IRS gets moving on Clinton referral Presented by the Land Trust Alliance

GETTING ELEVATED? Republican concerns about the Clinton Foundation’s tax exemption are heading to the IRS’s exam unit, the agency’s commissioner, John Koskinen, told GOP lawmakers in a letter they disclosed Wednesday.

How big a step that actually is remains to be seen — Koskinen told Rep. Marsha Blackburn (R-Tenn.), who’s been leading the GOP charge on the Clinton Foundation tax exemption, that the Exempt Organizations Examinations program “considers all referrals.”

Still, Blackburn said in a statement that Koskinen’s reply “shows that the inquiry has been elevated” and that “the IRS knows that it can no longer ignore the foundation's activities.” Blackburn and about 60 other GOP lawmakers wrote to the IRS and two other agencies almost two weeks ago, asking them to investigate “significant issues of public corruption” at the Clinton Foundation.

The IRS exam unit will now investigate whether it could reasonably be believed that those allegations may be true. Hillary Clinton’s campaign has called them baseless, and par for the course for House Republicans after their two-year investigation into the 2012 attacks in Benghazi, Libya.

The FBI and the FTC, the other two agencies contacted by the GOP, have yet to respond — though FBI Director James Comey raised a few eyebrows by evading questions at a House hearing about whether the agency had looked into the Clinton Foundation when investigating Clinton’s private email server. More from our Katy O’Donnell: http://politico.pro/2acgeoU

FLASHBACK: No matter what, Blackburn got a more personal response from the IRS than she did last June, when her complaints about the Clinton Foundation’s tax exemption drew a form letter response — unsigned, and addressed to “Sir or Madam.” http://bit.ly/2aaXWzJ

IT’S THURSDAY, EVERYBODY. It’s also the 20th anniversary of the discovery of Kennewick Man, a 9,000-year-old skeleton found in Washington state. (Sorry, hard for us not to think of Brendan Fraser: http://bit.ly/2adjJeQ)

Let us know what’s going on. Email: [email protected], [email protected], [email protected], [email protected]. Twitter: @berniebecker3, @tobyeckert, @brian_faler, @katyodonnell_ , @POLITICOPro and @Morning_Tax.

DON’T GET LARRY SUMMERS STARTED: The former Treasury secretary said America’s inability to invest more heavily in infrastructure was “insanity,” at a POLITICO event at the Democratic convention on Wednesday. Summers said the U.S. should spend upwards of $2 trillion on infrastructure over the next decade, especially given low interest rates. http://politico.pro/2ai5xPs

WHICH BEGS THE QUESTION … : Hadn’t policymakers been pointing to tax reform — and tapping the reservoir of offshore corporate income — as a way to finance infrastructure investments? Well, hope you haven’t been holding your breath. Ben Weyl, our colleague on the Pro Budget and Appropriations team, notes that Summers, Neera Tanden of the Center for American Progress and Alan Krueger, the former chairman of President Barack Obama’s Council of Economic Advisers, all suggested that tax reform wouldn’t be an urgent priority in a Clinton administration. (But they did continue to stress that any tax revamp would have to bring in more revenue for the government.)

IS THAT FINAL? Paul Manafort, a top adviser to Donald Trump, sounded pretty definitive when he told CBS News on Wednesday that the GOP nominee “will not be releasing” his tax returns because they're under audit. Trump, speaking to reporters on Wednesday, reiterated that he’d release his returns when audits were done — though he’s also said that he won’t release previous returns where the audit is already complete, because those years affect the returns currently under audit. Trump also scoffed at the notion he had business ties with Russia, after suspicions that hackers close to Vladimir Putin’s government might have purloined the Democratic National Committee’s emails. Our Toby Eckert with more: http://politico.pro/2avETCV

KAINE THE ATTACK DOG: Sen. Tim Kaine (D-Va.), Clinton’s running mate, suggested on Wednesday that Trump’s efforts to use “every trick” to avoid taxes were a major reason his returns are still hidden. Kaine then charged that Trump’s tax avoidance strategies are helping to keep veterans programs, one of Trump’s favorite topics, short of funding. “Look, by fighting to pay no taxes, who's funding veterans programs? Who's funding veterans services?" Kaine said. http://politi.co/2abrehw

TOMATO, TOMATOE: Tim Kaine, Tom Kean. Yes, it certainly sounded like Trump mixed up Clinton’s No. 2 with a former GOP governor of New Jersey. But what about his statement that Kaine’s first act was to propose a $4 billion tax hike? Not exactly. PolitiFact found that Kaine sought about $4 billion in tax increases over all of his four-year tenure. http://politi.co/2a9O35e

A message from the Land Trust Alliance: Congress: Support conservation; enact S. 170/H.R.1992. The Land Trust Alliance and our 1,000 member land trusts welcome the Senate Finance Committee’s report on abuse of the federal conservation tax incentive. The bipartisan study concluded the egregious, ongoing abuse must end – and makes it clear why Congress must take action now. [Learn More]

BOGGED DOWN: From this side of the pond, it looked as if Margrethe Vestager, the European Union’s antitrust chief, has been mowing through Brussels. (She just levied a record fine last week.) But our POLITICO Europe colleague Nicholas Hirst reports that some of Vestager’s largest investigations — including an inquiry into Apple’s tax setup with Ireland — might end up petering out. In fact, one expert suggested Vestager will have to decide whether to go for broke on cases like the Apple one, or find a compromise.

