expensing will help businesses make vital investments as they seek to bring workers back, onshore manufacturing capabilities, and ramp up production.

The American Innovation and Competitiveness Act, introduced by Rep. Ron Estes (R-KS). This legislation would make R&D expensing permanent to encourage more U.S. investment.  If Congress fails to act, this provision will expire at the end of 2021.

Much like full business expensing of new investments, full R&D expensing creates an incentive to increase capital investment, which leads to stronger economic growth, more jobs, and higher wages. If Congress fails to extend this provision, the resulting reduction of R&D spending will directly lead to 23,400 fewer jobs each year in the first five years and almost 60,000 jobs each year thereafter.

The Pushing Research & Development Into Hyperdrive by Doubling the R&D Tax Credit, introduced by Rep. Jackie Walorksi (R-IN). Currently, taxpayers can take a credit for qualifying research and development. Generally, the credit varies between 20 percent, 14 percent, or 6 percent, depending on alternative calculations and on the size of the company.

This legislation doubles each credit, which will encourage more American investment, to help grow the economy. Jobs tied to R&D are quality, high paying jobs. In 2017, the average wage for R&D related jobs was $134,978 – 2.4 times higher than the average wage, according to the Bureau of Labor Statistics. Doubling the R&D tax credit will help create more of these quality jobs.

The Coronavirus Relief for Working Seniors Act, H.R. 6554, introduced by Rep. Jackie Walorski (R-Ind.). Currently, American seniors who qualify for Old Age and Survivors Insurance (OASI) benefits are not entitled to full benefits if they earn income from outside work over the Retirement Earnings Test (RET) threshold. This penalizes seniors who wish to remain in the workforce after they have reached retirement age. 

This legislation would temporarily eliminate the penalty on working seniors that earn at or below the taxable maximum ($137,700) in 2020. This would allow beneficiaries who have lost retirement savings as a result of the pandemic to offset those losses by re-entering the workforce without penalty. As the focus remains on safely reopening the economy, this legislation also empowers retirees that wish to help their communities by re-entering the workforce.

The Advanced Medical Manufacturing Equipment Credit, introduced by Rep. Brad Wenstrup (R-Ohio). This legislation establishes a 30 percent tax credit for new investment in advanced manufacturing or machinery used in the U.S. to manufacture drugs, medical devices, or biological products. The credit phases down to 20 percent in 2028, 10 percent in 2029, and phases out in 2030. 

If implemented, this legislation will build on the success of the Tax Cuts and Jobs Act by supporting domestic innovation and encouraging American manufacturing. Investment in advanced manufacturing will also create high-paying jobs for American workers. 

The Domestic Medical and Drug Manufacturing Tax Credit, introduced by Rep. Brad Wenstrup (R-Ohio). This legislation creates a 10.5 percent tax credit on the net income from the domestic manufacturing and sales of active pharmaceutical ingredients (API) and medical countermeasures.

By lowering the tax burden, this legislation incentivizes increased domestic production of these important medical products and greater preparedness for a future public health emergency. This credit is also limited to the wages allocable to domestic production, which supports good, high-paying American jobs. 

Bringing Back American Jobs Through IP Repatriation, introduced by Rep. Darin LaHood (R-Ill.). Currently, American companies with significant overseas operations face a huge tax burden if they want to repatriate and bring their intellectual property (IP) back home.

This legislation would allow American companies that wish to come back to the United States to bring home any IP developed offshore without any immediate tax cost. Since this only applies to IP held on the date of enactment, it encourages companies to bring their IP home in the near future and discourages further migration of high-tech jobs outside the U.S. If implemented, this bill would build on the Tax Cuts and Jobs Act’s promise to restore competitiveness and grow our economy.

See also: 

ATR Supports Rep Schweikert’s "Invest Now Act"

ATR Supports The “Small Business Tax Fairness and Compliance Simplification Act”

Ways and Means Republicans Release Healthy Workplace Tax Credit Act

Ways and Means Republicans Release Legislation to Encourage Startup Medical Development

Photo Credit: Paulo O

Congress Should Reject Efforts to Undermine Contact Lens Rule

Share on Facebook
Tweet this Story
Pin this Image

Posted by Alex Hendrie on Wednesday, July 29th, 2020, 9:00 AM PERMALINK

After a process that lasted almost five years, the Federal Trade Commission (FTC) released its updated contact lens rule on June 23, 2020. The rule was issued on a unanimous, bipartisan basis to ensure that consumers have the freedom to purchase contact lenses from wherever they want whether that is from their optometrists or from a third party.

