More On Legal & Compliancefrom The Advisor's Professional Library
- Conducting Due Diligence of Sub-Advisors and Third-Party Advisors Engaging in due-diligence of sub-advisors isnt just a recommended best practice it is part of the fiduciary obligation to a client. An RIA should be extremely reluctant to enter a relationship with a sub-advisor who claims the firms strategy is proprietary.
- Scope of the Fiduciary Duty Owed by Investment Advisors A fiduciary obligation goes beyond the suitability standard typically owed by registered representatives of broker-dealer firms to clients. The relationship is built on the premise that the advisor will always do the right thing for the person or entity receiving advice.
As both the Senate Finance and House Ways and Means committees announced late last week that they had begun their “high-profile” efforts to reform the tax code—with meetings and hearings scheduled this week—the House and Senate plan to finish work this week on a continuing resolution (CR) to fund the government for the rest of the fiscal year.
Senate Finance Committee Chairman Max Baucus, D-Mont., and Orrin Hatch, R-Utah, ranking member on the committee, plan to release discussion papers to be used during bipartisan meetings on tax reform issues. The first meeting, scheduled for Thursday, will focus on simplifying the tax code for families. Other meetings will cover an array of issues, including examining the tax treatment of small businesses and corporate investment; families and children; education expenditures; different types of income and tax structures; international taxation; and charitable giving and tax-exempt organizations.
The committee said in a statement that the end goal was “a comprehensive tax reform plan—crafted through regular order with input from all members of the committee—that will help businesses create jobs, simplify the system for families and give the nation a long-term economic boost.”
The House Committee on Ways and Means held a hearing Tuesday on how tax reform and tax provisions affect state and local governments.
During his opening remarks at the hearing, Rep. Dave Camp, R-Mich., chairman of the committee, said that “we are not writing a tax reform bill in some ivory tower. Changes to the tax code will have a real impact on state and local economies, and the committee needs to hear directly from these stakeholders before considering any proposals as part of comprehensive tax reform.”
In addition to the Tuesday hearing, Camp said the committee’s 11 separate working groups would “serve as a way to gather information from these stakeholders about how current tax law affects them.” These reports, Camp said, “will be important to have as we begin to explore what changes, if any, should be considered.”
Camp pointed to several items in the tax code that directly affect state and local governments, with the most significant and widely known provisions including:
- The exclusion of state and local governmental income from federal income tax;
- The itemized deduction for state and local income, property and sales taxes;
- Various benefits for state and local bonds; and
- Special rules for state and local government employee pensions and benefits.
No Agreement Yet on CR
As to funding the government, with the March 27 deadline looming, lawmakers are set to finish work this week on a continuing resolution before breaking for a two-week spring recess.
On Monday, Senate Majority Leader Harry Reid, D-Nev., said lawmakers had recessed for the weekend so negotiators could attempt to reach an agreement on a list of amendments to consider Monday. Reid said that the bill managers, Appropriations Committee Chairwoman Barbara Mikulski, D-Md., and ranking member Richard Shelby, R-Ala., had “made good progress over the weekend,” but that they had not yet reached an agreement.
Joe Lieber of Washington Analysis notes in his Washington This Week newsletter that “all indications suggest that Reid spent the weekend working with other members to make whatever passes the upper chamber as palatable as possible for House Republicans, thereby minimizing the amount of bicameral work that needs to be done prior to the recess."
Reid went on to say in his Monday statement that “it is in the interest of all senators that we move forward quickly with this important legislation.” The House, he said, “awaits our action. There is a great deal to do this week on the other side of the Capitol as well. Also, the more time the Senate spends on the continuing resolution, the less time we will have later this week to vote on amendments to the budget resolution.”
Senate ‘Will Pass a Budget This Week’
Reid went on to note that the budget resolution “cannot be filibustered. But it is allowed up to 50 hours of debate. And we must reserve time this week to consider a number of amendments to the budget.”
Said Reid: “This will be a very full week. Senators should expect several long nights and late votes. And we will stay as long as it takes to complete work on both the continuing resolution and the budget resolution—even if that means working into the weekend and the Easter/Passover recess.”
On Tuesday, Reid said that the Senate “will pass a budget this week—crafted by the senior senator from Washington, Budget Chairman Patty Murray—that fully replaces the harmful sequester cuts with balanced, responsible deficit reduction.”
That budget, he continued, will create new jobs, repair crumbling roads and bridges, and train workers for high-skill jobs, and be paid for “by eliminating almost $1 trillion worth of loopholes that benefit the wealthiest Americans and the most profitable corporations.”
But in a speech on the Senate floor the same day, Hatch blasted Senate Democrats’ blueprint budget for fiscal year 2014 for failing to address the nation’s unsustainable entitlement programs. "Over the next decade, the federal government will spend a combined total of $22.4 trillion on the Medicare, Medicaid, and Social Security programs," Hatch said. "These programs are the greatest drivers of the nation’s near $17 trillion debt."
Liber notes that while neither chamber “has sought to add any additional funds to offset the sequester in their respective CRs,” he expects the final bill to include “five appropriations measures, which means that those areas covered by the bill—Defense, Homeland Security, Military Construction/Veterans Affairs, Agriculture, Commerce/Justice/Science—will not face indiscriminant [sic], across-the-board cuts, but rather more targeted reductions as prescribed by Congress.”
Unlike past efforts, Lieber said, “we expect this [CR] bill to make its way into law with relative ease, the delay on the Senate side due to a plethora of amendments notwithstanding.”
For more tax stories and advice, check out AdvisorOne’s 20 Days of Tax Planning Advice for 2013 home page.