As another year end approaches, Congress and Treasury are addressing tax reform projects, while the Affordable Care Act marketplace troubles are, hopefully, being resolved. The following are some recent developments:
I. Democrats Reject Scrapping the Affordable Care Act ("ACA") - Americans were supposed to be able to enroll in new health plans meeting the requirements of the ACA at the IRS website, www.HealthCare.gov. However, given the problems with the rollout, many Republicans in both the House and the Senate have urged Congress to simply repeal the ACA and start over. On November 24, 2013, House Minority Whip, Steny H. Hoyer (D-Md.) responded to such pleas by unequivocally stating that the Democrats in Congress, as well as the President, would not agree to such action.
II. The Small Business Efficiency Bill of 2013 - Rep. Mike Thompson (D-Calif.) and Rep. Kevin Brady (R-Tex.) recently introduced in the House of Representatives their version of a new bill aimed at helping small businesses that use outside firms (Professional Employer Organizations or “PEOs”) to comply with the ever increasing complexities of federal employment tax responsibilities. The bill is intended to clarify current federal tax law to eliminate any uncertainty about the ability of PEOs to solely assume liability for paying wages and collecting federal employment taxes for worksite employees performing services for PEO clients (i.e., small businesses). At present, if the PEO makes an employment tax mistake, the small business client for whom the worksite employee is working is still liable.
III. IRS Releases Proposed Regulations Aimed At Defining the Tax-Exempt Qualification Requirements for Social Welfare Organizations - The IRS has released long-awaited guidance in the form of Proposed Regulations on social welfare organizations - organizations seeking tax exemption under IRC Section 501(c)(4). The Proposed Regulations amend the current Treasury Regulations concerning Section 501(c)(4) organizations, and set forth a definition of the term "candidate-related political activity". The regulations now exclude that activity from the list of permissible things these organizations can do and still be entitled to tax exemption under IRS Section 501(c)(4). Under the Proposed Regulations, "candidate-related political activity" would be defined as communications that include the express avocation for a clearly identified political candidate or candidates of a political party. Uncertainly about how much political activity a 501(c)(4) organization can engage in while retaining its tax-exempt status gave rise to the Tea Party scandal in May of this year. The IRS was found to have subjected the tax-exempt applications of many 501(c)(4) organizations formed by Tea Party groups to special scrutiny, resulting in long delays in ruling on their applications.
IV. No Fundamental Tax Reform This Year - Legislation to revamp the Internal Revenue Code will not be introduced in the House Ways and Means Committee this year, the panel's Chairman, Dave Camp (R-Mich.) stated on December 4, 2013. Camp, who had set 2013 as the time for legislating fundamental income tax reform, could not overcome the competing priorities of another pending government shutdown, and the flawed rollout of the Health Care Exchanges under the ACA. Rep. Camp did state that support for simplifying the Internal Revenue Code, and helping U.S. businesses become more competitive globally, remains strong in Congress. He declined to say, however, how he intends to restart momentum for tax reform in 2014.
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