Chair Baucus Unveils Three Tax Discussion Drafts

December 4, 2013 Finance Committee Chairman Max  Baucus (D-Mont.) released three tax discussion drafts in three consecutive days—covering international taxation, tax administration and cost recovery and tax accounting. The drafts, while not technically considered bills, do contain legislative language and indicates the direction that Baucus is contemplating as he undertakes a large-scale rewrite of the tax code.

The first discussion draft details ideas on how to reform international tax rules in order to spark economic growth, create jobs and make U.S. businesses more competitive. This draft outlines proposal to:

•    Make the U.S. more attractive and competitive for multinationals to invest and create jobs.
•    Reduce incentives for U.S. companies to move jobs or the entire company overseas.
•    End the trapped cash problem, allowing foreign profits to be invested in America again.
•    Make it harder for multinationals to shift profits to tax havens, which reduce our ability to invest in U.S. infrastructure, education, and other vital initiatives.

The one page summary can be found here.

An overview of the discussion draft along with a detailed summary can be found here.

The full discussion draft in legislative language can be found here, here and here.

The second in his series of staff discussion drafts explores ways to simplify the tax process for all Americans by proposing reforms to the administration of the U.S. tax law.

The second package of reforms draws heavily from proposals offered by both Republican and Democratic members of the Senate Finance Committee. It details a number of reforms to modernize tax administration, minimize compliance burdens, reduce tax-related identity theft, and shrink the tax gap.  Specifically, the second discussion draft offers proposals to:

•    Simplify the tax filing process and greater utilize technology.
•    Provide the IRS with new tools to combat tax-related identity theft and assist victims of this crime.
•    Reduce the tax gap by increasing information reporting and providing IRS with additional collection tools.

For the third package, the discussion draft proposes a modernized set of cost recovery and tax accounting rules that are simpler, fairer, and lessen tax burdens on small businesses. The rules for cost recovery and accounting determine when a business can deduct the cost of investments and how they account for their income.  However, the rules are outdated, overly complex and reward specific industries to the detriment of others.  In addition, Congress keeps changing the rules. It is often difficult for businesses to plan for the future as a result of temporary, and sometimes retroactive, provisions.

These reforms would also raise enough revenue from corporations in the long-term to finance a significant reduction in the corporate tax rate.  Specifically, the third discussion draft offers proposals to:

•    Replace current rules with a system that better approximates economic depreciation based on estimates from the Congressional Budget Office.
•    Reduce the number of major depreciation rates from more than 40 to 5.
•    Eliminate the need for businesses to depreciate each of their assets separately.
•    Permanently increase Section 179 expensing to $1 million and expand the definition of qualifying expenses.

Senator Baucus has asked for additional feedback from members of Congress, key stakeholders and the general public on the discussion drafts. Feedback on the tax administration discussion draft as well as the cost recovery and tax accounting rules discussion draft and the international taxation draft are requested by January 17, 2014 and comments can be sent to:

A detailed summary of the tax administration staff discussion draft can be found here, and a one-pager on the draft can be found here.

The full staff discussion draft in legislative language can be found here.

An overview of the cost recovery and accounting discussion draft can be found here, and a one-pager on the draft can be found here.

Although the possibility of moving a tax reform bill through the Finance Committee this year is doubtful, Baucus still hopes Congress will act on a comprehensive measure in 2014.