Supreme Court Rules in Favor of Online Sales Tax Collection; Indiana Poised to See Millions in New Revenue

The U.S. Supreme Court decision issued yesterday in South Dakota v. Wayfair has been awaited by many brick-and-mortar retailers and state budget-makers for over 25 years. In a nutshell, the Supreme Court’s decision (5-4) will permit states to move forward with sales tax collection from online retailers.

The Court overturned the Quill v. North Dakota decision (and Bellas Hess on which Quill was based) dealing with sales tax on mail orders – dating back to 1992, well before the internet boom. The Court found those old decisions to be “unsound and incorrect” and deemed them to be “an extraordinary imposition by the judiciary on states’ authority to collect taxes and perform critical public functions.” The old cases found that requiring the collection of sales tax, when the seller has no physical presence in the state, an undue burden on interstate commerce – a constitutional issue. The “physical presence” test effectively prohibited states from requiring an out-of-state business to collect sales tax from its customers. But now the Court has stated that it “can no longer support the prohibition of a valid exercise of states’ sovereign power”. To put it simply, times have changed. There is readily available software that online retailers can utilize to set up the sales tax collection; it’s no longer a big deal. Separately, the online retail market has become so huge in the last two-plus decades as consumer shopping preferences have shifted; that’s made it all the more imperative that the segment be on a level playing field tax-wise with brick-and-mortar stores.

The Court also addressed the widely-held notion that this issue needed to be resolved by Congress. The Court responded to that saying, “It is inconsistent with this Court’s proper role to ask Congress to address a false constitutional premise of this Court’s own creation.”  In other words, the Court created this dilemma, if you will, with the Quill case and determined it needed to be the one to then provide a remedy.

The new ruling essentially upholds the South Dakota statute that allowed the state to require online sellers to collect sales tax if they deliver over $100,000 in goods into the state, or have over 200 separate transactions with customers in the state. (Technically, the case was remanded to the South Dakota Supreme Court to issue a new determination without the Quill case serving as a controlling precedent.) The Court found that the requirement under other precedent – that the seller have legal nexus in the state – was clearly met by the sales thresholds of the South Dakota Act.

The Indiana Chamber has been a long-time advocate for online sales tax collection; it is one of the key goals in our Indiana Vision 2025 plan. State lawmakers, led by former Sen. Luke Kenley, were also attuned to these issues and quite wisely enacted legislation in 2017 that was modeled after the South Dakota statute. In fact, our law is essentially identical. This means that with a law that the U.S. Supreme Court has now found legally sufficient, Indiana is poised to begin requiring online sellers to collect and remit Indiana sales tax from their Indiana customers. Again, this is directed at those online sellers who meet the $100,000 or 200 transaction thresholds outlined above.

 It is worth mentioning that Hoosiers are already legally obligated to pay the online sales tax when they file their state income tax returns, but as a practical matter almost nobody does. Uncollected sales tax from online transactions has resulted in substantial loss of revenue to states, thus increasing the tax burden on those who do pay the taxes they owe. Estimates place the uncollected tax for the state of Indiana at more than $100 million annually, perhaps as high as $200 million. That number has grown exponentially with the popularity of online shopping and is only going to keep rising.

So here’s to the U.S. Supreme Court for rectifying this long-standing problem, leveling the playing field between businesses and placing the sales tax burden evenly.

Much at Stake in U.S. Supreme Court Online Sales Tax Case

Today, the Supreme Court of the United States (SCOTUS) will hear oral arguments in South Dakota v. Wayfair. Wayfair Inc., Overstock.com and another online retailer challenged a South Dakota law that calls for them to collect South Dakota’s sales tax on their sales to South Dakota residents, even though the companies have no physical operations or physical presence in the state.

The online retailers’ position is supported by precedent. Over 50 years ago in National Bellas Hess Inc. v. Department of Revenue of Illinois (1967), SCOTUS found, based on Commerce Clause protections, that Illinois could not require an out-of-state business to collect its sales tax unless the business had a “physical presence” in Illinois.
This “physical presence” test was affirmed in Quill v. North Dakota (1992) when the Court ruled that North Dakota could not require a mail order company to collect its sales tax, again citing the requirement as an unreasonable burden on interstate commerce. But the Court’s opinion seemed to acknowledge that different circumstances could yield different results.

