Trade Act of 2015

Floor Speech

Mr. President, before we move to a vote on the Bipartisan Budget Act of 2015, I want to take a moment to discuss the part of the bill that is intended to be an offset for partially lifting the budget caps established under the Budget Control Act.

Under current law, large partnerships are subject to a special set of tax procedural rules. They are known as the TEFRA partnership rules because they were included in the Tax Equity and Fiscal Responsibility Act of 1982.

These rules are complex and unwieldly for both the taxpayers and the Internal Revenue Service. Most tax experts agree that these rules are in bad need of reform. I agree.

The Treasury Department, former House Ways and Means Committee Chairman Dave Camp, and Congressman Jim Renacci have all put forward reforms of the TEFRA partnership rules. And, on the Senate Finance Committee, we have been looking at those reforms and other proposals as well. We have also held discussions with the Ways and Means Committee, as well as tax professionals and members of the business community. These efforts, so far, have been bipartisan.

Because any such reforms would have a significant impact on a large number of taxpayers, we were prepared to tackle this problem the same way the Finance Committee has dealt with other widely applicable tax compliance measures. Specifically, we had planned to release various discussion drafts that would be open for public comment and subsequent modification. That is the way the Finance Committee handled issues like stock basis reporting and merchant credit card reporting, and the process has worked well in the past.
However, as these efforts were ongoing, bipartisan leaders from both the House and Senate identified TEFRA partnership reforms as a potential offset for this budget legislation. As per usual, the Finance Committee was consulted, and we provided assistance in drafting the offset language. I am pleased to say that many of our recommendations were adopted in the final version of the bill.

However, for those who might be concerned about this process, it is important to note that the effective date for the TEFRA partnership reforms in the budget bill is delayed for 2 tax years. In the coming weeks and months, the Finance Committee will treat the TEFRA partnership reforms as a work in process. As planned, we intend to hear comments and will be prepared to address issues raised by taxpayers, especially those issues that may not have been anticipated.

As an example, we have heard from stakeholders who were concerned that particular partner-level tax attributes that may be known by a partnership, such as certain passive losses under tax code section 469, should be identified in the legislation for purposes of modifying the so-called imputed underpayment amount with respect to the partnership.

In sum, I want the record to be clear: The TEFRA partnership reforms are not effective for a couple of years. We plan to use that window to properly address problems raised by affected parties.

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