Tax Policy Update - August 25, 2014

NUMBER OF THE WEEK: 8

The number of days both houses of Congress will be in session prior to the November midterm elections, while regulators will have 49 working days over the same time period to mete out administrative fixes where they can.

LEGISLATIVE LANDSCAPE

The House and Senate are in recess and will return in September.

REGULATORY WORLD

IRS Having Problems Collecting Medical Device Tax. The Internal Revenue Service is struggling to figure out which taxpayers are supposed to pay the medical device excise tax intended to help pay for the Affordable Care Act, resulting in more than $117 million in tax revenue discrepancies, according to an Aug. 19 report issued by the Treasury Inspector General for Tax Administration (TIGTA). The TIGTA report also revealed that the IRS has not been able to ensure that those subject to the tax, including medical device manufacturers, producers and importers, are accurately reporting and paying it. Sen. Orrin Hatch (R-UT), ranking member of the Finance Committee, told Bloomberg BNA that the report supports efforts to repeal the tax, calling the tax "a disaster."

New REIT Safe Harbor Guidance. The IRS has modified the asset test safe harbor for real estate investment trusts to prevent anomalies that may occur in the context of transactions involving debt secured by real estate, the fair market value of which has declined. In Revenue Procedure 2014-51, issued Aug. 22, 2014, the IRS also offers an illustration of the safe harbor.

The guidance modifies and supersedes the safe harbor in Revenue Procedure 2011-16 to address situations in which there is a subsequent increase in the value of real property securing a distressed mortgage loan.

Treasury Mulls Options to Curb Inversions. While lawmakers are away during the August break, chatter continues in Washington over corporate inversions. Reports are plentiful that Treasury Department staffers are hard at work preparing options for administrative action to rein in corporate reorganizations in which U.S. multinationals move their tax domiciles abroad to lower tax jurisdictions. In a meeting with policy specialists Aug. 21, 2014, Treasury Secretary Jacob J. Lew reiterated that the best way to deal with the issue of corporate inversions would be through a comprehensive revamp of business taxation, according to a statement from the department.

New Information Reporting Draft Instructions Issued...