Many Business Provisions Still Being Reconciled in Federal Tax Reform

We’re almost there. Tax reform has passed both the House and Senate. It now seems very possible that the President will have a bill to sign by Christmas. As some have described: All they need to do now is “sand the rough edges”. But another saying is equally applicable to the business tax components: “The devil is in the details”. Specifically, details directly relating to the taxation of both C-corporations and pass-through entities. Terms that will impact those who do business here and those who do business around the globe. In other words, details that will significantly affect big businesses, small businesses and everybody in between.

The process for reconciling the two versions of tax reform is already underway as the House and Senate name members to the conference committee that will determine exactly what will be in the package before it is voted on one last time. Indications are that majority leaders want to have a committee report for their respective bodies to act on by the end of next week. So while the details still have to be worked out, both bodies are very engaged and they’ve passed legislation that defines the general parameters.

There will continue to be debate, in public and in private, over the deficit, how much growth tax reform will generate, who benefits and who doesn’t, but the House and Senate are effectively committed to getting something done at this point. On the individual income tax side, they will need to find agreement regarding the limits on the deductibility of state and local taxes (SALT), as well as mortgage interest. These items are important to individuals, important to the numbers and important politically. But the two sides really aren’t that far apart. A $10,000 SALT deduction of some kind and a healthy mortgage interest deduction will almost certainly remain in the final product.

But where they land on many items critical to business is harder to predict; a lot is up in the air. Let’s start with the corporate rate itself. While both plans call for a 20% rate, the President hinted it could still change slightly. That appears unlikely, however, but the rate is tied closely to the fiscal projections. And the fiscal projections are why the Senate delayed the effective date for corporate rate change to 2019, to reduce the cost of the bill. So when exactly the change goes into effect is at issue.

Similarly, the taxation of pass-through income is also unsettled. The House limits the pass-through rate at 25%. The Senate approach was to give a deduction to pass-throughs to keep their tax down. Effectively, the different approaches would not have drastically different bottom line impacts for most pass-through income recipients. The real complications come via provisions directed at guarding against individuals in higher brackets from categorizing personal income as business/pass-through income.

What about the issues of interest to multinationals who conduct huge volumes of business activity around the globe? The House and Senate agree that the U.S. must move to a territorial system and companies shouldn’t be taxed here on income they earn overseas. But beyond that basic principle, how multinationals and their foreign-sourced income is handled is anything but clear right now. Both the House and Senate have included forms of supplemental taxes intended to prevent their perception of “base erosion” and to discourage what they view as corporations “gaming the system”.

Likewise, they are still working through how best to address the repatriation of foreign-earned profits and are looking at special, one-time tax provisions to encourage companies to bring those assets back to the U.S.  Another item important to many businesses of all types and sizes is how quickly, to what extent and for how long will they be able to claim deductions for capital expenditures/investments. Two final differences to note: (1) The Senate preserves the corporate alternative minimum tax; the House repeals it; (2) the House and Senate versions both limit the interest expense deduction, but in materially different ways. (A good summary of all the differences can be found in this report from the Tax Foundation.)

Of course, there are many, many other pending issues wrapped up in this legislation for the tax folks in Washington to resolve in short order. They include the health care mandate, estate tax, exemptions for educational institutions and nonprofits, and the list goes on. Tax reform appears close. Let’s hope good solutions are close too.

Republican Field Grows for U.S. Senate; Reminder of Chamber Endorsement Process

It’s been a busy week for Republicans wanting to challenge Sen. Joe Donnelly for his seat. The number now stands at six.

On Wednesday, Congressman Todd Rokita (IN-04) officially announced his intentions while on the steps of the Indiana Statehouse – it marked the first stop in his nine-city tour sharing the news.

“Hoosiers want a commonsense senator willing to take on tough fights. Hoosiers want a conservative senator who shares our values and works with President Trump and Vice President Pence to turn the country around,” Rokita said. “Hoosiers want a senator who votes the interests of Hoosiers, not the Washington elite. We don’t have that in Joe Donnelly, and too much is at stake to accept it. That’s why I am announcing my candidacy for the United States Senate.”