Moving forward, any efforts to undermine the proposal should be rejected including possible efforts by Members of Congress to block the contact lens rule in broader legislation.

Back in 2003, President George W. Bush signed the Fairness to Contact Lens Consumers Act (FCLCA) into law, legislation that ensured optometrists provide patients with a copy of their prescription. This provision was enacted to ensure consumers had the freedom to purchase contact lenses from wherever they choose without interference.

Optometrists differ from other healthcare professionals in that they both prescribe and sell the product to patients. While there should be no restriction on an optometrist selling contact lens, there should also be no barriers or restrictions placed on the ability of consumers to purchase from a third party.

Unfortunately, there was a clear need for FCLCA due to numerous well documented cases of some optometrists acting as bad actors by implicitly or directly blocking the free choice of consumers.

FCLCA was successful in addressing this and ensuring patients had more options on where to fill their prescriptions. The legislation allowed consumers the right to “passive verification” over contact lens prescriptions, a change that meant patients would have access to a written prescription so they could shop where they wanted.

The updated FTC contact lens rule builds upon the success of FCLCA in protecting consumers and free commerce.

Under the rule, optometrists are required to maintain documentation from patients that affirmatively acknowledge in writing that they have received a copy of their prescription. The FTC gives optometrists four different options for patients to acknowledge prescription receipts, including printing the acknowledgment on the receipt where they pay for their exam.  

This reasonable requirement aims to ensure that patients receive their prescription and have the freedom to shop where they choose. Any suggestion that it is overly burdensome to optometrists is exaggerated given they already would need to keep detailed records of their patients.

Moving forward, we should ensure the free market is protected and that consumers have the freedom to purchase contact lenses from optometrists or from a third party. The updated FTC contact lens rule achieves this in a balanced way that promotes competition and access. Any effort to delay or block the rule should be rejected.

Photo Credit: Lee Hayward

More from Americans for Tax Reform

Lawmakers Should Protect R&D By Passing the American Innovation and Competitiveness Act

Share on Facebook
Tweet this Story
Pin this Image

Posted by Alex Hendrie on Tuesday, July 28th, 2020, 11:39 AM PERMALINK

As the U.S. continues to recover from the economic damage caused by the Coronavirus pandemic, we need policies that encourage investment and job growth.

In addition to short term measures to stabilize the economy, the pandemic has exposed the need to rethink US supply chains over the medium and long-term so that we are not overly dependent on any one country.  One of the best ways to achieve this is to ensure that we have appropriate policies to encourage research and development (R&D) in America. 

Representatives Ron Estes (R-KS) and John Larson (D-Conn) have introduced H.R. 4549, the American Innovation and Competitiveness Act, which would make R&D expensing permanent to encourage more U.S. investment. This proposal should be included in future legislation to help the economy recover from the Coronavirus.

The Tax Cuts and Jobs Act passed by Congressional Republicans and signed by President Trump contained numerous pro-growth provisions including allowing businesses to immediately deduct the cost of new investments.

However, because of arcane Senate procedure and the refusal of Democrats to support the tax cuts, many provisions were given an expiration date, including immediate R&D expensing which expires at the end of 2021.

Starting 2022, businesses will be required to amortize domestic R&D spending over 5 years and amortize foreign R&D over 15 years. This is the wrong tax policy, will harm workers and businesses, and will make America even more uncompetitive. 

Immediate expensing is the right tax policy

Allowing businesses to immediately deduct the cost of all new investments – including R&D -- is the right tax policy.

It gives businesses the equivalent of a zero percent rate on new investments, which means more money for businesses to create jobs and increase pay. It also creates an incentive to increase capital investment, which leads to stronger economic growth, more jobs, and higher wages.

Expensing for all types of assets simplifies the tax code by equalizing the tax treatment of new investments with other business expenses such as wages, rent, and healthcare costs.

However, if amortization of R&D goes into effect in 2022, R&D spending will be disadvantaged relative to other types of business spending, creating a disincentive to make these investments.

R&D amortization will harm American workers

Jobs tied to R&D are quality, high paying jobs. In 2017, the average wage for R&D related jobs was $134,978 – 2.4 times higher than the average wage, according to the Bureau of Labor Statistics. 

However, allowing R&D amortization to take effect will threaten these jobs, according to a study by Ernst and Young. The study estimates that annual US R&D spending will decline by $4.1 billion in the first five-year window and $10.1 billion annually thereafter.

This reduction in R&D spending will directly lead to 23,400 fewer jobs each year in the first five years and almost 60,000 jobs each year thereafter. After accounting for indirect economic effects, amortization would cost 67,700 jobs every year for the first five years and 169,400 jobs every year thereafter. This would reduce incomes by $5.8 billion every year in the first five years and $14.4 billion every year thereafter.