And much has changed since 1992. Most notably, the internet was only in its infancy then and online retailers were unheard of. The application of Quill to a transaction and industry that barely existed when the opinion was issued has generated growing debate over the last 10 to 15 years. Pressure to overturn Quill has steadily grown as internet sales swallow up a larger market share each year, traditional brick-and-mortar retailers see their profits decline, states see their revenues decline and the “burden” associated with collecting the taxes has been steadily lessened by technological advances.

Congress has the authority to legislatively overturn Quill but countervailing political forces have impeded it from remedying the situation. Consequently, states have legislated an array of their own remedies, in the form of imaginative and constitutionally suspect laws. As part of a concerted effort across the country, advocates for overturning Quill began a campaign designed to present a new basis for testing the Quill holding.

It encouraged states to impose laws they knew would be challenged, in order to get a fresh case before the Supreme Court and give them the opportunity to argue Quill’s legal obsolescence. The laws would purport to establish legal nexus based on the level of sales that online businesses conduct in their state. This concept is referred to as “economic nexus”.

In comes South Dakota – the first state to pass legislation imposing the collection requirement based on a defined economic nexus. If an online seller has more than $100,000 in sales or more than 200 separate sales to South Dakota residents, then that retailer must collect the sales tax in those transactions. The South Dakota law served as the model as a few other states passed nearly identical legislation, including Indiana (in 2017). South Dakota fast-tracked the litigation and here we are with a potential landmark case before SCOTUS.

Will Quill be overturned? It seems very possible. First, the Court took the case which could be interpreted as a recognition that the issue needs to be revisited. Second, three justices have questioned the application of the Quill case. And many stakeholders have presented legal arguments to support and encourage the Court to reach an updated result. Forty amicus curiae (friend-of-the-court) briefs have been filed since the Court decided to hear the case in January.

These include briefs filed on behalf of: various retail business associations, 41 states collectively, the National Governors Association, the National Conference of State Legislatures, the Council of State Governments, the National Association of Counties, the National League of Cities, four U.S. Senators (two Republicans, two Democrats) and the Solicitor General of the United States.

Numerous other organizations filed briefs, including: the Multistate Tax Commission, Streamlined Sales Tax Governing Board and Tax Foundation. One was filed on behalf of “professors of tax law and economics at universities across the United States”. All these can be viewed here. Some taxpayer advocates argued against giving states the authority to require collection. But a majority favor overturning Quill. Typical is the argument of the Solicitor General, stating in its brief:

“In light of internet retailers’ pervasive and continuous virtual presence in the states where their web sites are accessible, the states have ample authority to require those retailers to collect state sales taxes owed by their customers. Quill Corp. v. North Dakota, 504 U.S. 298 (1992), should not be read to bar that result, both because the Quill Court did not and could not anticipate the development of modern e-commerce and because Quill’s analysis was deeply flawed.”

The Tax Foundation, whose brief does not directly support either party, made some important points. It recognizes that the U.S. Constitution’s Commerce Clause prohibits states from unduly burdening or unfairly taxing interstate commerce. But it also recognizes that the current hodge-podge of state laws is untenable. The Tax Foundation maintains that the South Dakota law is constitutional because it minimizes the burden on commerce by adhering to uniform and standard administration. Its brief sums it up saying:

“The Court’s guidance is needed before the states subject interstate commerce to death by a thousand cuts. (And it asks that) the Court reverse the decision of the Court below and uphold the South Dakota statute, but also resolve an almost universal lack of clarity about the proper scope of state sales taxation of out-of-state entities.”

The outcome of this case, 50 years in the making, will have a significant impact on many people. States and local governments care about this case because there is around $20 billion of state tax revenues at stake. (Estimates range from $13 billion to $26 billion and the number will only get larger as time goes by.) Indiana’s share would probably be in the $200 million range, so the state’s budget makers care.