Rokita’s campaign slogan promises to “Defeat the Elite” in Washington.

Meanwhile, Congressman Luke Messer (IN-06) will formally announces his bid Saturday at the 6th Annual Messer Family BBQ in Morristown.

Senator David Long, President Pro Tempore of the Indiana State Senate, has already thrown his support behind Messer:

“As a young and talented member of the Indiana House, Luke proved his conservative credentials early on by helping us create a new vision for Indiana in partnership with Gov. Mitch Daniels. As a strong and innovative leader for educational choice, Luke fought to ensure Hoosier families and children have the options they need to obtain a world-class education. As a quickly-rising star in Congress, Luke has proven he can work with difficult coalitions of interests to move an agenda for the American people.

“While the Republican Party is blessed to have a number of candidates interested in the seat, I believe Luke to be the absolute best person to effectively represent the interests of all Hoosiers in the U.S. Senate.”

State Representative Mike Braun of Jasper officially entered the race on Thursday. He previously cited the public sparring of Messer and Rokita as well as his business experience as reasons for his decision.

Meanwhile, Indiana Attorney General Curtis Hill made it clear on Wednesday that he hasn’t ruled out joining the GOP primary.

Other Republicans already in the field are Hamilton County businessman Terry Henderson, Kokomo attorney Mark Hurt and Floyds Knobs educator Andrew Takami.

In terms of any congressional endorsement the Indiana Chamber may provide, the matter is taken up by our federal political action committee (PAC). Bill authoring and voting history on pro-jobs, pro-economy legislation and in-person interviews of the candidates will play large roles in the decision making.

The PAC’s work won’t begin until after the candidate filing deadline early next year – as it’s possible a candidate may decide not to run, while there also could be someone else elect to throw their hat into the ring. But when the time comes, you can be assured that a thorough vetting process will take place before a determination is made to endorse a candidate (or no candidates).

U.S. Senate: Young, Bayh Speak Out in BizVoice

bayh young

BizVoice talked to both men separately this summer, asking them the same questions on policies critical to Indiana Chamber member companies and the business community at-large. (NOTE: The Indiana Chamber’s Congressional Affairs Committee has endorsed Rep. Todd Young in this race.) 

BV: What is your view on the federal tax code … are there areas you feel need attention? If so, what reforms do you see as the most important?

YOUNG: “We need to simplify the tax code. Washington needs to stop picking winners and losers through the tax code. We need to stop the double taxation of overseas income so that hundreds of billions of dollars of U.S. profit can be repatriated and invested in places like Indiana to create jobs and raise wages.

“We need to lower the corporate tax rate; we have the highest rate in the industrialized world – that clearly undermines our competitiveness and has even been causing our major corporations, with all their jobs, to relocate their operations overseas. And we need to lower the individual tax rate so that families and small businesses can participate actively in the economy.”

BAYH: “We need a tax code that is certainly simpler; it costs way too much to comply with it; it’s way too complicated. One of the areas I think we can get some bipartisan agreement on would be in the area of corporate tax reform – to get the tax rate down to make us globally competitive. Currently we have one of the highest corporate tax rates in the world, which leads to a couple of negative consequences. Number one: A lot of businesses that are globally competitive have stranded profits abroad. I think it’s in excess of a trillion dollars. So by making the corporate rate globally competitive, we would allow them to bring those profits home to invest in their U.S. operations.

“Number two: The fact that our tax code is not globally competitive creates an incentive for foreign companies to buy U.S. companies basically as a tax arbitrage (profiting from differences in how income or capital gains are taxed); it also leads to U.S. companies to re-domicile themselves overseas. By getting the tax rate down and making it globally competitive, you do away with that phenomenon.”

Read the full Q&A online.