The U.S. already lags many foreign competitors in promoting R&D

While allowing R&D amortization to take effect will harm American competitiveness, we are already lagging behind when it comes to promoting R&D. According to a Manufacturing Leadership Council study, the U.S. ranks 26thin R&D tax incentives when ranking the 36 developed countries in the Organisation for Economic Co-operation and Development (OECD).

While this low ranking is alarming, it is based on current U.S. policies, not what will happen if R&D amortization goes into effect. This ranking will almost certainly decline if R&D expensing is allowed to expire at the end of 2021.

Moving forward, we should be looking to policies to further incentivize R&D. We should pass further tax incentives to encourage R&D in the U.S. 

In the short term, as lawmakers continue debating measures to re-grow the economy, they should support the American Innovation and Competitiveness Act and ensure American businesses have the incentives they need to invest in the economy.

Photo Credit: KidTruant

Now is Not the Time for New Tariffs and Trade Wars

Share on Facebook
Tweet this Story
Pin this Image

Posted by Alex Hendrie on Monday, July 27th, 2020, 3:43 PM PERMALINK

Recent reports indicate that the United States is considering launching a trade investigation related to phosphate fertilizer imports. 

If this investigation proceeds, it could lead to new tariffs on farmers at a time that the U.S. economy is already weak because of the Coronavirus pandemic. Instead, the Department of Commerce and U.S. International Trade Commission should reject any effort to impose new tariffs and duties on phosphate fertilizers. 

On June 26, 2020, a countervailing duty (CVD) petition was filed against the import of phosphate fertilizers from Morocco and Russia. If this petition is successful, taxes on phosphate fertilizers could increase through a tariff of between 30 and 70 percent. In turn, this would result in significant new costs to farmers and increase the price of several commonly used crops. 

Farmers depend on phosphate fertilizers to produce several crops including corn, soybeans, cotton, wheat, and sugar beets. The cost of these fertilizers represents a significant portion of the costs of producing these crops.      

Imposing tariffs is the equivalent of increasing taxes on American consumers and American producers who use imported products. They fall particularly hard on industries that rely on imported products as an input, resulting in higher prices, leading to increased costs for consumers, lowering wages and leading to fewer jobs for American industry. They also lead to retaliatory actions from trading partners, resulting in fewer American products being exported to foreign markets which cost jobs and wages in the U.S. 

This damage is not hypothetical – over the past few years, trade wars have led to billions of dollars in losses for the agriculture industry, which has slowed revenues and led to bankruptcies and job losses. 

It has also forced the U.S. government to spend an unprecedented amount of federal dollars assisting agriculture. In fact, the U.S. government has already spent $32 billion this year in economic aid to farmers due to the damage caused by trade wars and COVID-19. 

Instead of launching trade wars and subsidizing farmers, we should look to promote fair and free trade that allows American exporters access to foreign markets.     

Ultimately, new phosphate fertilizer tariffs should be rejected as they will harm American farmers, reduce supply, increase prices, and endanger our economic recovery.

Photo Credit: United Soybean Board

More from Americans for Tax Reform

ATR Statement on Drug Pricing Executive Orders

Share on Facebook
Tweet this Story
Pin this Image

Posted by Alex Hendrie on Friday, July 24th, 2020, 6:26 PM PERMALINK

The Trump Administration today announced several executive orders on drug pricing including a “most favored nation” (MFN) proposal to impose an international pricing index (IPI) on Medicare Part B drugs. This proposal will tie the prices we pay for drugs to the prices in foreign, socialist countries.

ATR President Grover Norquist released the following statement in opposition to this proposal:

“A most favored nation proposal would slow medical innovation, threaten American jobs, and undermine conservative opposition to Medicare-for-All.

“President Trump has consistently opposed efforts that would lead to a government takeover of America’s health care—such as the “Medicare-for-All” scheme pushed by Democrats in Congress and on the campaign trial. As recently as his 2020 State of the Union Address, the President promised 'We will never let socialism destroy American health care.'

“Rather than fighting these socialist policies, a MFN would adopt them. This will have disastrous consequences to the economy and health care system and to the broader effort to fight against the government takeover of health care.

“The order is not set to be effective until August 24.  Between now and then we urge the President to explore ways to shift to a market-based approach like those the Trump Administration has consistently supported in other areas of healthcare.”

