WASHINGTON -- The Treasury Department has relinquished some of its authority over implementation of the recent tax cuts, with Treasury Secretary Steve Mnuchin ceding final oversight of new regulations to the White House Office of Management and Budget, which is headed by Mick Mulvaney.
An agreement announced Thursday by two of President Donald Trump's top economic advisers marks the end of a monthslong turf war that some tax experts feared could delay rollout of the law. The agreement centralizes more power within the White House, giving it more control over how the tax bill, including some of its murkier provisions, is interpreted.
The $1.5 trillion tax overhaul was pushed through Congress late last year and has left many lingering questions that the Treasury Department and the Internal Revenue Service, which is part of the department, have been scrambling to answer. Key among those are what kinds of businesses qualify as "pass-through" companies that are eligible for a new 20 percent deduction and how broadly to apply the international tax provisions aimed at preventing large companies from shifting profits overseas.
Last year Trump called for a review of the Treasury Department's exemption from the usual practice of the budget office doing cost-benefit analyses of regulations issued by government agencies, sparking a turf war between Mulvaney and Mnuchin.
Under the new agreement, the White House budget office will review Treasury Department regulations that could create interference or inconsistencies with regulations from other agencies. It would also assess regulations that raise "novel" legal or policy issues, such as penalizing conduct through the tax code. And regulations that have a revenue effect on the economy of more than $100 million will receive additional scrutiny.
In its effort to maintain control over tax guidance, Treasury Department officials argued that giving the budget office final say would create additional layers of red tape that could slow implementation of a law the administration is hoping will provide an economic boost. They also argued that the budget office did not have sufficient tax policy expertise to properly scrutinize complex regulations.
To alleviate the concerns of business groups, the agreement creates an expedited process for the budget office to review regulations related to the 2017 tax law, completing such assessments in 10 days.
Mnuchin and Mulvaney both claimed victory Thursday.
"This updated review framework will increase scrutiny of regulations most likely to impose new costs, while preserving Treasury's ability to ensure taxpayers receive timely, clear rules and guidance on how to comply with our tax code," Mnuchin said. "Under today's agreement, Treasury will continue to swiftly and successfully implement historic tax reform while still avoiding needless regulatory costs and delays."
Mulvaney called the deal "a reflection of tremendous coordination" between the Treasury and the budget office and said it would "promote economic growth and prosperity."
A spokesman for the chairman of the Senate Finance Committee, Sen. Orrin Hatch, R-Utah, praised the deal Thursday. "With this agreement, OMB and Treasury have struck the right balance to ensure a transparent, careful and expeditious regulatory process," Julia Lawless said in an email. "Moving forward, Chairman Hatch will continue to work with the administration as they develop IRS rules on the new tax law."
But Democrats and some outside experts continued to raise concerns that the additional layer of review would bog down the law's implementation and potentially open new avenues of confusion for businesses attempting to comply with the law.
"Small businesses are increasingly stuck in a bureaucratic twilight zone," Sen. Ron Wyden of Oregon, the top Democrat on the Finance Committee, said in a committee hearing Thursday morning. "There is rampant confusion about how the new tax law works -- untested policies, sloppy legislative drafting and outright mistakes in the law. On top of that, a Trump Cabinet turf battle has been adding to the uncertainty and lengthening the time that small businesses are going to be in the dark about how the tax rules apply to them."
Also Thursday, acting IRS Commissioner David Kautter told Congress that some 79 million refunds totaling about $226 billion for 2017 taxes had been issued as of April 6, averaging $2,900 -- up $13 from last year. Around 80 percent of returns filed claimed a refund. The final year under the "old" tax regulations has to be accounted for by taxpayers in returns by Tuesday.
Kautter also told the Senate Finance Committee that the new tax law "requires extensive work by the IRS this year and next." The paperwork alone is immense: about 450 forms and instructions will have to be amended.
Information for this article was contributed by Marcy Gordon of The Associated Press.
Business on 04/13/2018