As for the Apple case: Nicholas suggests that the timeline for a final decision — which has already slipped by more than a year — could end up going past November, to allow the U.S. elections to pass. Another wrinkle for Vestager: U.S. officials have really gone to bat for Apple, so she might be waiting to see how appeals in similar cases shake out. http://politico.pro/2avKUj2

GET READY: Tax Notes reports that the IRS is now requiring any cases dealing with Section 385 of the tax code to be coordinated with the associate chief counsel — a sign, Amy Elliott writes, that the agency is preparing to finalize those earnings stripping rules that have infuriated the business community. Full story here (requires a subscription): http://bit.ly/2ahAGT6

WONK FIGHT: The muni world (i.e., backers of the tax exemption for municipal bond interest) was none too happy with a Tax Foundation study questioning the incentive — and now the foundation is pushing back on the backlash. The short version: The foundation's Scott Greenberg argued that policymakers should consider scaling back the exclusion and perhaps consider shifting to a tax credit, maintaining that the exclusion is inefficient and too generous to the higher-income brackets. Advocates for the tax exemption then blasted the study in the Bond Buyer, taking special issue with the idea that it could lead states and localities to overinvest in infrastructure. (Gold star for this quote: “This is a classic woolly-headed, ivory tower analysis.”) Greenberg’s response: Essentially, if infrastructure investment is a slam-dunk with high benefits and low costs, why have a federal subsidy at all? http://bit.ly/2afbQ5G

INTERNATIONAL UPDATE —

GLAXOSMITHKLINE HEARTS INNOVATION BOX: Pharma giant GlaxoSmithKline is calling Britain’s patent box a big reason that it’s pouring about $363 million into three facilities in the U.K. — a sign, according to one business coalition, that Washington needs to follow London’s lead on an innovation box. “This is further evidence that IP boxes help spur domestic investments from innovative companies,” said Jim Morrell, a spokesman for American Innovation Matters, a coalition that includes Boeing, Cisco and Facebook. But as our Brian Faler noted earlier this week, House Republicans ditched the idea of an innovation box in their recent tax reform framework after taking a deep look at the idea in 2015.

A LABOUR ROW: Owen Smith is challenging Jeremy Corbyn to be leader of the U.K.’s Labour opposition — after serving until recently as a spokesman for Corbyn. The Wall Street Journal has a rundown on Smith’s tax platform: “He would scrap planned cuts in corporation taxes, increase income taxes on higher earners and boost government borrowing to fund infrastructure investment. He said he would introduce a new wealth tax on the investment earnings of the wealthiest 1 percent.” http://on.wsj.com/2a9YlDa

STATE NEWS —

ARE SALES TAX HOLIDAYS GOING OUT OF STYLE? The Tax Foundation notes that 17 states will roll out a sales tax holiday this year, down from a high of 19 states in 2010. (Massachusetts dropped theirs just this year.)

There’s agreement across the ideological spectrum that sales tax holidays aren’t great policy — the Tax Foundation says holidays don’t spark economic growth, just convince consumers to delay their purchases. Joe Henchman of the Tax Foundation said the group doesn’t know about any legislative efforts afoot in other states to get rid of sales tax holidays. But he noted that most holidays are clustered around the Southeast, so states elsewhere in the Union — Connecticut, Iowa, Maryland, New Mexico — might be most likely to drop their sales tax holidays. Full report from Tax Foundation: http://bit.ly/2arK9qf

QUICK LINKS

— Tim Kaine’s tax experience as Virginia governor might be foreshadowing for a Clinton presidency. http://tpc.io/2az3ncW

— Latest from the Panama Papers: Oil magnate Kolawole Aluko, with ties to stars like Beyonce and Jay-Z, is accused of cheating Nigeria out of a lot of oil revenue. http://bit.ly/2aFuXV5

DID YOU KNOW?

The biblical brothers Cain and Abel appear in the Quran as Kabil and Habil.

Follow us on Twitter Toby Eckert @tobyeckert



Bernie Becker @berniebecker3



Brian Faler @brian_faler



Aaron Lorenzo @aaronelorenzo