1. Art and Diseño

Tax Insights
Pharmaceutical and Life Sciences
What’s the likelihood of tax reform in
the new Congress?
January 28, 2015
In brief
The key question for US tax policymakers is whether 2015 will be marked by compromise or gridlock.
President Barack Obama and Republican leaders in the US House of Representatives and the US Senate
have said they want to work together and have identified tax reform as one of the few priority issues on
which agreement could be possible.
For the President, the next two years are an opportunity to define his second-term legacy. House Speaker
John Boehner (R-OH) and Senate Majority Leader Mitch McConnell (R-KY) have said they want to
demonstrate an ability to govern ahead of the 2016 presidential election. At the same time, differences
between the two political parties may pose challenges for the enactment of significant legislation.
In detail
Following the 2014 midterm
Congressional elections,
President Obama called tax
reform legislation that “closes
loopholes and makes it more
attractive to create jobs in the
United States” as a key issue on
which he hopes to work with the
new Republican-controlled
Congress. House Speaker
Boehner and Senate Majority
Leader McConnell also
identified reform of an “insanely
complex tax code that is driving
jobs overseas” as a priority for
the 114th Congress.
Meanwhile, in December 2014,
Congress passed a one-year
retroactive extension of the
research credit and other
temporary business and
individual tax provisions; thus,
these provisions expired again
on December 31, 2014. If, in
coming months, President
Obama and Congress cannot
reach an agreement on business
tax reform legislation that
would address the expired
provisions, look for Congress
later this year to make a strong
push to make permanent the
research credit and certain other
business and individual tax
provisions that have expired,
along with temporary
extensions of certain other
provisions and possible
elimination of some temporary
provisions.
President Obama outlines
tax policy goals
President Obama on January
20, 2015, used his sixth State of
the Union address to lay out an
agenda focused on ‘middle-class
economics’ and called on
Congress to support proposals
that include ‘lowering the taxes
of working families’ and paying
for those policies by closing tax
‘loopholes’ for corporations and
upper-income individuals.
President Obama noted his
Administration’s proposals for
business tax reform, including
using revenues from reform for
improving US infrastructure
and addressing the needs of
small businesses, but did not
offer new details on his business
tax reform proposals in his State
of the Union address. A
subsequent January 21 address
by Treasury Secretary Jack Lew
also reaffirmed the
Administration’s tax reform
goals that were first outlined in
a 2012 ‘framework’ for business
tax reform without offering new
specific reform proposals.
Additional details on the
Administration’s business tax
reform proposals may be
provided when President
Obama submits his FY 2016
budget to Congress on February
2. The President’s budget also is
expected to provide more details
on new individual tax proposals
recently announced by the
www.pwc.com/pharma
White House. While the
challenges faced by Congress in
enacting tax reform – divided
government and competing
legislative objectives – remain
significant, President Obama
and the Republican-led
Congress continue to identify
tax reform as a common goal.
The takeaway
While many outcomes of tax
reform are possible,
pharmaceutical and life sciences
companies should be prepared
for potential changes in the
corporate tax landscape. With
the new 114th Congress having
just recently begun, it will be
important to stay engaged in the
tax reform discussion as
Congressional leaders endeavor
to make our tax code one that is
globally competitive while
fostering strong economic
growth.
Let’s talk
For more information regarding how the potential for tax reform legislation could affect your business,
please see the PwC 2015 Tax Policy Outlook: Opportunities and challenges ahead and our Insight:
President Obama outlines tax policy goals in State of the Union address.
Pharmaceutical and Life Sciences Tax Leader
Kathy Michael, Florham Park
+1 973 236 4210
[email protected]
© 2015 PricewaterhouseCoopers LLP, a Delaware limited liability partnership. All rights reserved. PwC refers to the United States member firm, and
may sometimes refer to the PwC network. Each member firm is a separate legal entity. Please see www.pwc.com/structure for further details.
SOLICITATION
This content is for general information purposes only, and should not be used as a substitute for consultation with professional advisors.
pwc