See also: Norquist op-ed in RealClearHealth – “Now Is the Time to Fight the Government Takeover of Health Care, Not Surrender to It”

Photo Credit: Gage Skidmore

ATR Opposes Section 303 of the “Affordable Housing Credit Act”

Share on Facebook
Tweet this Story
Pin this Image

Posted by Alex Hendrie on Thursday, July 23rd, 2020, 10:00 AM PERMALINK

ATR today released a letter in opposition to Section 303 of S. 1703/H.R.3077, the “Affordable Housing Credit Improvement Act”, legislation introduced by Senator Maria Cantwell (D-Wash) and Congresswoman Susan DelBene (D-Wash).

If implemented, Section 303 would upend the low-income housing tax credit (LIHTC) by retroactively substituting a general partner’s defensive right of first refusal (ROFR) to purchase property from a limited partner who wishes to sell the property with an affirmative option to force the limited partner to sell the property at a below market price. 

Section 303 violates the longstanding principle that tax legislation should be imposed prospectively, not retroactively. Taxpayers routinely make decisions based on their reasonable interpretation of the law as it exists at the time, with the expectation that the law will be applied consistently and in a way that promotes certainty.

This change would undermine the certainty understood at the time of the LIHTC investment, particularly because a below market option flies in the face of longstanding tax principles relating to property ownership.

This provision also raises alarming constitutional questions. An analysis by the Federalist Society review concluded that the retroactive nature Section 303 would directly impact vested rights and contractual obligations, a blatant violation of the Due Process Clause. The below market option created by Section 303 could also violate the Takings Clause, exposing taxpayers and government to liability for monetary damages.

Moving forward, lawmakers should reject this proposal – regardless of whether it is considered as stand-alone legislation, within the Affordable Housing Credit Improvement Act, or as part of a broader package of legislation. 

You can view the full letter here.

Photo Credit: Kelli

Congress Should Include Business Tax Cuts in Next COVID Legislation

Share on Facebook
Tweet this Story
Pin this Image

Posted by Alex Hendrie on Wednesday, July 22nd, 2020, 10:25 AM PERMALINK

Congress is debating the contents and timing of the next COVID-19 relief package. As these discussions continue, lawmakers should include tax cuts for struggling businesses, so they have the liquidity to keep their doors open and continue paying workers.

Specifically, lawmakers should extend several tax cuts that were enacted on a bipartisan basis earlier this year through the Coronavirus Aid, Relief, and Economic Security (CARES) Act.

Provisions that should be extended include a tax cut allowing businesses to carry back losses incurred in 2018, 2019, and 2020 back five years, and a provision that expands the ability of businesses to deduct net interest expenses from 30 percent of EBITDA (earnings before interest, tax, depreciation, and amortization) to 50 percent of EBITDA for 2019 and 2020. 

Extending both provisions into 2021 will provide certainty and targeted cash flow for businesses to invest as we look to regrow the economy.

The expanded interest deductibility provision is important because without action, businesses may begin to hit the existing cap due to a drop in earnings. This would subject them to additional tax on debt accrued from investments made in past years.

Smaller businesses have no limitation on their ability to deduct debt payments, so extending the 50 percent EBITA threshold will help bring parity to larger businesses during the economic downturn.

The NOL provision is similarly important and will help businesses that have seen significant losses due to COVID-19. This tax change is relatively modest as businesses are already able to deduct operating losses in the year the losses are incurred and can carryforward losses indefinitely to future years.

Because of this, expanding NOL carrybacks is largely a timing change and costs little revenue. In fact, the Joint Committee on Taxation finds that a majority of the revenue loss incurred to the government is felt in the first couple of years that this provision is enacted, and is offset because companies will eventually deduct fewer losses throughout the 10-year window.

Both provisions are bipartisan, so there should be no hesitation including them in the next Coronavirus bill. The CARES Act was adopted by a vote of 97-0 in the Senate and unanimously in the House of Representatives.

In addition, NOL expansions have been enacted into law repeatedly over the past 20 years by Republican and Democrat presidents during economic downturns. For instance:


In fact, when NOL expansion was passed in 2009, House Speaker Nancy Pelosi specifically highlighted this provision when speaking on the House Floor in support of the legislation.  She stated, “the bill also has the net operating loss carryback, which businesses tell us is necessary for them to succeed and to hire new people, and also to mitigate some of the damage that has been done to the economy from past policies.”

While the economy has begun to recover from the worst of the Coronavirus, millions of Americans are still out of work and the unemployment rate is at 11 percent.

Moving forward, we need policies that help regrow the economy and ensure businesses can continue investing and paying their workers. Extending CARES Act-enacted tax cuts will help achieve these goals and should be included in a future COVID relief bill.

Photo Credit: 401(K) 2012