What’s on the 2014 Tax Law Agenda

The year gone by was unusually productive in terms of changes in tax law. The 800-pound gorilla was obviously the set of tax provisions that came into effect under the Affordable Care Act. But Congress managed to upstage the ACA by doing nothing and letting 55 tax provisions expire on Dec 31.

The question now is - What’s going to happen in 2014? The Godzilla and King Kong of this year’s tax law agenda in front of Congress are tax reform and the Marketplace Fairness Act.  

Tax Reform – Tax reform has been in the works for years without being taken seriously by Congress or by the taxpayers.

All the drama over fiscal cliffs, shutdowns and sequestration in 2013 forced people to sit up and take notice of tax reform as a possible permanent solution to the mess.

However, Senator Max Baucus, the main point man who was handling tax reform, is being packed off to China as the next Ambassador, which is not good news for people hoping to see a tax reform bill being voted on this year.

Marketplace Fairness Act – With Godzilla dead, the focus will shift to the Internet sales tax to be implemented on online sales under the framework provided by the Marketplace Fairness Act.

This is virtually a done deal, since Congress is behind the curve on this one. Online retailers such as Amazon have already worked out separate deals with individual states. Many of the deals Amazon has agreed to actually came into effect on Jan 1, 2014.

Implementation of the Marketplace Fairness Act therefore merely makes the process more orderly for both businesses and the states.

International Tax Avoidance – One of the watershed moments of 2013 was Switzerland agreeing to allow their banks to cooperate with U.S. tax authorities as required under the Foreign Account Tax Compliance Act (FATCA).

It effectively knocks down the wall of secrecy behind which untold billions are tucked away by U.S. citizens in offshore accounts all over the world.

The next stage takes it further with a proposed network of bilateral agreements between nations to share tax data and unearth complicated tax avoidance schemes by corporate taxpayers.

This is a complex issue agreed upon by world leaders at the G-20 Summit. With hundreds of billions of dollars at stake and the plan required to be implemented by 2015, Congress is likely to take it up in 2014, even if only to decide what happens with the money.    

Tax Extensions – Unless tax reform takes care of everything in a single bill, many of the 55 tax provisions that were allowed to expire on Dec 31 will soon be revived through amendments attached to one of the other big bills.

The only question is about when this will happen. It’s an election year, so nothing much is going to happen in the last quarter.

The extensions have to be done now in January while the lapsed provisions are still newsworthy. If not, other items will take center-stage and the extensions will be pushed back again and again to near the end of the third quarter, at which point it gets a lot more difficult to get anything passed.

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