Brick-and mortar retail businesses in Indiana care because they must compete with online retailers and having to charge their customers the 7% Indiana sales tax puts them at a price disadvantage to the online sellers who don’t collect it. Indiana businesses that sell online to customers in other states care because they must comply with the expanding spectrum of varying state laws. Taxpayers should care because they are legally already obligated to pay use tax on their online purchase, whether they presently do or not, and because dwindling/unrealized revenues can spur tax increases elsewhere.

SCOTUS hearings are not broadcast. However, a recording of the oral argument will be made available the Friday following the hearing.

The Court’s decision will be made sometime before the end of June when its current term expires.

Victory! Software-as-a-Service Bill Set to Become Law

This week, the Senate unanimously approved the House changes to Senate Bill 257 (Sales Tax on Software). This bill began as a top Indiana Chamber goal; it was embraced by the administration and made a priority of the Governor, the Senate got it introduced and rolling, then the House took good legislation and made it even better.

The Senate concurrence vote means the bill is on its way to Gov. Holcomb and there will be SaaS (software as a service) tax clarity in Indiana!

This is exactly what the Indiana Chamber has been working toward since last summer and it is good news for the SaaS industry. Senate Bill 257 is a straightforward piece of legislation that can reap very real economic benefits for the state. We thank legislators for listening to our members and taking this important step forward to demonstrate Indiana’s commitment to embracing the growth of the SaaS industry. The legislation puts Indiana in a very favorable position to attract more and more of this burgeoning business to our state.

What the Senate Leadership Changes Mean for the Business Community

The 2018 legislative session marks the first one without fiscal stalwarts Brandt Hershman and Luke Kenley, both of whom retired from the Senate – Hershman’s announcement coming just before Christmas. While it’s hard to replace such experience and wisdom, those stepping up to fill their shoes have been waiting in the wings for a while and should make for smooth transitions.

Back in mid-July, Sen. Ryan Mishler (R-Bremen) was tapped to succeed Kenley as the chairman of the Senate Appropriations Committee, which is tasked with that chamber’s budget-writing duties. Mishler was the ranking member of that group for years and worked on the school funding formula component of the budget.

Senator Travis Holdman (R-Markle), who takes over for Hershman as chair of the Senate Tax and Fiscal Policy Committee, has been the long-time ranking member there and often assumed the chairman’s role during meetings. Holdman is well versed in the matters that come before the committee and the business community will continue to be well served by his thoughtful viewpoints.

To take that post, Holdman relinquished his leadership on the Senate Insurance and Financial Institutions Committee. The “next man up” there is Sen. Chip Perfect (R-Lawrenceburg), who is a no-nonsense and intelligent legislator. He has been extremely helpful on labor issues and owns several businesses himself, so he knows the difficulties that businesses face. That perspective will likely also factor into how he handles the health insurance bills, which are now being assigned to his committee.

Short Session Starts With a Flurry of Activity

The Governor and General Assembly have continually heard from Hoosier employers on the need for a skilled workforce – and better aligning state programs with job demand. The good news is bills are being introduced to address those concerns. While only a handful of measures have been released to date, we are seeing legislation related to training tax credits and grants, as well as efforts to streamline current workforce programs. We anticipate a comprehensive workforce bill (1002) will be introduced in the House later next week.

The Governor’s computer science bill (SB 172) requires all public schools to offer a one-semester elective computer science course at least once each school year to high school students. We expect a hearing on this measure in the next two weeks. Both this and the workforce efforts are 2018 Indiana Chamber legislative priorities.

Senate Bill 257 has been introduced by Sen. Travis Holdman (R-Markle) to serve as the beginning of discussions on clarifying the exempt status of computer software sold as a service (SaaS) – a Chamber priority. Holdman is also authoring another major piece of tax legislation, SB 242, which contains a variety of tax matters. The House bills are coming in too, with a good number already filed addressing local tax issues.

