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Congress adds tax revenue offsets to floundering trade bills

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Tax Hot TopicsRepublicans are considering new ways to enact a series of trade initiatives with tax revenue raisers after congressional Democrats blocked the bills in a series of votes.

The trade bills are supported by the president and many Republicans, but have faced strong opposition from congressional Democrats. Republican leadership has tried various procedural maneuvers to try to pass the bills, but have been unable to get identical versions of them approved in both the House and Senate. Republicans are still exploring options for reconciling the competing House and Senate versions or combining the bills to push them through.

Each bill contains minor revenue-raising tax provisions that are meant to be noncontroversial. Combined they would raise a little more than $1 billion over the next 10 years, according to the Joint Committee on Taxation. The various versions of the trade bills in the House and Senate (H.R. 1890, H.R. 1295, H.R. 1314 and H.R. 644) include tax provisions that would do the following:
  • Extend customs user fees
  • Increase the required corporate estimated tax payment in the third quarter of 2020 for corporations with at least $1 billion in assets
  • Require taxpayers to have a valid Form 1098-T for tuition payments to claim any deduction or credit for education
  • Waive penalties for some educational institutions unable to collect Taxpayer Identification Numbers of individuals paying fees
  • Increase the minimum penalty for failure to file a return within 60 days from $135 to $205
  • Deny passports to taxpayers with tax delinquencies
  • Extend the health coverage tax credit for workers affected by trade-related job losses
  • End the refundability of the child tax credit for taxpayers using the foreign income exclusion
  • Require information reporting on financial accounts with less than $10 in annual interest
  • Increase the penalties for failing to file Form 1099 information returns from $30 to $60 for errors corrected within 30 days, $60 to $100 for errors corrected before Aug. 1, $100 to $250 for delinquencies after Aug. 1, and $250 to $500 for intentional failures (with corresponding increases in the maximum penalties of each)

If Congress eventually passes the trade bills with some or all of these revenue offsets, it could make it more difficult for tax writers to find noncontroversial revenue raisers to pay for a short-term extension of highway spending. Highway funding is set to expire at the end of July, and tax writers need approximately $11 billion to extend it through the end of December. Not all this figure would need to come from tax provisions.

House Ways and Means Committee Chair Paul Ryan, R-Wis., continues to explore the possibility of combining international reform and a repatriation position to fund a long-term bill. He has all but ruled out a gas tax increase or a mileage-based user fee. Senate Finance Committee Chair Orrin Hatch, R-Utah, appears to be shifting focus from a short-term bill to an 18-month or three-year extension. He has expressed little interest in a repatriation provision and is exploring other nonrevenue funding options. Both chairmen have expressed interest in increasing tolling or bonding programs, shifting more spending responsibility to states, or simply in transferring money from the general fund to the highway fund.

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