Publish Date

Feb 09, 2021

Cracks in the Crystal Ball: TCJA and Other Tax Law Changes to Watch Out For

A&M Tax Advisor Weekly

While every new year brings new opportunities and possibilities, during the first six weeks of 2021 we have already seen a seismic shift in the political (and tax law) landscape. With the Democratic Party winning unified control of Congress and the White House for the first time in 12 years, taxpayers can safely expect major tax law changes are coming. However, how imminent the tax changes are, whether they will include tax increases, and how many revenue measures Congress will consider in the next two years (and under what procedures) are all open questions right now.

Due to the uncertainty surrounding the immediate future, we thought it would be helpful to highlight the changes we know are coming this year and next, as well as to consider how additional changes might come to fruition and what preemptive steps taxpayers can take to mitigate the risk of any upcoming tax increases.

Specifically, this alert covers the following topics:

In this ever-changing tax environment effective and efficient tax planning requires taxpayers to stay abreast of current political and legislative developments. Fortunately for you, this task is made easier with the help of your trusted A&M advisor, who can provide you with the latest insights and assist you with your decisions.

Pre-Inauguration TCJA Regulations

Before leaving office, the Trump Administration worked feverishly to complete nearly all regulatory projects under TCJA provisions that have already taken effect. However, now that the Democrats have control of both houses of Congress and the White House, they could use the Congressional Review Act (CRA) to review many of these regulations. The CRA gives Congress 60 working days, keyed to the lesser of House legislative days or Senate session days, to overturn major regulations through a joint resolution of disapproval, signed by the President. Major regulations are regulations that have an annual effect of $100 million or more on the economy. When a CRA joint resolution of disapproval is enacted, it has the effect of not only striking the regulation in its entirety, but also preventing the federal agency from issuing a substantially similar regulation in the future.

While it is notable that a CRA resolution has never been used to nullify a tax rule, likely owing to the prohibition on reissuance of substantially similar rules, given the flurry of activity coming out of Treasury the past few months, the CRA could have significant implications for a number of recently finalized tax regulations.

A&M Insight: Senate Democrats have not yet discussed using the CRA to overturn TCJA, or other tax, regulations. But the Democrats’ broader approach will be guided by floor-time constraints, post-COVID tax plans, and the bluntness of the CRA instrument itself. Given their ambitious legislative agenda, it is unlikely that Democratic leaders will want to burn working days repealing regulations implementing tax statutes that could themselves be modified or repealed shortly – or, for provisions unlikely to be repealed, whether they want to throw the baby out with the bath water by tying Treasury’s hands with respect to issuing revised regulations.

Expiring TCJA Provisions

Democrats have made clear that they intend to undertake their own version of tax reform. However, what Democratic tax reform will consist of, and to what extent it will entail repeal of the Trump Administration’s signature piece of tax legislation, the TCJA, remains to be seen. Regardless of whether Democrats choose to repeal all or parts of the TCJA, if no other action is taken, a number of key TCJA provisions will take effect or expire over the next few years.