Indiana Chamber Reaffirms Endorsement of Todd Young for U.S. Senate

youngAt a series of press conferences Aug. 29, the Indiana Chamber reaffirmed its endorsement of Congressman Todd Young (R-IN, 9th District) for the U.S. Senate. The announcement was first made at the Associated Builders and Contractors training facility on the east side of Indianapolis, followed by stops in South Bend and Fort Wayne.

The organization previously had endorsed Young in the primary before Evan Bayh, former U.S. senator and Indiana governor, emerged as the Democrat candidate.

Once Bayh entered the race, our congressional affairs committee thought the appropriate action was to take another look at this race and talk with him about policies important to the business community.

We were able to do that recently and appreciate Sen. Bayh’s willingness to have that discussion. At the end of the day, however, our committee overwhelmingly decided to keep our endorsement with Congressman Young.

His military, business and government experience have him prepared to take this next step of leadership. Young is also an economic-minded individual who has repeatedly demonstrated prudent decision-making on issues that are vital to jobs and economic growth.

Additionally, Young’s engagement with the business community and his focus on economic, fiscal and regulatory issues were key factors. After he was appointed to the Ways and Means Committee, the congressman sought substantial feedback on potential federal tax reforms and what would have the most impact on Hoosier companies and their employees. He listened to our members – through personal conversations and a survey – using their insights to help form his pro-economy agenda.

The Indiana Chamber frequently hears from its members about burdensome federal regulations. They bring uncertainty and put a stranglehold on job creation. Congressman Young understands these frustrations and has sought to remedy that. In each session, he has introduced legislation (the REINS Act) that would require members of Congress to vote on major rules before they go into effect.

At both the state and federal levels, Indiana Chamber endorsements are driven by vote scores on pro-jobs, pro-economy issues. For state endorsements, the Indiana Chamber relies on its Legislative Vote Analysis report.

Congressional endorsements are based on a combination of the U.S. Chamber’s own vote scores and an analysis of votes on Indiana Chamber federal policy positions. The U.S. Chamber’s lifetime congressional voting record for Bayh is 55%; Young is at 91%.

The Indiana Chamber’s congressional affairs committee, which determined Young’s endorsement, is a nonpartisan group comprised of volunteer business leaders from around the state.

Representatives of the U.S. Chamber, which also is supporting Young’s general election campaign, joined the Indiana Chamber for the press event.

Indiana Chamber Endorses Rep. Todd Young for U.S. Senate

young pic camera (2)The Indiana Chamber is endorsing Congressman Todd Young (R-IN, 9th District) in his candidacy for the U.S. Senate. The announcement was made today at a press conference at Indiana Chamber headquarters in downtown Indianapolis.

“We believe Todd Young is the most qualified and most economic-minded individual running for the Senate seat,” said Indiana Chamber President and CEO Kevin Brinegar. “He has repeatedly demonstrated sound fiscal policy and prudent decision-making on issues that are vital to jobs and economic growth.”

Brinegar further emphasized Young’s engagement with the business community and his focus on economic, fiscal and regulatory issues.

“After he was appointed to the Ways and Means Committee, the congressman sought substantial feedback on potential federal tax reforms and what would have the most impact on Hoosier companies and their employees. He listened to our members – through personal conversations and a survey – using their insights to help form his pro-economy agenda.”

The Indiana Chamber’s nonpartisan congressional action committee, comprised of volunteer business leaders from around the state, determined Young’s endorsement.

At both the state and federal levels, Indiana Chamber endorsements are driven by vote scores on pro-jobs, pro-economy issues. For state endorsements, the Indiana Chamber relies on its Legislative Vote Analysis report. Congressional endorsements are based on a combination of the U.S. Chamber’s own vote scores and an analysis of votes on Indiana Chamber federal policy positions.

Representatives of the U.S. Chamber, which also is supporting Young’s campaign, joined the Indiana Chamber for the press event.

VIDEO: See Why Brandt Hershman was Named 2015 Government Leader of the Year

One of State Senator Brandt Hershman’s first jobs was in the White House. But thankfully he eventually moved back to Indiana, and is now considered a jack of all trades on the Senate leadership team. He “sweats the details,” and has helped make Indiana a fiscally responsible and business-friendly state. That’s why the Indiana Chamber named him the 2015 Government Leader of the Year.

