Treasury Secretary Steven Mnuchin has been holding "Big Six" meetings to plan tax reform. The "Big Six" are Treasury Secretary Steven Mnuchin, White House Economic Council Director Gary Cohn, Senate Majority Leader Mitch McConnell, Speaker of the House Paul Ryan, Senate Finance Committee Chair Orrin Hatch and House Ways and Means Committee Chair Kevin Brady.
In a media appearance on August 31, Munchin stated the plan is "not a 100-page bill with every single detail," but it is a specific and extensive description of tax reform.
President Trump discussed tax reform on August 30 in Springfield, Missouri. He outlined four tax reform principles.
Fair and Simple - Since the last comprehensive tax reform in 1986, the tax code has tripled to 2,600 pages. Over 90% of taxpayers need professional help to complete their return. The tax reform goal is to provide a return "on a simple, single page."
Competitive for Jobs - The 1986 tax code reduced the top corporate rate to 34%, which was one of the lowest rates at that time in the first world. The U.S. corporate rate now is the highest among industrial nations because all of the others have lowered their rates. As a result, companies and jobs are moving to China and other nations. The tax reform bill must lower business tax rates in order to compete for jobs.
Middle Class Tax Relief - Tax reform will be intended to reduce taxes "for middle-income Americans."
Overseas Corporate Cash - With high U.S. corporate tax rates, over three trillion dollars in cash is held overseas by American corporations. Tax reform is designed to encourage the American companies to return cash to America and invest to increase employment.
Ways and Means Committee Ranking Member Richard Neal (D-MA) responded to the Trump speech on taxes. Neil described the speech as "vague, decades-old talking points." He continued, "Democrats believe that now is the time to act on comprehensive tax reform. We stand ready to work in good faith with Republicans on real tax reform that provides tax relief and expands opportunity for middle-class families, closes the skills gap and promotes middle-class job growth."
Editor's Note: The Senate Finance Committee and House Ways and Means Committee are both expected to have tax reform hearings during September. However, the House and Senate legislative calendar is limited. An independent poll of American business leaders indicated that only 10% expect tax reform to be completed in 2017.
Hurricane Harvey Tax Relief
The National Weather Service (NWS) officially reported Hurricane Harvey rainfall of 49.32 inches in the southeast Houston area. This is a record for a storm in the continental United States.
The storm caused widespread flooding in both Texas and Louisiana. Over 14 NWS reporting stations had 40 or more inches of rain.
In response to the natural disaster, the IRS published letters with two types of tax relief. IRS Commissioner John Koskinen stated, "This has been a devastating storm, and the IRS will move quickly to provide tax relief to hurricane victims. The IRS will continue to closely monitor the storm's aftermath, and we anticipate providing additional relief for other affected areas in the near future."
In IR-2017-135, the Service granted an additional extension for taxpayers and business. Many individual taxpayers had previously extended their 2016 filing date to October 16. Some businesses were on extension to September 15. Texas residents in the 18 affected counties may now file by January 31, 2018.
In IR-2017-138 and Announcement 2017-11; 2017-39 IRB 1, the Service relaxed rules on hardship loans or distributions from retirement plans.
The IRS has streamlined loan procedures for retirement plans under Sec. 401(k), Sec. 403(b) and Sec. 457(b). The streamlined rules enable plan participants to access funds more quickly.
While IRAs do not permit loans, there also will be streamlined plans for hardship distributions from IRAs.
The IRS cautions that the income tax treatment will remain unchanged. The IRS stated, "Retirement plan loan proceeds are tax-free if they are repaid over a period of five years or less. Under current law, hardship distributions are generally taxable and subject to a 10% early-withdrawal tax."