By Business & Finance 
With a number of favourable provisions from the 2017 Tax Cuts & Jobs Act due to expire at the close of 2025, how can foreign-based companies ensure U.S. policy makers have enough information about them to positively inform key decisions?
Michael DiRoma, Managing Partner at DiRoma Eck & Co. LLP, a Washington Advisory, explores the dilemma facing companies.
The ups and (mostly) downs of U.S. legislative politics never cease to amaze: What can be a treacherous, unnerving process can also be exhilarating the moment your prized bill is signed into law by the President. But if my work in U.S. government relations has taught me anything, it’s that incremental fits and starts can actually be beneficial to those trying to influence the outcome. More time to educate policymakers in both the Congress and the Executive Branch is a net positive for all involved.
Having served as Tax Counsel to a senior moderate Senator and then as Deputy Assistant Secretary of the Treasury for Legislative Affairs, it is my sincere belief that reasonable outcomes are generally desirable and are, in fact, the most likely to occur. More data, more anecdotes, more government relations, from industry remain quite essential to the legislative process in Washington.
Sitting in the legislative staffer’s seat, the perspectives of your boss’s constituents back home (whether it’s Maine or California) are ever-present, and rightly so. It’s also relatively easy to catch a glimpse of the preferences and needs of the wider U.S. population as analyses trickle out of various federal governmental agencies or as stories are reported by national media. But finding enough information, or enough time, when it comes to deciphering the desires of foreign-based organizations is not always so simple. Making things more difficult is the fact that those foreign entities obviously don’t have political representatives in Washington. Non-domestic priorities, especially those that affect revenue to be collected by the U.S. Treasury, are often overshadowed by issues that hit closer to home.
While it may not seem fortunate in the short-term, the major tax bill currently, and unexpectedly, making its way through Congress (H.R. 7024) represents a perfect example of this phenomenon. Companies around the United States made clear the negative effects of the cascading expirations of highly valued provisions from 2017’s Tax Cuts & Jobs Act (TCJA).
One such expiring provision, immediate expensing for research and development, provides a real enticement for businesses to innovate rapidly (and has actually done so successfully for decades). Without new legislation, taxpayers must now amortize such expenses. Senate Finance Committee Chairman Ron Wyden (D-Oregon) and House Ways and Means Committee Chairman Jason Smith (R-Missouri) spent months negotiating with each other (and the business community) a tax package that would return these favourable approaches to the tax code in exchange for expanded access to the child tax credit. Left out of the deal? Most foreign companies with U.S. ties that invest resources back home in research and development.
This is certainly distressing, but it portends something even worse for the future: many more favourable TCJA provisions will begin to expire at the close of 2025. What is going to motivate Congress to act any differently toward foreign companies? More outreach, more data, more clarity as to local impact in congressional districts across the United States. Taking early affirmative steps to connect with policymakers who will be making these decisions will no doubt pay off. Investing time this year and next to ensure that they understand the connection between Irish companies and American jobs and investment will go far. And in this age of Zoom and Washington flexibility, adjusting one’s schedule to U.S. Eastern time should be the only hindrance that remains.
About the author: Michael DiRoma is a Managing Partner of DiRoma Eck & Co. LLP, a Washington advisory firm. He served as Tax Counsel to Senator Susan M. Collins of Maine, who is now the Vice Chair of the Senate Committee on Appropriations, during the successful passage of the Tax Cuts & Jobs Act of 2017. Michael also served as Deputy Assistant Secretary of the U.S. Treasury Department, overseeing the International Affairs portfolio in the Office of Legislative Affairs. He received an LL.M. in Taxation, with distinction, from Georgetown University Law Center, a J.D. from the University of San Diego School of Law, and a B.A. in Political Science from the University of California, San Diego.