Speaking of local matters, the Chamber is very pleased to see that the House Republican agenda includes a bill that will make township government more effective and efficient by the merging of townships (approximately 300) where less than 1,200 people reside. Such local government reform has been a longstanding Chamber goal.

In addition to SB 257, other technology-related bills include Rep. Ed Soliday’s (R-Valparaiso) autonomous vehicle (AV) proposal to position Indiana to safely test and implement AV technology with automobiles. The bill also will address truck platooning, which uses GPS and WiFi technology to allow trucks to more closely follow each other for greater efficiency, on Indiana roads.

Rural broadband, high-speed internet and small cell wireless structures technology all will be topics for the Legislature to debate. Certified technology parks also will be discussed with the idea to have an additional capture of sales and income tax revenue for those complexes that perform well.

In health care, enabling employers to ask prospective employees if they are smokers not only heads the Chamber’s wish list but also appears to be gaining traction this go-round. Eliminating the special protections (currently in state statute) for smokers is found in SB 23 and will be guided by Sen. Liz Brown (R-Fort Wayne). The bill has a pretty good chance of getting a hearing in the Senate – which would be a first. Previously, a measure was taken up in a joint hearing in the House.

Increasing the tobacco tax and raising the legal age for smokers to 21 are policies that likely will be included in a bill to be introduced by Rep. Charlie Brown (D-Gary). The Indiana Chamber is supportive of both.

Nine utility-related bills are on our radar screen at this point. They range from tweaks of last year’s big legislation (like SB 309, which addressed rising energy costs and a long-standing struggle between the investor-owned electric utilities and larger consumers of energy) to compulsory sewer connection, excavation for infrastructure, regulation of solar energy systems in homeowners’ associations and new water legislation. Separately, Sen. David Niezgodski (D-South Bend) has a proposed ban on coal tar pavement sealer, which we oppose.

There are also a number of bills proposing changes to Indiana’s alcohol laws including: Sunday sales, cold beer sales by grocery and convenience stores, and increases in fees and penalties.

The Chamber will be providing more details on all of these bills as the session progresses.

For anyone who wants a refresher about how legislation becomes law, the Chamber has a handy guide free of charge. It includes a diagram of the bill process, a glossary of often-used terms and a look at where bills commonly get tripped up.

Additionally, the Chamber will be providing updates and issuing pertinent documents throughout the session at www.indianachamber.com/legislative.

Chamber Talks Workforce Needs, Impact of Opioid Addiction as 2018 Legislative Session Begins

As the 2018 General Assembly gets underway, the Indiana Chamber is highlighting three big issues expected to be debated in the coming days and weeks: workforce needs, the opioid crisis and smoking rates.

Indiana Chamber President and CEO Kevin Brinegar says, “We’ve done so well recently from an employment standpoint that we’ve almost outstripped our ability to hire skilled workers since unemployment is so low in the state.

“It’s clear we need to raise up the skills of those who are here, but the Indiana Chamber is also suggesting that perhaps we need to pursue a parallel strategy of recruiting people from out of state. Talent is more mobile than ever before and once people gethere, they really appreciate our cost of living.”

But make no mistake, Brinegar stresses, the state’s priority should be on the potential talent pool at home. That means some major changes will need to occur – ones that hopefully start in the new legislative session.
“What we’ve been doing wrong is saying, ‘Here is our program, you come use it and we hope that it will solve your needs.’ Instead, there should be a conscious effort to truly listen to employers and then develop training programs that are demand-driven to what the needs of the marketplace are now.”

Many of those jobs today and down the road are in the middle skills area – skills that require more than a high school diploma but less than a four-year bachelor’s degree. Brinegar states this should be a focus for both Hoosier workers who need to improve their skillset and young students.

“We know from our member companies that they are reaching down to high schools and even middle schools to explore with students what job opportunities there are with their companies, what skills they need to have, what classes they need to take in high school to be eligible to take those jobs. It’s becoming a lot more focused on getting people ready with some specificity for jobs after high school.

“There will always be the need for a number of jobs requiring a four-year degree or more, but the real growth is in show me what you know, show me what you can do, show me what machinery you can operate. That’s the mindset we need to have to transform some of these government silos … along with listening to employers and creating programs that communicate to young people what those job needs are.”

