US Rep. Richard Neal seeks clarification on GOP tax law's pass-through deduction
Washington, DC,
May 2, 2018
U.S. Rep. Richard Neal, D-Springfield, called on the Trump administration this week to clarify details surrounding the new pass-through deduction included in the Republican-backed tax overhaul law passed last year. Neal, the top Democrat on the tax-writing House Ways and Means Committee, sent letters to Treasury Secretary Steven Mnuchin and Acting Internal Revenue Service Commissioner David Kautter Tuesday asking for clarifying guidance on the deduction, which he argued has caused confusion among taxpayers. Pointing to reports that taxpayers were unsure of their eligibility for the deduction or used it aggressively to minimize tax liabilities, the congressman argued that direction from the Treasury Department and IRS is needed for the law to be correctly implemented. Neal noted that while the tax code generally allows the owners of sole proprietorships, S corporations or partnerships to deduct up to 20 percent of their share of income earned by the business, there are various limitations, exceptions "and poorly defined terms of art that have left taxpayers (and tax advisers) struggling to comply with their tax obligations." "Without computational and definitional guidance to assist taxpayers in determining whether, and to what extent, they may qualify for the pass-through deduction, it is difficult for them to properly calculate their quarterly estimated tax payments," he wrote. "Given the possibility that individuals may have considerably different tax liabilities under the new law, the inability to determine the appropriate estimated tax payment could result in liability for additions to tax and underpayment penalties." Neal further argued that the actual cost of the tax law could surpass estimates if such confusion is not addressed, due to increased attempts to minimize tax liabilities and more disputes between taxpayers and the IRS. The Democrat, who has repeatedly criticized the way in which GOP leaders moved the tax bill through Congress, chastised Republicans for failing to address potential areas of confusion before it was signed into law. "Republicans rushed the tax bill through Congress with little opportunity for public comment or close scrutiny," he wrote. "As a result, taxpayers are left struggling to understand its implications, and opportunities to exploit its ambiguities abound. I urge Treasury and IRS to issue guidance as soon as possible to address these concerns." Neal's letter comes more than a week after the he rejected Republicans' claims regarding the tax law in Democrats' response to President Donald Trump's weekly radio address. The congressman, ahead of delivering the address, raised concerns about the lack of details surrounding the pass-through deduction in an interview with The Republican. He contended that "now people are knocking on the doors again to find out what was in the tax bill and what wasn't in the tax bill because there's still a great deal of confusion as to interpretation" of various provisions, particularly on the corporate side of the tax code. The president signed the $1.5 trillion GOP tax overhaul bill into law in late December, capping his and the Republican-controlled Congress' first major legislative victory of 2017. The bill, which represented the largest change to the American tax code in 30 years, made sweeping adjustments to the individual and corporate tax structure, including: nearly doubling the standard deduction, increasing the child tax credit; and allowing taxpayers to take a property tax deduction in addition to deducting either income or sales taxes up to a total of $10,000. |