U.S. tax legislative proposals | KPMG | GLOBAL

U.S. tax legislative proposals, possible implications for imports

U.S. tax legislative proposals

The U.S. House Ways and Means Committee this week began its markup of a tax bill that includes provisions that may affect the treatment of payments made for certain imports. The committee’s markup of the “Chairman’s mark” of H.R. 1, the “Tax Cut and Jobs Creation Act” began yesterday, and there already have been votes on amendments.

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In the Chairman’s mark, there are proposals that could affect imports. For example, there is a provision that would impose a new excise tax on deductible payments by domestic corporations to related foreign corporations. The new tax would be sweepingly broad in scope, applying to virtually every form of payment (other than interest) that would give rise to a reduction in U.S. taxable income, and would apply to both U.S. and foreign-headquartered groups, thus including payments by U.S. multinationals to their controlled foreign corporations (CFCs). The rate of the proposed excise tax would equal the highest corporate tax rate (20% after enactment).

There are other tax proposals that could have implications on imports. Read more in KPMG’s report [PDF 1.7 MB] of initial analysis and observations on the Chairman’s mark. 

 

Also read TaxNewsFlash-Tax Reform that provides the most recent information about the markup (as of the evening of November 6, 2017).

Legislative process

Further modifications to the Chairman’s mark may be made this week. If the Ways and Means Committee approves the bill and orders it to be reported, the bill would proceed to the House Rules Committee, and then would be debated and considered by the full House. It is possible the House could pass the bill as soon as mid-November, if there are no major setbacks causing a delay in either the Ways and Means Committee or in the full House.

Senate Finance Committee Chairman Orrin Hatch (R-UT) is also reportedly contemplating swift action on a tax bill. It is possible that Chairman Hatch could release his mark as early as this week, with Finance Committee action possibly taking place prior to the Thanksgiving recess. How the Senate bill might differ from the House bill is uncertain, but Chairman Hatch has stated his intention to produce his own bill, regardless of the bill that ultimately might be approved by the House. 

During the Finance Committee’s markup, it is possible that additional amendments might be made. After the Senate Finance Committee finishes its markup and approves a bill, it would order its bill to be reported. During consideration by the full Senate, it is also possible that amendments could be adopted on the Senate floor. It is not yet certain when Senate floor action would commence or when a vote on final passage would take place. The Senate bill potentially could be very different from the House bill.

For tax reform to become law, the House and the Senate ultimately would have to pass identical legislation and send it to the president. If the House and Senate bills differ, as seems likely, a conference committee may be convened to work out the differences between the two bills. The more significant the differences between the two bills, the longer it can be expected to take to negotiate a conference agreement, and reaching an agreement could be challenging. For tax reform to become law, the conference agreement would need to be approved by both the House and the Senate and signed by the president.

The often stated goal of Republican congressional leadership is to pass a bill prior to the end of 2017. The aggressive schedule outlined by House and Senate leaders is aimed at meeting this deadline. Significant hiccups at any of the many junctures along the path to enactment could derail this tight timeline and push the process over into 2018 or lead to the demise of the bill.

 

For more information, contact a professional with KPMG’s Trade & Customs practice:

Douglas Zuvich | +1 (312) 665-1022 | dzuvich@kpmg.com

Andrew Siciliano | +1 (631) 425-6057 | asiciliano@kpmg.com

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