Additionally, the Indiana Chamber is partnering with the Governor’s office and the state’s drug czar, Jim McClelland, to be the source for the business component of the state’s plan to combat the opioid crisis.

“We will be researching on best practices, disseminating information to employers and putting on training programs. I’ve told the Governor’s office that we want to be part of the effort and part of the solution. It’s a big problem and it’s not going to be solved overnight, but this has become an employer problem in addition to a personal and societal problem,” Brinegar offers.

“We’ve rapidly gotten to the point to where employers almost can’t fire somebody for failing a drug test because there isn’t the depth in the workforce to tap into for new workers. Employers are looking for guidance. They want more information on what they can do, how they can train supervisors to recognize signs and know where the effective treatment programs are.”

The Indiana Chamber, a founding member of the Alliance for a Healthier Indiana, would like the same urgency placed on reducing the state’s smoking rates.

“There are 10 times more people dying from smoking-related illnesses every year than opioids. And it’s the most preventable source of disease,” Brinegar notes.

“We need to improve our health metrics, including obesity, which are in the bottom third of the states. I rarely accept average for anything, but if Indiana rose to be just average when it comes to smoking, that would significantly curb health issues and save those individuals and businesses a lot of money on insurance coverage and health care costs.”

Indiana’s current smoking rate is at 21% of the population; the national average is 15%.

Enhanced workforce efforts and reducing the state’s smoking rates are among the Indiana Chamber’s Top 9 legislative priorities for 2018. The full list is available at www.indianachamber.com/priorities.

Walorski Pushes for New Repeal of Medical Device Tax; Messer’s Reverse Transfer Concept Amended Into Reauthorization Bill

Congresswoman Jackie Walorski (IN-02) has brought forth legislation to suspend the medical device tax for five years. She joined Rep. Erik Paulsen (R-MN) in co-authoring the bill, H.R. 4617, which would delay the implementation of the 2.3% tax that was originally created through the Affordable Care Act. In 2017, Congress delayed the tax for two years, but without intervention it is set to take effect January 1, 2018.

“The job-killing medical device tax would have a devastating impact on Hoosier workers and patients across the country who depend on life-saving medical innovation,” Walorski said. “I am committed to permanently ending this burdensome tax. As we continue working toward repeal, we must protect workers and patients by preventing it from taking effect.”

Congressman Luke Messer (IN-06) and Congresswoman Jackie Walorski (IN-02)

Walorski’s bill was part of a group of legislation introduced by members of the House Ways and Means Committee aimed at stopping Obamacare taxes set to take effect in 2018. The other four measures are:

• H.R. 4618, introduced by Rep. Lynn Jenkins (R-KS), provides relief for two years from the tax on over-the-counter medications, expanding access and reducing health care costs by once again allowing for reimbursement under consumer-directed accounts;
• H.R. 4620, introduced by Rep. Kristi Noem (R-SD), provides relief in 2018 from the Health Insurance Tax (HIT) that drives up health care costs;
• H.R. 4619, introduced by Rep. Carlos Curbelo (R-FL), provides needed relief from HIT for two years for health care plans regulated by Puerto Rico; and
• H.R. 4616, introduced by Reps. Devin Nunes (R-CA) and Mike Kelly (R-PA), delivers three years of retroactive relief and one year of prospective relief from the harmful employer mandate paired with a one-year delay of the Cadillac tax.

Earlier this year, Congressman Luke Messer (IN-06) introduced legislation that encourages a more seamless transition for community college transfer students earning degrees. Messer’s proposal would make it easier for students to earn a degree through a “reverse transfer,” where students who transferred from a community college to a four-year-institution but haven’t completed a bachelor’s degree can apply those additional credits back toward an associate’s degree.

Originally titled the Reverse Transfer Efficiency Act of 2017, it was recently added as an amendment to the Higher Education Re-authorization by the House Committee on Education and Workforce. The provision would streamline credit sharing between community colleges and four-year institutions so transfer students can be notified when they become eligible to receive an associate’s degree through a reverse transfer.

