Congress will often enact legislation with negative unintended consequences that cause problems for taxpayers. Less reported, however, are technical mistakes in drafting legislation that cause administrators to have to enforce laws in ways actively contrary to the intent of Congress. A recently-released discussion draft developed by the House Committee on Ways and Means in conjunction with the Committee on Taxation and the Department of the Treasury will address some of these technical corrections. The Tax Technical and Clerical Corrections Act would fix several errors in the language of recent laws - mostly in the Tax Cuts and Jobs Act. Outgoing Ways and Means Chairman Kevin Brady noted that draft is intended "to give stakeholders an opportunity to provide feedback on the provisions included in the draft and on potential additional technical corrections that should be considered."
Technical corrections in this package include:
- One amendment to a provision in the Consolidated Appropriations Act of 2018 clarifying that specified agricultural businesses cannot have zero tax liability.
- One amendment to a provision in the Bipartisan Budget Act of 2018 removing certain unintended requirements for a person to qualify as the owner of carbon capture equipment.
- Thirty-eight amendments to provisions in the Tax Cuts and Jobs Act, including:
- Solving the “retail glitch,” where the omission of a cost recovery period for investments to building improvements for retailers and restaurants meant that the recovery period defaulted to 39 years and is ineligible for full expensing.
- Multiple fixes to tax treatment of offshore income, including global intangible low-taxed income (GILTI) and multinationals.
- Clarifying the applicability of Net Operating Loss (NOL) deductions to businesses whose taxable years do not align with the calendar year.
- One amendment to the Working Families Tax Relief Act of 2004 clarifying that the time for determining a child’s age is at the end of the calendar year when determining eligibility for the child tax credit.
Glitches such as these in major legislation are a common occurrence, and it is a positive sign to see an effort to address them. Hopefully the 116th Congress will move these needed corrections across the finish line to prevent recent legislation from deviating from their intended purposes. While these corrections may seem minor to some, the unintended consequences of drafting errors can have an enormous impact on affected businesses and individuals. It’s extremely important for Congress to fix these problems.