Senator Lankford Questions Mnuchin on Cooperation with OIRA on Regulation Review, Seeks Clarity on Opportunity Zones
CLICK HERE to watch Lankford’s full questions of Secretary Mnuchin.
WASHINGTON, DC – Senator James Lankford (R-OK) today attended a Senate Appropriations Committee Subcommittee on Financial Services and General Government (FSGG) hearing regarding fiscal year 2020 funding for the Department of the Treasury.
Lankford questioned Treasury Secretary Steven Mnuchin about Treasury’s work to prevent US dollars from being funneled to international terrorist organizations and drug cartels. Additionally, Lankford asked about the level of cooperation between the Treasury Department and the Office of Information and Regulatory Affairs (OIRA). The new review process began after Lankford sent a letter to former OIRA Administrator Rao in February 2018 to request IRS regulations be subjected to OIRA review. On April 12, 2018, prior to a hearing before Lankford’s Homeland Security Subcommittee, Treasury and the Office of Management and Budget announced their agreement to implement a new IRS regulation review process by OIRA.
Lankford also questioned Mnuchin on the application of federal tax law in federally created Opportunity Zones in Oklahoma, particularly when businesses in those zones conduct business that currently violates federal law.
On OIRA review of IRS regulations (Starts at 02:35)
Lankford: Another area that we brought and came up out of this Committee in some conversation in the past is for the IRS and OIRA and regulatory issues to try to make sure that there was some cooperation between those two. Treasury and OIRA have had a Memorandum of Understanding to try to be able to go through the regulatory process. My question to you is: that’s now been in place for a year, how is it going? Have there been any hiccups in that process between Treasury, the IRS, and the Office of Information and Regulatory Affairs?
Mnuchin: I’d say generally it’s going well. I think, you know, we reached an agreement with OIRA, and there are certain things that should be reviewed. Obviously any time we change these procedures, there are certain things obviously we wish would go a little bit faster, and we’ll continue to work closely with OIRA on this to make sure that it doesn’t slow down issues for taxpayers, but it’s something we have a good working relationship on.
On federal law application in Opportunity Zones (Starts at 03:32)
Lankford: You and I have talked before about Opportunity Zones and the regs that Treasury has put out for that. That is exceptionally helpful. Thank you for continuing to be able to get those out. There is still an unanswered question that’s hanging out there that we’ve talked about before and that is: if an activity is illegal in federal law, can you apply[ing] an Opportunity Zone credit for that economic activity in a state.
Specifically, this would apply in many states to marijuana businesses. So the question is: if a marijuana business tries to say they want to get an Opportunity Zone tax credit—it’s illegal in federal law, but maybe it’s legal in a particular state—has that been clarified yet in federal policy? And my suggestion is: what is illegal in the federal government, we should not give a federal tax credit for, if you want my personal opinion on that. But I think this is an area that hasn’t been clarified yet by Treasury.
Mnuchin: I appreciate you bringing that up. So, first, let me comment, we obviously a conflict in certain states…
Lankford: I’ve noticed.
Mnuchin: …more broadly between federal law and state law, and that creates significant problems for us at Treasury, particularly in areas of the IRS and other areas where we need to collect taxes. And we have to build cash rooms and everything else, and this has become a cash business.
So without me making a policy view on this, I would encourage Congress that this is an issue that needs to be addressed because it has created issues. Specifically in regards to your question—and we have not yet put out guidance, so I will defer to my team, but my recommendation to them would be: that it is not the intent of the Opportunity Zones, that if there is this conflict that has not been cleared that for now that we should not have those businesses in the Opportunity Zones. But I defer to my group to put out guidance on this. But I—again I would just emphasize the broader issue is an issue that impacts us in many ways, that is an issue for Congress to look at.
Federally Qualified Opportunity Zones were created through the 2017 tax reform law and are intended to encourage economic development in specified areas of states through federal tax credits. For a map of Qualified Opportunity Zones in Oklahoma, please click here (requires Adobe Flash player).