“An associate’s degree can make a huge difference for working Hoosiers,” Messer said. “By making it easier for transfer students to combine credits and get a degree they’ve earned, Hoosiers will have more opportunities to get good-paying jobs and succeed in today’s workforce.” This legislation was supported not only by the Indiana Chamber, but also by Ivy Tech Community College and the Indiana Commission for Higher Education.

Many Business Provisions Still Being Reconciled in Federal Tax Reform

We’re almost there. Tax reform has passed both the House and Senate. It now seems very possible that the President will have a bill to sign by Christmas. As some have described: All they need to do now is “sand the rough edges”. But another saying is equally applicable to the business tax components: “The devil is in the details”. Specifically, details directly relating to the taxation of both C-corporations and pass-through entities. Terms that will impact those who do business here and those who do business around the globe. In other words, details that will significantly affect big businesses, small businesses and everybody in between.

The process for reconciling the two versions of tax reform is already underway as the House and Senate name members to the conference committee that will determine exactly what will be in the package before it is voted on one last time. Indications are that majority leaders want to have a committee report for their respective bodies to act on by the end of next week. So while the details still have to be worked out, both bodies are very engaged and they’ve passed legislation that defines the general parameters.

There will continue to be debate, in public and in private, over the deficit, how much growth tax reform will generate, who benefits and who doesn’t, but the House and Senate are effectively committed to getting something done at this point. On the individual income tax side, they will need to find agreement regarding the limits on the deductibility of state and local taxes (SALT), as well as mortgage interest. These items are important to individuals, important to the numbers and important politically. But the two sides really aren’t that far apart. A $10,000 SALT deduction of some kind and a healthy mortgage interest deduction will almost certainly remain in the final product.

But where they land on many items critical to business is harder to predict; a lot is up in the air. Let’s start with the corporate rate itself. While both plans call for a 20% rate, the President hinted it could still change slightly. That appears unlikely, however, but the rate is tied closely to the fiscal projections. And the fiscal projections are why the Senate delayed the effective date for corporate rate change to 2019, to reduce the cost of the bill. So when exactly the change goes into effect is at issue.

Similarly, the taxation of pass-through income is also unsettled. The House limits the pass-through rate at 25%. The Senate approach was to give a deduction to pass-throughs to keep their tax down. Effectively, the different approaches would not have drastically different bottom line impacts for most pass-through income recipients. The real complications come via provisions directed at guarding against individuals in higher brackets from categorizing personal income as business/pass-through income.

What about the issues of interest to multinationals who conduct huge volumes of business activity around the globe? The House and Senate agree that the U.S. must move to a territorial system and companies shouldn’t be taxed here on income they earn overseas. But beyond that basic principle, how multinationals and their foreign-sourced income is handled is anything but clear right now. Both the House and Senate have included forms of supplemental taxes intended to prevent their perception of “base erosion” and to discourage what they view as corporations “gaming the system”.

Likewise, they are still working through how best to address the repatriation of foreign-earned profits and are looking at special, one-time tax provisions to encourage companies to bring those assets back to the U.S.  Another item important to many businesses of all types and sizes is how quickly, to what extent and for how long will they be able to claim deductions for capital expenditures/investments. Two final differences to note: (1) The Senate preserves the corporate alternative minimum tax; the House repeals it; (2) the House and Senate versions both limit the interest expense deduction, but in materially different ways. (A good summary of all the differences can be found in this report from the Tax Foundation.)

Of course, there are many, many other pending issues wrapped up in this legislation for the tax folks in Washington to resolve in short order. They include the health care mandate, estate tax, exemptions for educational institutions and nonprofits, and the list goes on. Tax reform appears close. Let’s hope good solutions are close too.

Some Puzzling State Revenue Numbers

The Indiana State Budget Agency recently released the revenue collections report for October. The overall collections for the fiscal year now stand 2.8% ($136 million) below projections; not good, but not critical at this juncture.