Lugar Leads the Way; Now About that Skills Gap

100_5793Our recent poll question asked you to tab the most influential Indiana senator since 1960. It can’t be too much of a surprise that Richard Lugar (foreign relations, nuclear security, agriculture and other areas of leadership) topped the voting. The results:

  • Lugar: 56%
  • Birch Bayh: 26%
  • Evan Bayh: 9%
  • Dan Quayle and Dan Coats: 4% each

The current poll (top right) seeks your insights on workforce challenges.

Keystone XL Pipeline Defeat Will Likely Be Short-Lived

119744231The Keystone XL Pipeline bill was narrowly defeated Tuesday in the U.S. Senate. Indiana Chamber of Commerce President and CEO Kevin Brinegar offers his thoughts on the policy and the latest activity in Washington:

“Canada is going to continue to develop the oil sands and sell to other nations whether the U.S. allows the Keystone XL Pipeline or not. Whatever the impact that activity has on the environment, the activity is still going to happen. That’s the reality. Continued posturing by the Obama Administration and others amid calls from environmental groups isn’t going to change that.

Other countries are looking out for their energy futures. The U.S. needs to as well. Going forward with the Keystone XL Pipeline is an important part of the mix. It would strengthen and expand our already vital energy relationship with Canada. And sourcing more of our energy from a friendly, North American neighbor will help reduce our reliance on energy resources from less stable areas of the world.

Indiana is fortunate to have two senators – Dan Coats and Joe Donnelly – who understand the pipeline’s importance and have been staunch supporters of the project. It’s too bad the Senate, on the whole, couldn’t get past politics and do the right thing for our nation’s energy security. However, we look forward to early 2015 when this measure seems destined to finally pass the Senate and make its way to the President’s desk.

Background: The proposed Keystone XL project would construct a 1,700 mile pipeline to transport about 800,000 barrels a day of heavy crude oil from tar sand fields in Canada across the central U.S. to refineries on the Gulf Coast.

IBRG’s Brantley: Election a ‘Mini-Mandate’ in Indiana to Stay on Course

UOur friends at Inside INdiana Business interviewed Jeff Brantley, the Indiana Chamber’s VP of Political Affairs and our PAC, Indiana Business for Responsive Government (IBRG), about Tuesday’s election (the link includes an audio clip about the federal elections as well). Here’s the synopsis (edited for accuracy):

The Indiana Chamber of Commerce’s vice president of political affairs believes Hoosier voters in yesterday’s mid-term elections delivered a “mini-mandate” to legislators to continue focusing on job growth and the business community. All Indiana Congressional incumbents won re-election and Republicans swept the contests for secretary of state, state auditor and state treasurer. Jeff Brantley says voter turnout appears to be higher than anticipated and believes results in Indiana General Assembly races demonstrate Hoosiers like the direction policy makers are going.

Only one U.S. Congressional race, the 7th District between Representative Andre Carson and challenger Catherine Ping, was within 15 points. The winners are:

Peter Visclosky (D-1)
Jackie Walorski (R-2)
Marlin Stutzman (R-3)
Todd Rokita (R-4)
Susan Brooks (R-5)
Luke Messer (R-6)
Andre’ Carson (D-7)
Larry Bucshon (R-8)
Todd Young (R-9)

Statewide office winners were Secretary of State Connie Lawson (R), Suzanne Crouch (R) for State Treasurer and Kelly Mitchell (R) for State Auditor.

Jeff Brantley says, with only one exception, all candidates the organization endorsed were victorious.

Some incumbents in the Indiana General Assembly were unseated. They include Sen. Richard Young (D-47), who was beaten by Republican Erin Houchin, and Senator Tim Skinner (D-38), who lost to Republican Jon Ford. Incumbent Reps. Mara Candelaria Reardon (D-12) and Shelli VanDenburgh (D-19) also fell.