The troubling numbers for the revenue watchers are the corporate tax collections. They were down again this month and are now at 52% below the April revenue forecast projections. Nobody really knows how to fully explain the drop. While the corporate collections historically fluctuate widely from month to month and are the hardest to predict for many reasons (that are not directly related to predictable economic activity), the gap between projections and collection is extraordinary. Fortunately, corporate collections have never represented a big piece of the pie (only around 6%) when compared to sales (48%) and individual income (36%) tax collections. Still, the unforeseen drop accounts for $126 million of the $136-million-dollar shortfall.

The State Budget Agency has drilled down on the matter and is attributing it to a high volume of refunds. But what is triggering the refunds is not clear either. Sometimes refunds can cover a number of years. They could be tied to a recent settlement of numerous cases or result from changes in the law – lots of possible factors. Whatever they are attributable to, they probably don’t mean that corporate collections will stay down; they are likely to rebound over the balance of the fiscal year and smooth out the impact, but they are not likely to recover to the total of the original projections. Let’s hope this is just a temporary mysterious dip that is evened out over time.

For those interested, you can review all the numbers and commentary from the State Budget Agency.

House and Senate Get Started on Tax Reform; Where Does Donnelly Stand?

Late last week, the House Ways and Means Committee concluded its markup of the GOP tax reform bill (the Tax Cuts and Jobs Act) and voted along party lines to move the measure, 24-16. The core of the House bill reduces the number of individual tax rates, slashes the corporate tax rate and eliminates many deductions and credits.

The bill now will be taken up by the full House of Representatives for debate and vote – likely before the Thanksgiving recess. What are some sensitive issues being discussed in the tax reform bill? Pass-throughs, adoption tax credits, deductibility of state and local taxes (SALT), excise tax and more.

The GOP can only lose 22 votes in the House and whip counts are being held very close to the vest – only five or six Republicans have publicly stated that they are against the bill in the current form (all due to SALT).

Meanwhile, the Senate decided on Thursday to release its own tax reform plan. From the business perspective, the differences largely are about adjusting the dollar dials and creating negotiation items. In other words, politics. The Senate option does delay some positive economic effects, but if that’s what it takes to get a permanent tax reduction in the books so be it! We do want to point out that there are some notable differences between the two versions, particularly on the individual side – including with the estate tax and mortgage deduction, which, again, serve to set up further negotiations.

Senator Todd Young welcomed the effort from the Senate Finance Committee.

“I’m encouraged by the Senate’s proposal to create a tax code that is simpler, fairer and allows hardworking Hoosiers to keep more of what they earn. I’m also glad that this proposal maintains the adoption tax credit that is important to so many Indiana families. As we continue to debate a final tax relief package, I will keep working to ensure Hoosier voices are heard.”

Meanwhile, Sen. Joe Donnelly, didn’t give away his stance: “As I have said, tax reform should create jobs, protect jobs, invest in American workers and benefit middle class families. I will carefully review the Senate proposal and continue to engage with my colleagues and the White House on behalf of Hoosiers as the Senate works on tax reform.”

Donnelly also met on Thursday with the White House Director of the National Economic Council Gary Cohn to discuss his tax reform priorities. Earlier last week, Donnelly participated in another such meeting with White House Director of Legislative Affairs Marc Short and Cohn. President Donald Trump called in for a portion of the event. In that meeting, Donnelly discussed his tax reform priorities and shared a letter that he also sent to Vice President Mike Pence on Tuesday emphasizing that the tax policies should align with the interests of American workers and support companies that invest in the U.S.

Donnelly’s priorities are consistent with his End Outsourcing Act, which would support companies that invest in American workers and penalize companies that ship American jobs to foreign countries.

The Hill reported late last week that “Blue Dog Democrats are lining up in firm opposition to the Republicans’ tax code overhaul, hoping that Tuesday’s election results (particularly in Virginia) will force GOP leaders to reach across the aisle for a bipartisan alternative.”

Donnelly, a Blue Dog Democrat, has not said anything of the kind publicly and has been heavily courted by the Trump administration for his vote.